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9 Lowell Street, Beverly, Massachusetts, 0915-3652 - Phone 978.922.9961 - Fax 978.922-9961
Conflict Free Financial Planning, Investment Counseling & Financial Education

FAQ

                                                                              Frequently Asked Questions

1. How safe is my money?

This is really two questions. The first deals with investment risk and the second with the risk that someone will steal your money.

Investments in stocks and bonds entail risk of loss. It is the advisors job to build a portfolio which balances these risks against the returns
clients require to reach their goals. Our investment process and our strategies for controlling investment risk are detailed in the section on
this site discussing our philosophy.

In answer to the second part of the question this firm has been structured to protect client interests by eliminating conflicts of interest with
our fee-only compensation structure, our operational procedures, and by separating the delivery of advice from the custody of assets, the
execution of transactions and the delivery of brokerage statements.

First, our fee-only compensation structure aligns our incentives with our client’s interests. If we wish to increase the fee income we receive
from a client we must work to increase the value of their account. That is in the client’s interest. If we succeed we get a raise in pay, if the
account loses value we take a pay cut.

Second, we do not require our clients to give us direct control over their accounts as do most fee-only advisors. This is called “discretion”
and it means you have given your advisor the legal authority to call your broker to order buy and sell transactions in your account without
checking with you. We work with you in an advisory capacity. We do all the work and recommend an investment strategy which is
appropriate for your personal circumstances. You make the final decisions and call your broker to order the recommended changes. You
retain complete control over your account at all times.

Third, we do not take custody of client assets; execute client transactions or issue trade confirmations or brokerage statements. It seems
that every year we hear of a different scheme in which clients/victims of an investment advisor have had their life savings stolen. All of these
schemes have one thing in common. The advice given was not separated from the firm which held client assets, executed transactions,
received brokerage commissions, issued trade confirmations and brokerage statements. The advisor had complete discretion to determine
what to buy and sell, had custody of client investments, executed transactions, and received the brokerage commissions from those
transactions and issued trade confirmations and brokerage statements. This type of arrangement is ripe for abuse. At Montserrat Advisory
Services client interests are protected.

2. How is MAS different from other fee-only advisors and why should I choose to work with your firm?

Investment managers can be grouped into two categories; those that practice an active management style, buying and selling individual
stocks and bonds in an attempt to earn a market-beating return and those who practice a passive management style buying index funds in
an attempt to capture the long term return of the target index. Studies have shown that it is extremely rare for active managers to earn a
market-beating return over the long term on a risk adjusted basis. This is because markets are relatively efficient and as Warren Buffett
has said, expenses will hurt returns.

Most fee-only advisors practice an active management style and will likely underperform the market. Some buy and sell individual stocks
and bonds on their own while other advisors use actively managed mutual funds. In both cases clients face higher expenses. In the case of
those using advisors who buy and sell individual securities, trading costs are generally 1% for each transaction. This is in addition to the
fee charged by the advisor. For advisors who use mutual funds, clients will be faced with trading costs as well as fund expenses in the
neighborhood of 1% - 1.4% in addition to the advisor’s fee. You are paying more in fees for results that will likely underperform the market.

MAS practices a passive style of investment management using low cost index funds with expenses of approximately 0.25% or less. Index
funds are designed to replicate the return of the target index less these low expenses. Expenses represent a drag on investment returns
and there is no need to pay higher costs unless you are likely to get better results.

3. I have a portfolio of individual stocks and bonds. Can you help me and if so what can I expect?

Yes, we can help. If you have reviewed the material on this site you know that we have a strong commitment to passive investment
strategies using low cost index funds. We build broadly diversified portfolios with exposure to domestic and international categories of
securities. It is unlikely that your portfolio is as diversified and it is likely that your return will under perform the broader market over the long
term. If you decide to work with us you should be comfortable selling your securities and buying index funds. There may be some individual
securities in your portfolio that you wish to hold. Your advisor will develop a strategy including those securities. If your securities are held in
a taxable account with significant capital gains exposure, we will develop a strategy to transition your portfolio in a tax efficient manner.
However, while taxes should be a consideration, one should not let the tax tail wag the investment dog.

4. Do I have to close my current accounts and transfer my investments to MAS?

As discussed in question one, MAS does not take custody of client assets. Your advisor will recommend a financial institution that
represents the best combination of low fees, product availability and service. The client is under no obligation to use the institution
recommended. The recommendation is made in the clients best interests. MAS does not receive commissions or referral fees from the
recommended institution. In the event you choose to work with an institution other than that recommended you may incur higher fees and
expenses.

5. If minimizing fees is so important why shouldn’t I just buy an index fund on my own and save the fees I’d pay an advisor?

The principal function performed by an advisor is to develop a long term investment strategy including an asset allocation and to help you
implement that strategy and stick with it over time. If you are an experienced investor who is confident that you can determine the return you
require to reach your goal and decide how much of your portfolio to invest in stocks and bonds given your holding period you may want to
consider going it alone. If you have the ability to calculate how much you should be saving each year to retire comfortably or how much you
can afford to withdraw each year in retirement so you won’t run out of money you might go it alone. If you are confident you can stick with
your strategy during volatile markets and have a strategy for dealing with poor short term investment results doing it yourself might make
sense. If you have any doubts in these areas paying a fee-only advisor will probably be worth the investment. You certainly don’t want to
the pay the fees of an actively managed mutual fund whose manager does not know you and cannot help you with these issues.

Another thing to consider is the large number of index funds available. Do you know which ones to choose and how much to invest in each?
Managing money is no easy task.

Do you have a question we haven’t answered? Click on the link below and ask it or contact us for a free initial consultation.

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9 Lowell Street, Beverly, Massachusetts, 01915-3652 - Phone 978.922.9961 - Fax 978.922.9961
Conflict Free Financial Planning, Investment Counseling & Financial Education
Adam Smith David Ricardo