The Optimal FAQ for Individual Investors

Optimal Asset Management started out by building portfolios for large sophisticated pension funds. We are an SEC-registered Investment Advisor.

We’ve built over $2B in portfolios for large pension funds that are implemented by our partners, and we also directly manage over $700M in discretionary assets under management.

We spent years building sophisticated portfolios and tools for pension funds and were frustrated that we didn’t have access to the same solutions for our own personal investment portfolios.

We built our platform to change that. For everyone.

Our goal is to deliver the power of these ‘Big Guy’ strategies to individual investors like you – online and at low cost.

Optimal delivers institutional-grade investment solutions to all investors.

What does this mean to you?

First, we provide access to the most sophisticated factor-based strategies directly implemented in stocks in your brokerage account. Because we do not use any wrappers such as ETFs or Mutual Funds for these strategies, you hold a sophisticated, scientifically diversified portfolio of hundreds of stocks and avoid the multiple layers of fees you are probably paying right now.

Second, we offer a fully-automated goals-based risk control panel that allows you to set a downside floor and upside target for your account, which our engine then manages for you, with the goal of maximizing the chances of hitting your upside target without ending up below your downside floor. We implement this transparently in your account by allocating a dynamically computed portion of your account to a portfolio of US Government Treasuries, immunized to minimize the effect of interest rate changes. We are unaware of any retail platform that permits that level of personalized risk control.

Third, we charge a transparent 0.50% all-in fee that includes all our management fees, transaction fees, commissions, custody fees. There are no “nickel and dime” or hidden or embedded fee surprises. We’ll even rebate you for any embedded fees in ETFs we use in your portfolio, something that no other platform offers (to the best of our knowledge!).

Just like many Robo Advisors, Optimal is an online investment platform, with low fees.

However, that’s where the similarity ends, and Optimal differs from Robo-Advisors in many significant ways:

  • We provide access to the most sophisticated and scientific upside-seeking portfolios: Optimal’s implementation of your stock portfolio never uses standard retail-marketed products like mutual funds or ETFs. Instead, we offer direct, stock-level access to sophisticated, scientifically diversified portfolios through ultra-high performance index strategies, eliminating layers of hidden and embedded fees – and opening up opportunities for tax-loss harvesting and other customization. Even when you invest in a well known benchmark like the S&P500, you’ll directly hold all 500 S&P stocks in your account!
  • You’ll have cutting-edge Goals-Based Risk Control that you probably didn’t know was possible: Optimal’s risk management panel gives you incredibly powerful control over risk in your account by setting a downside floor and upside target goals for your account. Institutions do this all the time (just google “Liability Driven Investing”) but it’s not usually offered to retail investors in a simple-to-use web UI like we do.
  • Zero embedded fees: In cases where we need to use ETFs or Mutual Funds (e.g. for US Treasury Bonds for risk management) we’ll rebate you back any embedded ETF fees. No Robo that we know of does that!
  • Live, clueful, help: You always have a live human account manager and a dedicated advisor, who will help you select strategies and set risk controls, and help you review your strategy options as often as you need

Optimal charges an annual management fee of .50% (one half of one percent) which probably covers (i) everything you expect it to cover, (ii) a bunch of things you might not have expected it to cover and (iii) layers of annoying embedded and hidden fees that you are probably paying now and don’t even know you are paying (such as Mutual Fund, ETF or Third Party management fees).

Here’s what our fee covers:

  • Our Asset Management Fees
  • Trading Commissions, regardless of how often you trade
  • Any other transaction fees such as ticket charges, settlement charges, regardless of how often you trade
  • Custody fees, regardless of how many different accounts you choose to open with us
  • Bank/ACH/Incoming Wire transfers (watch out though: your bank may charge you, but that’s between you and them!)
  • All custodian statement fees, as long as you are ok with electronic statements. Our custodian will charge you for paper statements and we’ll pass that cost on to you with no additional mark up or service fees
  • In case we use any ETFs, Mutual Funds or External Managers in your account, we’ll cover their management fees in the form of a credit back to your account

In the United States, the Securities and Exchange Commission (SEC) regulates investment advisers and their investment adviser representatives.

Optimal Asset Management is an SEC-registered Investment Advisor, with over $700M discretionary assets under management (primarily pension plan assets in institutional separately managed accounts).

Here are a couple of important SEC filings with relevant facts about our business:

Our form ADV filing is here:

https://adviserinfo.sec.gov/IAPD/content/ViewForm/crd_iapd_stream_pdf.aspx?ORG_PK=165661

And our part 2 Brochure here:

https://adviserinfo.sec.gov/IAPD/Content/Common/crd_iapd_Brochure.aspx?BRCHR_VRSN_ID=503867

 

In addition,

Optimal is a fiduciary to our clients. This fiduciary standard of care means that Optimal is legally obligated to always act in your best interest, and not ours.

The most important thing to understand is that Optimal does not actually hold your assets. We act as an advisor on your account, which is always held at a FINRA-regulated third party, which performs custodial, clearing and account-keeping such as Apex Clearing Corporation.

For instance, even your account statements will clearly reflect the fact that they were prepared by the FINRA-regulated third party, not by Optimal.

We act as advisors, which means that we take on the responsibility of trading the holdings within your account in accordance with the risk preferences you set through the risk control panel.

Specifically, your money and assets are held in your brokerage account titled in your name, and are always segregated from all other client accounts. Furthermore, your assets are SIPC insured up to $500k, for each type of account you open. The details are all spelled out here.

For the US equity portion of your account, Optimal invests your money directly in US stocks. We do not use any ETFs, mutual funds or expensive outside managers for US Stocks. As a result, you will never incur any pesky layers of embedded or hidden management fees.

For safe bond exposure you will hold ultra-low-cost US Treasury Bond ETFs or other inexpensive instruments, and where we use these in your portfolio, we’ll rebate you the expense ratio of such funds.

In either case, you will not incur those extra layers of fees that we all despise!

Optimal’s interactive risk control panel allows you to set a “downside floor and “upside target” for your account over a desired time horizon. This panel connects to the Goal Optimizing Outcome Shaping Engine (that we lovingly refer to as GOOSE™) which then calculates a mix of stocks and bonds that maximizing the chance of hitting your upside target account level without going below your downside floor account level.  This engine is regularly monitoring your account to help you reach your goals.

Optimal allocates assets like the big institutions do, aiming to ensure that you have the highest possible exposure to equities for upside, while minimizing the risk that you lose more than you can afford for your investment goal (e.g. like a down payment on your new home).

 

Asset allocation is automatically and directly based on the risk levels you set in GOOSE.

 

Here is how risk control works in practice:

 

  • You use the GOOSE’s control panel to set the dollar-level of risk (downside floor and upside target) for the account
  • You can update GOOSE levels at any time without incurring additional costs
  • Optimal trades your account, allocating between the upside seeking portfolio of your choice and a “safe portfolio” of US Treasury Bonds, to maximize the chances of hitting your upside target without ending up below your downside floor.

 

If you choose to simply invest in one of the equity portfolios and disable your GOOSE risk control settings, the account will have zero allocation to US Treasury Bonds.

 There is no lock up.  You can allocate/ de-allocate to strategies, adjust risk controls and transfer cash in and out of your account on any day at no extra cost.

This is exactly one of the reasons why you have chosen to investment with Optimal.

 

Through Optimal’s intuitive and groundbreaking GOOSE™ process you can set your downside floor. Our systems and portfolio management team’s overriding goal is to keep you above this floor at the end of your investment horizon.

Yes, you will receive quarterly account statements and trading confirmations. Forms like your 1099 are also available via Optimal’s web-portal.

Go to https://invest.optimalam.com. It takes about 5 minutes to create an account. Please reach out to support@optimalam.com if you need help.

Most transfers happen painlessly through an automated all-electronic process known as an ACATS transfer. We do not charge a fee for an ACATS transfer.

We know that transfers of some 401k and IRAs can on some rare occasions be a hassle depending on where the assets are coming from (we’re not naming names, but we know who they are!). To makes these rare cases as painless as possible, we offer a complementary transfer-concierge service that is experienced in these account transfers, and can usually handle most of the hassle for you electronically. Email us on support@optimalam.com.

You can also directly link you bank account to your Optimal investment account allowing you to transfer money in and out without incurring any processing fees, or of course, just wire the money in.

 

You can open almost any type of account, including (rollover) IRA’s, Roth, individual or joint accounts, or trust accounts. The account opening process is entirely digital and happens within the browser (except for Trusts, which sadly involves a few extra hoops that we’ll help you with).

Most accounts can be approved immediately online, provided that we can verify your identity and you can pass our identity theft protection checks. In rare cases, you might be asked to provide additional documentation, which you can send us through our secure upload process.

 

Yes, our minimum is $100k, but we will waive it for the right reasons 🙂

Just call us at 650 472 1187 or email us at support@OptimalAM.com