Dimensional Fund Advisors (DFA) and Octo Capital

Dimensional Fund Advisors (DFA) is one of the leading evidence-based investment management firms, yet their funds are only available through a select network of advisors.

OCTO Capital has established a relationship with Dimensional Fund Advisors (DFA), an investment management firm based in Austin, TX with offices across the globe. ​​Established in 1981, Dimensional and its affiliates manage approximately $576 billion in assets globally as of March 31, 2019, and offer funds to individual investors through a select network of fee-only financial advisors.
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DFA maintains close links with the University of Chicago and other research centers for financial economics. Board members and consultants include some of the nation’s most distinguished academic theorists and Nobel laureates, including Eugene Fama, Kenneth French, Roger Ibbotson, Donald Keim, Merton Miller, and Myron Scholes.
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We strongly believe this relationship can help address your financial objectives and help you pursue an even more successful investment experience. One of our explicit goals is to assist clients in achieving outstanding investment results using disciplined, well-established practices. Dimensional strategies are grounded in the research of leading financial economists. The firm's broadly diversified portfolios, consistent investment approach, and trading expertise seek to provide low expenses and turnover.

In its ongoing effort to maintain the low expense characteristic of institutional mutual funds, Dimensional requires us to place client trades through one of several firms (e.g. TD Ameritrade Institutional) who maintain an “omnibus” account relationship with Dimensional and aggregate buy and sell orders on a daily basis. By adhering to this approach, we are able to purchase fund shares in amounts as small as $2,500, versus DFA’s published minimum of $2,000,000.

​We receive no compensation from Dimensional.

Dimensional and Higher Expected Returns

DFA offers nearly 100 portfolios that focus on the factors that are known, based on academic research, to offer higher expected returns. The portfolios are tilted to value stocks, small cap stocks, high profitability stocks and stocks with the strong recent momentum. All portfolios are structured closely to the structure of index funds, but they do not slavishly adhere to the commercial indexes. Instead, DFA created its own index allowing for a flexible rebalancing and trading while keeping the cost and turnover low. (To view DFA videos on various subjects, please click here)
 
The fixed income portfolio does not include long-term bonds and is designed to lower the volatility of the equity portfolios. Equities: As examined in “The “Lost Decade”. Portfolios during 2000-2002 and 2007-2008 crisis and beyond” and other articles on this website, most investment managers do not outperform “The Market” as represented by S&P 500 or Dow Jones. DFA’s globally diversified balanced equity portfolio outperformed the S&P 500 by 2.8% from 1973 to 2018 and by 3.2% over the last twenty-year period. The outperformance was not achieved by taking on more risk as measured by standard deviation, since 1973 to 2018 standard deviation for the S&P 500 has been 15.1% and DFA strategy 15.2%.

Fiduciary and Low-cost DFA Financial Advisor

At OCTO Capital, our goals are: (1) serve our clients as true Fiduciaries, eliminating potential conflicts of interest. (2) Effectively manage portfolios to produce the best possible risk-adjusted returns. (3) Incorporate financial planning into advising, striving to improve our client’s situation not only through investment management, but also through tax management, efficient portfolio withdrawals, cash flow planning and estate planning.

​We offer some of the lowest advisory fee structures possible. The returns and the success of your portfolio are closely correlated to the fees you are paying for servicing the portfolio, i.e. the less you are paying in fees, the more you will see in returns.

We believe that the outdated Wall Street model should be changed. Firms are still charging their clients outrageously high fees simply because they can get away with it. It does not take twice as much time and effort for an advisory firm to manage a $2 Mil. portfolio or three times as much time and effort to manage $3 Mil. portfolio versus a $1 Mil. Portfolio. Why then, do most firms believe it is fair to charge two or three times more to the client with the larger portfolio? The typical advisory fees for a $2 Mil portfolio in most firms are $15,000-$20,000 annually and $20,000 to $30,000 for a $3 Mil portfolio. Clients with larger portfolios are paying substantially more.

​We intend to change that, at least for our clients. Our fees are fixed, established at the beginning of the relationship and typically range from $625/quarter to $2,000/quarter. This means, for example, that a client with $3 Mil. portfolio will be “capped” at $8,000 annually or paying an equivalent of 0.26%. A client with a $ 4Mil portfolio will be paying an equivalent of 0.20% annually.
 
We do not receive any compensation for placing trades in client’s accounts, there are no commissions, or 12b-1 fees paid by the funds. We do not receive any compensation from DFA for using their portfolios. We only get paid by the clients, therefore eliminating potential conflicts of interests.
 
How do we manage to keep our costs that low? The strategies we use are efficient in the way they are structured and do not require as much of our time as active strategies might. The day to day management process of portfolios is handled by DFA. We cut the middle man out of the process by working directly with DFA and we keep our overhead and costs low. We strive to use the latest technologies to improve and keep our process as efficient as possible. At the same time, this allows us to have more time to spend with our clients and we are always available to answer any questions, provide recommendations or brainstorm ideas with our clients on how to handle many financial planning topics that may arise.
 
All client accounts are held at TD Ameritrade Institutional in the client’s name. We do not aggregate accounts or holdings. Clients have full control over their accounts, access to TD Ameritrade via web or phone directly, and they receive monthly statements directly from TD Ameritrade. As a custodian, independent of OCTO Capital, TD Ameritrade is responsible for safekeeping the accounts. At any time, clients are free to terminate our advisory relationship and they can transfer the accounts to a self-managed platform at TD Ameritrade or any other financial institution. While we’re managing the accounts, our authority is limited to placing trades in the account to buy or sell the portfolios we agreed upon in writing and submit advisory fee invoices to TD Ameritrade to be paid directly from the accounts managed.

Free Access to OCTO Capital's Financial and Retirement Planning Portal

We provide our clients with additional reporting tools, including a password-protected portal containing portfolio information including balances, allocations, holdings, balance sheet, net worth statement, cash flow projections, tax estimates and other information. Additionally, the portal offers a secured file-sharing and storage ​vault, allowing you to share or access confidential documents with optimized security.
 
On the portal, clients can choose to link their held-away (not managed by us) accounts to the financial institutions the accounts are held at to have a clear picture of all their wealth on one site, in one place. We also provide portfolio performance reporting for the accounts managed by us.
 
Our DFA portfolios aim to capture market returns of the given asset class or a mix of classes, improve performance by tilting to dimensions of expected returns by applying Nobel-prize winning academic research and provide added value through tax-management and low costs. Over time, losing less and making more results in higher returns, and paying lower advisory fees means more of the return goes to our clients.

If you are interested in learning more about OCTO Capital or Dimensional Fund Advisors, contact us here.

​If you want to see how our portfolio recommendations and investment strategies may improve your situation, we are offering a Free Test Drive of our Financial and Retirement Planning Portal, where you can enter your information for a free net-worth statement, cash-flow estimate for retirement, Social Security recommendations and more. To learn more about this offer, head over to our Get Started page.