ADVISORS
Issue 80
SEPT 2017
magazine
suze orman
empowering
Limiting Taxes on 401ks
women in finance
Feeling the Effects of the Shift
Financial Education Pays Off
U.S. Placed 9th in Educational Development
DOL Attacks Private Investment Portfolios The “Fiduciary Rule” What’s all the Fuss About?
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INV E S T MEN TS
publishers note
ISSUE 80 | SEPT 2017
Publisher Erwin E. Kantor Managing Editor Michael Gordon Editorial Robert Jordan Mattew Edward Samantha Jones Staff Writers Robert Jordan Judy Scinta Amy Armstrong Hadrian Scott Matthew D. Edward Andrea Lehner Martin Frost Christopher Parks Contributors & Guests Steven Selengut, IAR Vitaliy Katsenelson, CFA Ben Schrock, BFATM Illustrators Paul Kales Khalil Bendib Marketing / Advertising Sean Rome Billing
Eric Daniels For advertising inquiries, to order prints, contact: editorial@advisorsmagazine.com No part of The advisors Magazine may be reproduced or transmitted in any form of by any means, without prior written consent of the editor. Due to the nature of the printing process, images can be subject to a variation of up to 15 percent, therefore Advisors Magazine cannot be held responsible for such variation.
WE’VE GOT A NEW NAME AND A NEW LOOK! I am pleased to present to you— Advisors Magazine. For those of you that are reading us for the first time, welcome. After a 10-year journey building content as The Suit, we are pleased to announce the next step in our evolution. We’ve changed our name to Advisors Magazine to more closely reflect the content we bring to our readers, and the opportunities we bring to advisors of all professions to share their expertise. And, along with our name change, we are delighted to announce the launch of our website, AdvisorsMagazine.com. Visitors to our new site will find in-depth interviews with CEO’s and people in the national business spotlight, as well as interviews with financial professionals and other representatives from small to medium professional service firms. Creating compelling articles in step the latest news trends in finance, business, and technology is at the heart of what we deliver to readers. We take consumers inside the hard-to-understand, yet, important issues like investment options for financial growth and retirement, and economic, business, and technology trends. We feature stories about real people who share real experiences. The financial climate has certainly changed - we who offer a fresh perspective and an objective eye that will give you a well-rounded look at big topics. Journalist Matthew Edwards covers financial education with TV head Suze Orman, Author, speaker and TV celebrity known for the Suze Orman Show. Ben Schrock, an Investment Adviser Representative, insurance professional and president of B.A. Schrock Financial Group, covers 4 Tips For
Limiting The Taxes On A Robust 401(k) plan. Enter Steven Selengut, reporting on a The DOL, and their attack on private investment portfolios. Uniform Fiduciary Standards, eventually imposing tighter restrictions to broker-dealers and investment advisors, due to the 2008 financial meltdown. Dubbed the “Fiduciary Rule”, whats all the fuss about on page 8. American teens ranked below average in a global study assessing financial literacy among 15-yearolds. Conducted by the Organization for Economic Cooperation and Development, the U.S. placed ninth, being outranked by countries such as China, Australia and Poland. Check out FamZoo a financial education App that help children learn about earning, saving and spending in real time, real life financial transactions on page 18. In the meantime, 2017 will be an exciting year for Advisors Magazine. We celebrate 10 years and we have a full slate of stories for our readers and special features for our clients. It feels good to give back to the community that has given so much to us. We hope you find the new website fresh, modern, and most of all, informative; we’ve worked hard to make it a pleasant viewing experience for you. We wish you all continued success.
Enjoy the Issue,
Erwin Kantor Erwin Kantor, Publisher
sept 2017 CONTENTS cover feature
digital issue
ADVISORS
Issue 80
SEPT 2017
Wealth Guru Suze Orman Empowers Women in The World of Finance.
magazine
suze orman
empowering
She says she knows what women want.
Limiting Taxes on 401ks
women in finance
Feeling the Effects of the Shift
Financial Education Pays Off
U.S. Placed 9th in Educational Development
DOL Attacks Private Investment Portfolios The “Fiduciary Rule” What’s all the Fuss About?
Susan Lynn “Suze” Orman is an American author, financial advisor, motivational speaker, and television host.
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18
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FINANCIAL EDUCATION FOR KIDS PAYS OFF
4 TIPS FOR LIMITING THE TAXES ON A ROBUST 401(K)
LIFE CHANGES REQUIRE A TRUSTED ADVISOR
Baby boomers must feel a little like lab rats when it comes to retirement.
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THE DOL ATTACK ON PRIVATE INVESTMENT PORTFOLIOS The “Fidauciary Rule”, What’s All The Fuss About?
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p.4
ADVISORS MAGAZINE - SEPT 2017
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RETIREMENT IS A UNIQUE JOURNEY
business / finance
30
35
PLANNING for CHANGE
CONNECTING WITH CLIENTS
38
32
IT’S HARD TO FEEL GOOD ABOUT HEALTH INSURANCE
TAKING THE LONG VIEW FOR MILLENNIALS, A FRESH ADVISOR
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40 BIG FIRMS LEAVE SMALLER INVESTORS BEHIND
42 Seasoned Financial Pro is Still a Teacher at Heart 58 Money Mentors: Education is Key Transitioning from teacher to financial planning industry
45 Helping Investors Sort Through Information
Everybody could use a mentor
Internet provides investors with more information
47 Financial Security Means More Than a 401(k) Educating employees to best use their sponsored 401 (k)
48 Slow and Steady Wins the Race Outperforming the S&P 500 year over year
50 Stock Jockeys’ Can’t Help Investors Financial service firms often fail to put clients first
52 Social Investing Still Requires Business Sense Taking a different approach helping babyboomers
53 Newly Retired, Attracted to NC Firm
Striving to make complicated financial concepts simple
56 Helping Clients Preserve Their Wealth A good, healthy retirement requires an active lifestyle
ADVISORS MAGAZINE SEPT p.5
WIN MORE WORK. PROPOSAL TRAINING & PRESENTATION COACHING FOR PROFESSIONAL SERVICES FIRMS
Stephen F. Mayer, PhD, PE
SFMAYERLLC.COM CALL 716.864.1761
4 Tips For Limiting The Taxes On A Robust 401(k)
Baby boomers must feel a little like lab rats when it comes to retirement.
A
fter all, their generation is the first to truly feel the effects of the shift from traditional pensions to employeecontribution plans that started in the 1980s. We’ve heard plenty about the failures: According to a 2016 PWC survey*, roughly half of all baby boomers have set aside $100,000 or less for retirement. And without a pension, that could leave them overly dependent on Social Security checks. What we haven’t heard nearly as much about are the people who get to the end of the savings maze with hundreds of thousands of dollars growing tax-deferred in 401(k)s and 403(b)s. Maybe that’s because the experiment isn’t over for them just yet. “There are many people out there with 401(k)s who suddenly must think about how those savings will be taxed by Uncle Sam,” says Ben Schrock, an Investment Adviser
Representative and president of B.A. Schrock Financial Group in Ohio (www.baschrock-fg.com). “The government can hardly wait to get its hands on all the money people didn’t pay taxes on while they were working.” When savers take distributions from those accounts in retirement, it’s taxed as ordinary income, just like a paycheck, he says. “And retirees are often surprised to see the effect it can have on their bottom line.” Here are a few ways you can avoid being caught unprepared by taxes in retirement: Think twice before withdrawing 401(k) funds to cover a big expense. “I never want to discourage people from making a big buy – a new car, a trip or some other big-ticket item,” Schrock says. “I just want to make sure they’re aware of the consequences. If they pull out a chunk of money from a tax-deferred account, it might increase their current tax bracket, triggering more taxes that year.” Be aware of how all your
retirement income streams will be taxed. Taxes on your 401(k) distributions are a factor all on their own, but you also must keep tabs on how those distributions will affect the taxes on other income streams, including Social Security, Schrock says. In addition, if you withdraw money from a tax-deferred account before you reach age 59½ you will be charged a 10 percent penalty along with taxes. Watch out for required minimum distributions. Ready or not, when you reach 70½, the government is going to get its share of your tax-deferred savings, Schrock says. That’s because you’re required to withdraw a minimum amount each year and that withdrawal is taxed. “I often do Roth conversions for clients in their 50s and 60s to limit their exposure to RMDs,” Schrock says. Consider where you’ll put your money when you take your RMDs.
Many people make the mistake of putting those RMDs into investments that don’t make any money or where the gains could be taxed again, Schrock says. “Your adviser can help you pick the path that’s best for you,” he says. Because they’re largely invested in 401(k)s, many baby boomers never get around to hiring a financial advisor. Schrock says you probably can get away with being handsoff during the years you’re contributing to those funds. “But in retirement,” Schrock says, “a specialist is needed to give you the strategies you’ll need to take control of your investments and avoid surprises.” * PwC, April 2016, “Employee Financial Wellness Survey 2016,” https://www.pwc.com/ us/en/private-company-services/ publications/assets/pwc-2016employee-wellness-survey.pdf, July 20, 2017. About Ben Schrock Ben Schrock (www.baschrockfg.com) is an Investment Adviser Representative, insurance professional and president of B.A. Schrock Financial Group, an independent, full-service financial advising firm in Wadsworth, Ohio. He holds a National Social Security Advisor™ designation, as well as a Behavioral Financial Adviser™ designation. He received a Bachelor of Arts degree in psychology from The College of Wooster in Wooster, Ohio, where he played football for The Fighting Scots for four years. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and B.A. Schrock Financial Group are not affiliated companies. Investing involves risk, including the potential loss of principal.
ADVISORS MAGAZINE SEPT p.7
special report
THE DOL
ATTACK ON PRIVATE
by steve selengut
INVESTMENT PORTFOLIOS The "Fidauciary Rule", What's All The Fuss About?
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ADVISORS MAGAZINE - SEPT 2017
I
NTRODUCTION
Can I have a show of hands please? How many of you know the difference(s) between "defined benefit" pension plans and 401k, IRA, 403b, and other forms of "defined contribution" plan? Some of the major differences are: the purpose of the plan, who makes the investment decisions, the content of the investment portfolio, and goal achievement guarantees, if any. How many regulators, congresspersons, American presidents, or financial services industry overseers could explain these distinctions? Right, and yet it is these people who create the rules that the "fiduciaries" (who actually should know the differences) must operate within and under. The main thrust of the DOL Fiduciary Rule is to prevent conflicts of interest between investment advisors and their clients... sounds like what the SEC and FINRA have been doing for decades.
ADVISORS MAGAZINE SEPT p.9
special report
The Frances Perkins Building, which serves as the headquarters of the U.S. Department of Labor In the process, they are requiring employers to "guarantee" the performance of plan participant stock market investment decisions. One could make the case, that the DOL regulations are creating a situation that, itself, on the personal portfolio level, a violation of the Fiduciary Rule. The problems are that the DOL is trying to apply: (1) pension plan rules to defined contribution programs, (2) Wall Street investment performance measurement protocols to what they have incorrectly labeled retirement "income" programs, and (3) fiduciary responsibility to persons and businesses who are merely helping clients and employees execute their own personal, discretionary, investment transactions. Will employees be able to sue p.10
ADVISORS MAGAZINE - SEPT 2017
their employers to recoup employer contributions that they have lost in the stock market? So why the "media" fuss about aborting implementation of the DOL Fiduciary Rule? They simply don't know that adequate fiduciary rules are already in place and that the new rules are already causing significant harm to the very people they (the media) think are being protected. Retiree Joe has an under $200,000 IRA generating roughly 6.0% spending money (net after management fees, commissions Wall Street service charges, etc)... he spends more than his account produces, thus depleting his working capital (and decreasing his income) every year. The new DOL rules will reduce
his spending money an additional 17%... tripling his direct, fixed fee, withdrawals. Additionally, the new rules do absolutely nothing to eliminate the parasitic siphoning of billions of dollars out of client portfolios and into Wall Street institutional pocketbooks. Finally, and perhaps potentially most dangerous, the new rules could take client complaints (about the failure of their own decision making) out of the arbitration process and into the courts for settlement.
Y
ears ago, I was meeting with the account executive in charge of my investment management portfolio relationships at a major "wire house". His message was a clear
reflection of where Wall Street was heading: "Frankly, we make a whole lot more money charging a flat annual fee than we do with individual commissioned transactions... and with a lot less liability. Let's get your "book" into the hands of some of our great, in-house, pooled portfolio managers". At the time, these were "wrap accounts", where every person has precisely the same portfolio... totally different from individually managed, separate account, investment portfolios. The media is (inadvertently, I'm sure) playing right into Wall Street's hands by trying to keep the new DOL rules in place... just one more piece of their attack on private investment portfolios... yes, your IRAs, 403bs, 401ks, individual investment accounts, etc. NOTE: Investors who are dealing with any form of registered investment
advisor are already dealing through willing, responsible, fiduciaries... and have been for decades. The "new" rules do nothing to extend fiduciary responsibility to the entities that create and market inappropriate, and often quite speculative, products to "retirement program" participants... and the institutionalized service fee "pocket picking" continues unchecked. What DOL scrutiny and fining power has done effectively, is to throw financial services' company compliance departments into a "cover their ass" frenzy of unprecedented proportions. Here's an example: The DOL has determined that it is a Conflict of Interest (COI) in retirement programs if the same "entity" collects both management fees and trading commissions from a client. Yet, it is not a COI for that very same "entity" to collect management fees, transaction charges, service fees, ticket charges, ADR fees, custodian fees, etc. in the very same account... or management fees + commissions + service charges, etc. in a regular trading account. So what if (within the entity), the management fees are totally directed to one person or firm; commissions totally to a second person or firm; and all other charges are directed through the "house"? You guessed it, still deemed a COI, so that Wall Street now get's its maximum fixed cash flow (regardless of trading activity) from all retirement program. Yes, that's exactly what I said: "the same trading fee is charged even if there are no trades in the account."
ADVISORS MAGAZINE SEPT p.11
the
DOL to bring the same level of thievery to individual retirement income portfolios (not the same thing as pension plans) as they have institutionalized in employer benefit programs... where the most popular of all Retirement Income Funds produces less than 2% in spending money. There are no managed income Closed End Funds in 401k plans because 2% spending money with low expenses is somehow better than 6% in your wallet after higher expenses. The DOL's proposals are supporting the Wall Street agenda by increasing the fixed costs of investment management by 50% or more... by nearly 150% in some "income only" managed portfolios At the same time, new regulations codify self serving Wall Street myths that make it virtually impossible for employee benefit plan participants to create "retirement ready" income portfolios. Another example: Picture an IRA portfolio generating 6% in dividends and interest
special report
media, obsessed as it is on bashing the Republicans, is missing the big story. Killing the new fiduciary rules just leaves things as they are now... with more than enough rules and requirements to get the job done. The real story, the one that the media is ignoring, is the increased theft of investment capital from retirees, retirement programs of all shapes and sizes, and many other investment programs. Phil makes 6% spending money on his portfolio of income Closed End Funds, net/net, after all fees and commissions... His broker and manager could be fined because the fees plus "variable cost" commissions are "too high". Instead of dictating that the commissions be reduced individually, or capped collectively, regulators turn the variable expenses into a fixed fee that not only reduces Phil's spending money, but also reduces his ability to grow his annual income. The DOL rules turn variable expenses into fixed deductions from investment portfolios while doing nothing to halt broker/dealer fees and charges from being taken as well. The Media is allowing the Wall Street directed (ya think)
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after all trade commissions, management fees and miscellaneous Wall Street charges. (Yes, such accounts really do exist). Of the $18,000 the retiree receives, he spends roughly $13,000 and reinvests the rest. The new DOL rules will reduce his reinvestment by $3,500.... and reduce his income growth significantly. Clients who are spending all of their deferred taxation income now, will be forced to reduce either their standard of living or their portfolio capital to satisfy the new DOL requirements. While the DOL focuses on the internal costs of investment products, it totally neglects what it says it thinks is the retirement income purpose of employer provided investment programs. One more example: Investment managers trade securities to help grow client portfolios... if a manager takes a profit and reinvests the proceeds, two or more commissions are generated. Simply, a "trade" always involves two elements, a "buy" and a "sell", and in a true investment account, every security is always for sale. The "cost" of the buy, and the proceeds of the sell include the impact of the variable expense called a "commission". Regardless of the commission size, or the trading frequency, nothing is ever withdrawn from the investment account. The only way to reduce the variable costs of trading (without stealing the money from investment capital) is to reduce the size of the commissions. If there is more profit than loss, over the course of time, the client benefits regardless. If the client deposits money to an account regularly, transactions are generated. If an account generates routine income from dividends and interest, more transactions are needed to reinvest the earnings. If an account is managed properly: the more trades that occur, the more money is made by the client... if my manager makes me 8% on my trades after commissions, I frankly don't give a damn if I've paid 4% or even 10% in
commissions! DOL rules assume that trading is excessive if the trading ROA (return on assets) to the broker/dealer is above 4%. If 4% ROA is so horrible, why not just cap commissions at 3.5% per year or cut the amount of the commissions themselves. Really, is it worth $250 to push the button on the screen that says "sell me"... after the manager has told the broker what to do? Every trade, whatever the type, is done, electronically, immediately, and with the same "effort" regardless of size, and regardless of brokerage firm. So why does a commission vary from $65 to $650 for the same effort? And "why o why" can the SEC jump in there and siphon off a few bucks on every sell trade processed on every exchange? The Fiduciary Rule All SEC registered advisors, and Investment Advisor Representatives, have forever been fiduciaries, and the majority of other investment professionals operate under very high "client's interests first" requirements.
The required account setup paperwork reeks of fiduciary(ish) data gathering, and the mandate for all involved is to "know your client".
So, at best, the fiduciary rule is redundant.... and a bit scary. It tries to make stock brokers (mostly product salespersons these days) fiduciaries with respect to "unsolicited" transactions, i.e., making them responsible for client bad judgment while making no attempt to: make institutions fiduciaries with respect to the products, derivatives, funds, and contracts they force their employees to place in client accounts. Force institutions to provide client statements that accurately reflect the purpose of the securities that are included in their portfolios. (They have the information, but they refuse to present it.) For example: a portfolio containing nothing but Closed End Municipal Bond Funds receives a monthly account statement saying the portfolio is 100% invested in "equities". ERISA The Employee "Retirement Income Security" Act is a federal law that sets minimum standards for most voluntarily established "pension programs" in private industry...
in order to provide protection for individuals in such plans. It is the employer who voluntarily creates these plans, pays to administer ADVISORS MAGAZINE SEPT p.13
special report
them, makes the bulk of the contributions (in most plans), and hires the Trustees who make the investment decisions. Pension investments were once mostly bonds and plan objectives were the provision of x% of the last few years of salary or wages. Speculations of the kind found in 401k plans today were not considered "appropriate". The "Act" was not designed for an "employee investment choice" environment; it defined rules of investment quality and diversification, and specified trustee duties and qualifications. The DOL sites ERISA as the law that allows it to oversee 401k, IRA, and other Defined Contribution programs, in spite of the indisputable fact that such programs are in no way similar to pension plans. ERISA is relevant only to pension programs which, when the law was written, were designed to fund a future, fixed income benefit to plan members. Trustee "fiduciaries" were charged to manage the income production program, and employees absolutely had no input regarding the security mix. Where was the DOL when the "Prudent Man Rule" was altered to allow pension trustees to invest in all manner of speculations, derivatives, and other MPT future prediction strategies? If a pension/retirement program were managed according to its "guaranteed" income purpose, new DOL performance rules would be inappropriate. Since the income produced isn't impacted by changes in market value, the regulatory focus on market value growth and total return is "totally" inappropriate. Under the DOL rules, it is practically impossible to create an income portfolio in the majority of 401k plans. 401k, IRA, and similar investment programs put investment choice in the minds (and cursors) of for the most part, totally "investment unqualified" plan participants. Then, adding insult to stupidity, the DOL wants to fine employers (and other advisors) if the investment selection menu fails (under regulatory crystal clear hindsight) to "perform" as well as the top echelon of hundreds of thousands of potential investments. Is "performance" of these presumed-tobe retirement income programs a measure of the retirement income? Nope, it's a measure of market value growth. p.14
ADVISORS MAGAZINE - SEPT 2017
Here's a point of interest that the DOL fails to recognize: the cyclical nature of interest rates and the inverse impact it has on interest rate sensitive securities, is the fuel that feeds the productive income purpose portfolio. Financial Risk is the key element of analysis with income purpose investing, regulators (and the media, incidentally) insist upon Market Risk analysis. Falling bond, preferred stock, and income CEF prices rarely have any impact on the payout received by investors... while actually providing an opportunity to increase yields (not "returns") by adding to positions. Nowhere, in any regulatory edict, is any mention made of the income (spending money) produced by the savings and investment plans. Not even media darling President Obama had a clue that these plans were not, in any way, shape or form, pension plans. In effect, the DOL wants employers to guarantee the market value performance
of the stock market investments being made by employees who are making all of their own investment decisions... is this lunacy, or am I missing something. How To Kill A Reliable Retirement Program... get the DOL involved The DOL rule requires that all "managed" IRA programs switch from a trading commissions + manager fee basis to a flat transaction fee basis. Let's look at 70 year old Bob's $800,000 (100% invested for income) IRA portfolio: The management fee is 0.6% per year, ($4,800) payable to a private investment manager, an advisory rep of a Registered Investment Advisor/Broker Dealer. Estimated realized net annual income is roughly $60,000. Transaction commissions are paid to an independent advisory firm who operates under the "shell" of the same broker/dealer. Commissions (discounted considerably but ridiculous when one realizes that they are merely push button entries involving no advice) can range up
ADVISORS MAGAZINE SEPT p.15
special report
to $250 depending on the size of each transaction. DOL rules ignore excessive commissions (which are absorbed within transactions), but replace them with allowable flat fees up to 4%, taken directly from the investment portfolio... So now Bob, who is spending nearly all of his $60,000 net income, will have to cut his spending money by roughly $10,000 (his new fee becomes 1.8% with his generous broker), or start dipping into his kids' inheritance. Don't you just love how the regulators protect you! Turning Variable Expenses Into Fixed Costs The distinction between fixed and variable expenses is one of the first lessons Business and Management majors deal with in college. The lesson is really pretty simple. For an enterprise to be successful, fixed costs must be minimized, controlled, and attended to fanatically. An investment portfolio is a goal directed, for-profit, enterprise, and regardless of your politics or generation, you need it to be both profitable and income productive, or you will be "out of business". Increasing certain variable costs (commissions, in an investment portfolio), may actually lead to increased revenues. If revenue does not exceed fixed costs, there are no dollars available for employee payroll. OK, back to the investment portfolio. In investing, the variable expenses (i.e., commissions) are included in
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ADVISORS MAGAZINE - SEPT 2017
the cost basis of the securities owned; fixed expenses, management fees + Wall Street charges are not. If your total realized portfolio earnings exceed the management fees, you would be operating in the black... were it not for the Wall Street "parasite" deductions. Higher variable expenses, raise the selling price at which reasonable profits can be taken, while increasing the dollar profit of each trade. Fixed costs are direct deductions from working capital... similar to paying property taxes, tuition, & travel expenses by selling your personal belongings. A retirement portfolio is an income generating business... increased fixed costs mean less spending money for retirees.. DUH! If, during the course of a year, I sell securities at a profit of 8.5% after all commissions, my profit is 8.5% less the management fee of from 0.60% to 1.2% (depending on the account size and asset allocation). Regardless of the number of trades involved, be it 10 or 1,000. Under the DOL rules (as interpreted by some compliance departments) the 8.5% net/net profit I've produced for my clients will now be reduced by from 1.65% to 2.55%, regardless of the number of trades, be it 0 or 1,000. The DOL Rule, Impact on Small Investment Accounts When I first started doing odd jobs for people in my community, my father funded the purchase of a lawn mower with one stipulation... I was to deposit at least one third of my gross earnings in a savings account, and begin to appreciate
the power of compound interest. The savings account became a managed investment portfolio, and the advice I received from my first broker, became one of the building blocks of the successful management strategy I employ today: buy only high quality, dividend paying stocks, diversify properly, take reasonable profits, and maintain no less than 30% of investment capital in income purpose securities. The DOL fiduciary rule forbids investment management and or commissions on "retirement" portfolios of under $25,000. My first portfolio was under $1,000 and I willingly paid commissions for the sage advice I was receiving from an experienced professional. How many brokers or investment advisors are going to manage start up IRA accounts grandchildren's startup educational funds for less than nothing? Why less than nothing? Because the DOL rules allow all the service charges and fees to rain down on the newbie portfolio while broker dealers and custodians charge the broker/advisor for every transaction made in the management of the portfolio.
A BOUTIQUE INVESTMENT MANAGEMENT FIRM. Stability. Service. Solutions. Sulzberger Capital Advisors focuses on working with individuals and families offering investment advice, financial planning and overall wealth management. We work with a deep network of national investment service providers to find customized solutions for our clients.
Gene C. Sulzberger, JD, CFP®, TEP, ADPA® President 4500 Biscayne Blvd., Suite 205, Miami, FL 33137 E-MAIL: gene@sulzbergercapital.com OFFICE: 305.573.4900 FAX: 305.573.4990 www.sulzbergercapital.com Registered Investment Advisor. ADVISORS MAGAZINE
SEPT p.17
FINANCIAL EDUCATION FOR KIDS PAYS OFF American teens ranked below average in a global study assessing financial literacy among 15-yearolds. Conducted by the Organization for Economic Cooperation and Development, the U.S. placed ninth, being outranked by countries such as China, Australia and Poland.
B
ut fear not – there is hope and help in America. The children of some 1,500 U.S. families who currently are members of FamZoo, a virtual family bank, may outshine their peers when it comes to financial savvy by the time they reach adulthood. FamZoo is a private online family banking system where parents operate as the bankers and their children are their customers. The platform is designed to help parents teach their children to earn, save, spend and contribute money wisely through real-time, real life and real financial transactions. “The whole idea was to allow parents to set up a banking system where they could make the rules themselves in such a way that they felt it would motivate their kids and create habits that would carry forward into adulthood – and also so that
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they could make mistakes in a safe environment under the tutelage of parents,” explained Bill Dwight, CEO and founder of FamZoo, Inc., a startup company he launched in 2006. As a father of five, Dwight realized that as his older children reached middle school, no one was teaching them the basics of finance. So he used their weekly allowance – a stream of income often taken for granted by kids – to help his children gain handson experience in making financial decisions. It was a raw system at the beginning. He tracked each child’s allowance and how they spent it using a spreadsheet, but that soon became tedious. In the next iteration, Dwight, who had been designing software for over 20 years for Oracle and startups in Silicon Valley, decided to turn the spreadsheet into a website
that represented online banking. His children could sign into it, and he and his wife managed it. “We controlled the accounts, and that created certain advantages. For example, if we wanted to encourage them to save, we could decide that we were going to pay our kids a weekly interest rate,” Dwight said. As FamZoo operates today, parents can manage their children’s funds in IOU accounts or prepaid card accounts, or a combination of both. “They can set up automated allowances, rewards for chores and odd jobs, payroll withholding for saving or giving, penalties for missed work, parent-paid interest on savings, loans and much more,” explained Dwight. Parents are charged a monthly flat fee which tops out at $5.99 per month if paying monthly, but if they opt for a plan where they prepay to cover a block of time in advance, discounts are applied. “A family could spend as much as one overdraft fee to get the system for two years,” said Dwight, in attesting to its value.
“We have predictable pricing with no ‘gotcha’ fees; it's a flat rate for the entire family. That's what FamZoo is all about – letting kids make mistakes in a safe environment – and we're not going to profit off of that. It's up to the parents and the kids to work together through those mistakes,” Dwight explained, adding that there is no charge for replacement costs for lost prepaid MasterCards, something that parents of teenagers can readily appreciate. While FamZoo is still a small company, its growth is consistent each year as the concept catches on through word-of-mouth. Financial advisors and teachers also use this platform to work with families and students
respectively, to promote financial literacy among youth. Financial advisors are able to create a co-branded version of the FamZoo platform. “We believe we've built a banking system that is totally designed to encourage good habits for young kids, teenagers and young adults. Every email that I get from a parent saying, ‘Thank you so much for getting my relationship with my kids concerning money in order,’ is extraordinarily motivating to us,” said Dwight. For more information about FamZoo, visit: http://www.famzoo.com/
ADVISORS MAGAZINE SEPT p.19
WEALTH GURU SUZE ORMAN EMPOWERS WOMEN IN THE WORLD OF FINANCE She Says she Knows What Women Want by matthew edward
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Financial guru Suze Orman believes women bring a different mindset to the fiscal table. She argues that there’s a sharp difference in how men and women invest for the future. “The most frequent question a woman will ask is, ‘How do I pay for my kid’s education?’ A man will ask, ‘What stocks are good to invest in?’” Orman told “Advisors Magazine” during a recent interview that covered women in finance, how to save, and more.
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Orman, 66, the former host of The Suze Orman Show on CNBC — described by “The Washington Post” as “TV’s only sane space in a money crazed world” — and a long-time motivational speaker about all things money might not hit the airwaves every night with financial advice, but still commands large audiences for her in-person events, frequently is seen in financial media, and recently published a children’s book, “The Adventures of Billy & Penny,” about the value of money. Nine of Orman’s previous books consecutively made the New York Times Bestsellers list, and several topped it. Orman also has remained active via social media, and in a recent LinkedIn post described the financial services industry as tonedeaf to women.
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“WALL STREET B
But Wall Street needs to connect with women, for its own sake. Women outlive men — 81.2 years to 76.4, according to the Centers for Disease Control and Prevention’s latest statistics — and, increasingly, younger women out-earn their husbands. Recent data reported by NPR earlier this year showed that 38 percent of wives earn more than their husbands. And finally, there are estimates that by 2030 women will be the primary decision-makers for more than two-thirds of the wealth in the U.S. If the financial industry continues to flounder with women, it might find itself floundering with profits in the coming decades as well. So what’s a financial advisor to do? Here’s what Orman had to say. Cautious investors Women make cautious investors, something Orman pins on the desire for greater financial security, not returns. Financial advisors must take that need into account, she said. “A woman’s nature is to nurture, she has the ability to give birth … She spends her entire life caring more about her spouse, her parents, her brother, her sister, her employers, her employees, her pets, and her plants
AND THE BROADER FINANCIAL INDUSTRY PRETTY MUCH, WELL … SUCK AT WORKING WITH WOMEN,” ORMAN WROTE LAST MARCH IN THE CHARACTERISTICALLY BLUNT POST.
taken care of. Ease and security also can keep women invested in lackluster products as well — Orman previous had a deal with TD Ameritrade to contribute an additional $100 to women’s savings accounts based on 12 monthly, consecutive $50 deposits, but when TD Ameritrade reduced interest rates on those accounts during the 2008 financial crisis, Orman encouraged women to put their more than she cares about herself,” money elsewhere. None of the 150,000 Orman said. women who signed up made the Male advisors tend to be ignorant switch, however, she said, adding that of the “fear component” that drives she believes comfort outweighed the many women’s financial decisions. potential financial benefits of moving Women often attach strong emotions elsewhere. to financial security, which can lead “Men need to understand how a to fear and anxiety around investing woman needs to remove her emotional in products where the returns are not block that keeps from being more, guaranteed. Single mothers can be and having more, in order to be especially hesitant to commit their seriously successful with her financial money to an investment product, wellbeing,” Orman said. Orman said. Women who overcome that Women who do invest often “emotional block,” however, tend to hesitate, however, to leave an advisor become effective investors, Orman who “isn’t doing anything for them,” said. Orman drew a contrast between once a personal relationship is many male investors — “financial established, Orman said. Often, she fakers” being her term for most of sees female investors who believe their them — and women who eventually advisor is performing well because he enter the market, describing the latter took them to lunch, sent a birthday as more willing to ask questions and card, or otherwise engaged them on admit when they don’t understand a personal level, but that has little to what an advisor is saying. do with whether their money is being
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ORMAN ONCE CONDUCTED an EXPERIMENT, putting several men in a room and then providing a stream of nonsensical advice. None of the men asked any questions when the presentation finished. At that point, the men when were asked to explain the presentation to their wives, who were in on the joke. As expected, none of the men knew what to say, because none of them had understood a word. “That’s how Bernie Madoff was able to become Bernie Madoff,” Orman said. “Everybody wanted to be part of a lie.” The seminar experience highlighted the key difference between the sexes, she added. “Women will ask, men just act,” Orman said. “Women become very great investors, once you get them over the fear component.” Now is the time to learn Women often control household finances, but traditional gender roles tend to prevail when it comes to investing, with husbands being responsible for the majority of retirement funds. Widows, then, often are left in a difficult position when their spouse dies; both
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coping with grief and coming to grips with a financial situation they were excluded from. Women going through divorce encounter similar problems, often grappling with unclear financial pictures and feeling uncomfortable speaking to a financial advisor who had a better relationship with their now ex-spouse. Women need to be proactive in developing financial literacy and an understanding of what their husband has done with their money, before problems force them to. “The time to learn about their money is not when they’ve suffered a
divorce,” Orman said. Building relationships with (male) clients’ spouses likely would do financial advisors some good. Many women working through the loss of a husband or divorce often begin talking to the “family” financial advisor — who really only had a relationship with the now out-of-thepicture man — and find themselves feeling alienated, or simply unsatisfied. “Survey after survey shows that women tend to be seriously dissatisfied with their financial advisor ...” Orman wrote in March.
“It is absolutely no surprise to me that one survey found that within one year of being widowed, [most] women fire their (male) advisor.” Orman’s advice to new widows and divorcees? Sit tight and keep your money safe for at least six months, preferably 12. “The time to learn about finances is not when you’ve suffered the loss,” Orman said. “That’s the time women are the most vulnerable because they know nothing, and when many financial advisors will seek them out.” And women aren’t the only ones
who need to learn; advisors need to meet them half-way as well. Many financial advisors, accustomed to speaking in jargon or prioritizing clients’ more selfish financial goals — owning a boat or retiring early for example — can fail to connect with women by misunderstanding the values that drive them to invest. “They will care about everybody
before themselves, so when speaking and dealing with women you have got to understand the emotional component that goes along with being a woman,” Orman said. “It’s not simply do this with your money, do that with your money, buy this, sell that.”
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Divorce often leaves people in confusion struggling with a combination of loss, anxiety, and coming to grips with what’s next.
“
They are shell-shocked and vulnerable and in some cases, they have a considerable amount of assets and no idea what to do,” said Lloyd D Lowe Sr, MBA, RFC, LACP, the chief investment advisor of LD Lowe Wealth Advisory. “The work we do is critical in helping individuals get to a point where they can make their own decisions.” LD Lowe Wealth Advisory is a Dallas-based firm that provides wealth management, financial planning, investment planning, estate services and more to clients. LD Lowe Wealth Advisory is a comprehensive wealth management firm with an expertise in divorce financial planning. The divorce rate might not be making headlines like it did in the 1980s and 1990s, but nationally it’s still quite
high—about 50 percent of all marriages eventually end that way. Divorce is often confusing and complicated to work through for the individuals caught in one. A life-altering event requires steady financial planning. LD Lowe Wealth Advisory acts as a fiduciary—meaning client needs come before commissions or advisors’ fees—and works with clients to provide honest, tailored assistance that is easy to understand. Breaking down complex financial concepts so that clients can understand them matters to Lowe. The amount of financial information available to consumers via media, the internet, automated investing platforms, and more can be similar to “drinking from a fire hydrant,” Lowe said. “We’re not going to move forward until the client understands where he or she is going and what the destination is,” he said. Often, acting as a fiduciary means breaking bad news to clients and encouraging behavioral changes so those clients can reach their financial goals. “If a client can’t fund enough money to handle the average cost of retirement, I shouldn’t be advising them to retire,”
Lowe said. “For example, many people retire without considering the effects of paying for long-term care, and how that cripples their ability to pay for retirement. Consideration must be made for this issue, even if it ends with us telling a client, ‘You need to work another three years.’” Would-be retirees often need this advice – especially as lifespans increase – requiring retirement funds to be stretched over 20 or even 30 years. Long-term care insurance continues to rapidly rise in price as well, providing many retirees with precious little “slack” in their retirement accounts. Clients hoping to reach their financial goals, recover from a difficult divorce, or retire comfortably should also keep in mind that partnering with a financial advisor is a big decision – one that should be made carefully, Lowe said. “What a client should be looking for, and what I want a client to ask from me is, what my training, my tenure, and my track record looks like,” he said. “Those three things provide clients with clarity, substance and distance to decide on who their advisor should be.”
where do you want your bridge to take you? www.ldloweplan.com
ADVISORS MAGAZINE SEPT p.27
by matthew edward
RETIREMENT Is a Unique Journey
Retirement presents different challenges and opportunities for everyone.
B
ut, as lifespans become longer and longer—retirees now have a one-in-five chance of living to 90—and financial media streams saturate consumers with contradictory information, it takes a dedicated professional to help turn a person’s unique retirement situation into a satisfying journey. “Not everybody’s financial situation is going to be the same, it never has been and never will be,” said Duane Johnson, president of Duane Johnson Group, LLC., told Advisors Magazine during a recent interview. “By having that one-on-one with people, it eliminates that … Rather than having to listen to what the Internet’s saying, it’s not as confusing when you can actually sit down and talk to someone.” The Duane Johnson Group, LLC., is a Murrieta, California-based, financial services and insurance firm that provides retirement and income planning for clients in or nearing retirement. The Duane Johnson Group, LLC., also maintains a sep-
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arate tax office that works closely with the retirement side of the business. The firm does not require a minimum amount of assets to become a client, with Johnson chalking that up to being a “big believer that everyone needs help.” People often put off dealing with their finances. The complexity, jargon, and diversity of products—combined with the array of financial problems the average person may be facing—can make finances overwhelming. That’s where Johnson steps in, taking careful stock of prospects’ financial situation, goals, and needs, then following that up with a tailored plan. Increased longevity can complicate retirement for many. “Potentially you’re going to have 25-plus years of retirement,” Johnson said. The chances that anyone will outlive their savings are considerable given that lifespans now can frequently push 100. Johnson works to mitigate this by planning for
ADVISORS MAGAZINE - SEPT 2017
client longevity and incorporating fixed annuities into plans so that his clients can feel confident in at least on income stream regardless of how long they live. New financial tools, such as automated “robo-advising” platforms, may help demystify some of these financial challenges, but Johnson believes a professional still matters. Many would-be do-it-yourself individuals, after all, can struggle with financial literacy, and the new tools are useless without the knowledge to use them correctly. Using those tools correctly, for many, requires a professional financial advisor who can answer prospec-
tive clients’ questions and explain complex financial products in a language they can understand. Personalized service also matters, Johnson believes, given each client’s unique financial goals, not to mention, it’s just good business. “I would not want anyone to feel like a number,” he said. For more information: www.duanejohnsongroup. com. Duane Johnson is a licensed insurance broker, CA insurance license #0C28543.
PLANNING for CHANGE keeps clients on course by jude scinta
T
wo fundamental beliefs at San Francisco-based Mosaic Financial Partners: clients deserve honest, transparent, conflict-free advice to guide them, and planning is best performed continuously throughout their lifetime so they can successfully navigate life’s transitions and unexpected events. “Personal financial issues impact much of our everyday lives as well as our plans for the future,” said Norman M. Boone, founder and president of the financial planning and investment management firm. “Unfortunately, too many people are unfamiliar with—and are therefore uncomfortable about—financial issues, so these issues don’t get addressed in appropriate and timely ways. People too often fail to plan ahead. If you don’t plan for the possibilities, you probably won’t like the outcome. Lack of understanding, plus a lack of planning, typically results in sub-optimal decisions. Our job as financial planners is to help educate our clients, to help them identify important issues and plan for them, so they can flourish.” With an investment minimum of $1.5 million, Mosaic Financial Partners, Inc. advises people who have enjoyed some success in life, most often
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including corporate executives, business owners and professionals. Their “model client” is a female executive, concerned not only with her managerial responsibilities, but with concerns about her compensation complexities, her husband and kids, as well as her aging parents. Addressing her life requires analyzing a broad range of issues, including career development, estate planning, insurance needs, taxes, investments, preparing for retirement, and philanthropic strategies. Mosaic encourages an internal culture based on intellectual curiosity and continuous education. “Given the relative success of our clients, we have to stay on top of our own game. For us to be able to offer the best counsel to our clients, it’s critical that we routinely scan the environment to learn what’s changed and what new and better ideas are out there. We’re always asking the question, ‘is there a better way for us to serve our clients?’” “For example, we came out of the 2008 Great Recession with an appreciation that the downturn created a lot of fear for many of our clients. We wanted to find a way to help our clients continue to invest for growth, but at the same, try to minimize their potential
ADVISORS MAGAZINE - SEPT 2017
losses when markets turn negative. As a result, beyond the stock and bond exposure we get through ETFs and mutual funds, we’ve added more real estate and alternative strategies. The extra diversification offers broader protection on the downside while still providing plenty of upside opportunities,” Boone said. The best advisors are fully trustworthy. Boone, who co-authored the investment textbook Creating an Investment Policy Statement: Guidelines and Templates and founded online software technology platform IPS AdvisorPro®
purchased by Fi360 in 2013, is passionate about the fiduciary issue. “Fiduciaries are people you can trust to do the right thing. We have publicly positioned ourselves as fiduciaries for 25 years and we are strong believers that part of our role as a trusted advisor— and part of the way we’ve earned that trust—is to always put our clients’ interests first and disclose any conflicts,” said Boone. Mosaic adopted the new fiduciary rules set forth by the U.S. Department of Labor well before it was required, updating their internal processes and procedures accordingly in
support of the initiative. But ultimately, Boone would like to see the U.S. Securities and Exchange Commission take the lead in establishing the requirements. “In everything that financial advisors do, they should be required to put the clients’ best interests first. ‘Suitability’ is not a satisfactory criterion by which anybody, including financial advisors, ought to be able to recommend choices,” said Boone. “At Mosaic, we see ourselves foremost as financial planners who perform top-notch investment management, rather than being primarily investment managers. We take a holistic
view of a client’s life, starting with their goals and values. This means that we work with all the key parts of our clients’ lives, going well beyond just their investments.” “Of course,” Boone continued, “good investing is vital to a client’s need to accumulate assets for the future. Fundamentally, our investment philosophy is that we want a fully-diversified portfolio with broad representation in all major
asset classes, customized to serve the individual client’s life goals and needs,” said Boone. “We’re not shooting for the highest returns. What we’re shooting for is to raise the probability of our clients achieving their goals over time. Our success is not based on chasing the latest fad, but on making effective long-term decisions.” As part of their comprehensive approach, Mosaic Financial Partners offers clients coaching services, a unique aspect for an advisory firm, but one Boone predicts is sure to become more common. For over a decade, at least one member of the firm has been a Certified Professional Co-Active Coach®. Currently, three additional advisors are working towards certification through the Coaches Training Institute. “Eventually, we hope all our advisors will possess coaching skills. We think that coaching is going to be an increasing part of the advisory relationship. Beyond the decisions a client needs to make, one of the most difficult things for people to do is to learn to modify their behavior so that what they do supports those decisions. They may know they should do certain things, but can’t get themselves to do those things. Coaching gives us an additional ability to help clients adapt to their world and realize their goals and dreams.” For more information on Mosaic Financial Partners, Inc., visit: www.mosaicfp.com/
ADVISORS MAGAZINE SEPT p.31
by martin frost
taking the long view
1999, the S&P 500 grew at a jaw dropping average of 17.9 percent annually. “During that timeframe, if the market dropped, investors felt confident that When investing, it helps to take the long view. stocks would come back, and they did very quickly,” he said, adding that market “To give investors the proper perspective on long-term investing downturns in August of 1997 and 1998 saw the market “come back with the same in stocks, I like to show them the history of the Standard & Poor’s vengeance on the upside.” The aftermath of 500 Index (S&P 500). Educating the investor by giving them the 2008 financial crisis, which threw global a brief understanding of the financial markets is important and markets into turmoil, has seen the average empowering,” said Derek Hobbs — a financial advisor at Evart, annual S&P 500 return dip, but the index Young & Hobbs Investment Management — explaining that he remains a crucial tool in explaining the risk and returns of the stock market. walks clients through the S&P 500’s performance from 1926 to “The mindset of the investor has become 2016 to provide a much-needed investment perspective. more defensive because of 2008,” Hobbs said. “However, citing the prior example, “I like to point out that any given 30-year time interval, the if the returns of the S&P 500 were extended S&P 500 has averaged a low of 8 percent a year return to a from 1980 to the end of 2009, which high of 13 percent per year,” Hobbs told “Advisors Magazine” includes the 2008 financial disaster, a thirty during a recent interview. “If you’re going to invest for a long year time interval, an investor would still period of time, prior history allows an investor the proper have had a long-term average return of over perspective on future returns, the risks involved and it shows 10% per year. When investing with a longthem that patience is critically important.” term mindset, the returns of the S&P 500 Evart, Young & Hobbs Investment Management, based in land close to their historical averages.” Redwood City, California, is a wealth management firm that Hobbs works with investors to help them provides financial planning and asset management services understand what a “reasonable” return to its clients. The firm maintains an investment minimum of looks like, and then looks at their additional $250,000, but will make exceptions if the client’s expectations investments they might be adding over and philosophy align with the company’s, Hobbs said. time to see if they will be able Hobbs works with clients to first identify their financial to have enough income to goals. After that, the appropriate financial plan can be sustain themselves throughout For decades, our firm crafted. The firm practices asset allocation as the investment retirement. That requires strategy, primarily using no-load mutual funds and exchange has successfully guided frequent client communication, traded funds as the investment vehicles, and implements the our clients through the a balanced investment portfolio strategy once they have a clear understanding of their client’s of stocks and bonds, careful gloom of the bear and investment goals. planning for unexpected In addition to the history of the S&P 500’s average longthe boom of the bull emergencies — everything term returns, Hobbs highlights the dramatic ups and downs from a death in the family to a markets. that pepper the index’s past. For example, between 1980 and leaky roof — and the ability to rein clients in when the market shakes. “Our greatest value to our clients is to have the appropriate asset allocation and ability to manage client emotions when financial markets are performing incredibly well or poorly,” Hobbs said. For more information see www.eyhadvisors.com
© 2017 Richard Iriye
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FOR MILLENNIALS, A FRESH ADVISOR O
lder millennials—the generation born between 1983 and 2000—might struggle to find an advisor who genuinely understands their needs. That’s not surprising considering just 22 percent of financial advisors are under the age of 39, according to a 2016 Ernst & Young industry report. Those numbers are unlikely to improve in the short-term. The EY report notes that for every financial planning college student who graduates, two advisors become eligible for Social Security. Eric Lai knows that millennials can face difficulties finding the right advisor, and his firm Archvest Wealth Advisors, Inc., provides guidance to these younger investors that they can understand. “The average age of the principals here are in their 30s, that’s a distinct difference… In an industry that is old and getting older,” said Eric, a CERTIFIED FINANCIAL PLANNER™ practitioner (CFP) and Archvest Wealth Advisor, Inc.’s chief executive offi-
cer. “Most advisors are working with clients plus-or-minus five years of their own age.” Archvest Wealth Advisors, Inc., a California-based wealth management
firm, provides estate, investment, insurance, and tax planning services. The firm does require a minimum fee to invest, but serves clients of any age or background, even though their specialty is younger investors. Archvest Wealth Advisors, Inc., takes a flexible, personalized approach to building financial plans. Eric agrees that the investing paradigm has shifted away from chasing “alpha” and toward a more personalized approach, especially now that the market has diversified with so many options.
by hadrian scott
“This talk of alpha … Is really kind of a thing of the past,” Eric said. “In our opinion, that is not a comprehensive way to do financial planning because if you have this alpha type of approach, you are, of course, subject to market swings.” Providing clients with a personalized strategy also requires that advisors strip the industry jargon from their vocabularies and offer common-sense, simple explanations. Eric added that the firm’s young advisors also can provide clients with a different approach to investing, one tailored to the new generation of investors’ needs. He said, “It’s always harder to explain things simply.” “We are bringing a fresh perspective into the financial planning field, that we can relate to the same issues our clients are facing today,” he said. For more information see www.archvestwa.com
CONNECTING WITH CLIENTS by hadrian scott
Give a man a fish and he eats for a day. Teach a man to fish and he eats for a lifetime.
F
or Bill Parrott (CFP©), president and chief executive officer of Parrott Wealth Management, it’s more than just an old saying—it’s how he approaches client relationships. “I use stories, real life examples,” Parrott told The Suit in a recent interview. “If I talk to someone about fishing, it requires patience and planning just like investing.” Stories and parables remain the “best way to connect” with clients and relate investing to their financial goals, Parrott added. Parrott Wealth Management is a comprehensive wealth management firm based in Austin, Texas. The firm provides wealth management, financial planning, retirement planning, and other services to clients who mostly are approaching retirement. Parrott Wealth Management does not maintain a firm minimum investment. “I don’t want the minimum to be a barrier,” Parrott said. “A lot of people have minimums but, if I set the minimum at $500,000 and someone comes in with $400,000, I’m going to work
with that person.” Parrott’s approach to clients involves considerable education and a strong focus on financial goals. Some investors may be consumed by seeking alpha and looking for products targeted toward maximizing returns, but Parrott cautions those investors to plan first, and invest second. “I feel it’s more important for an individual to focus on their financial goals than on a money management style,” Parrott said. “Investors who try to invest without a plan are like a homeowner trying to build a home without a blueprint.” Investors also need professional guidance to understand the tools available. Robo-advisors and new, automated investment tools can be helpful to a subset of would-be investors, but most still need help to sort their options and make an educated decision, Parrott said. “It’s kind of like when I walk into a Home Depot, I’m surrounded by thousands of tools most of which I don’t know how to use,” Parrott said. “I could certainly go to a YouTube channel and educate myself on how to use
a certain type of tool, but for me I feel more comfortable talking to an expert in the store who can give me some type of training.” The increased information made possible by new tools and the Internet has failed to deliver an uptick in financial literacy, he added, noting that few people are genuinely literate when it comes to managing their own money. But that doesn’t mean the new tools are useless. In the future, those tools likely will enhance traditional advisors’ services, not replace them, Parrott said. “The right tool in the right hands is a powerful thing,” he said. For more information see www.parrottwealth.com
ADVISORS MAGAZINE SEPT p.35
by matthew d. edward
its hard to feel good about health insurance
R
ising health insurance costs are increasingly squeezing small business owners, and the industry needs several drastic changes to improve access and affordability. “Getting back to having plans that are affordable,” is vital so that average Americans can keep health care within reach, said Ray Freer, owner of RF Insurance Masters during a recent interview with “Advisors Magazine.” “When they put ‘affordable’ in the Affordable Care [Act], that’s when the prices doubled.” RF Insurance Masters, based in Austin, Texas, provides health insurance services to individuals and businesses, in addition to life insurance and other products such as annuities and travel insurance. Americans spend $3.4 trillion per year on health care, according to data from the Centers for Medicare and Medicaid Services. When broken down individually, that means the average American spends a staggering $9,956 on health care, according to CMS’s 2012 figures. And costs have risen rapidly over the past two decades; in 2007, the average American spent $7,700, almost $2,000 less than in 2012. Freer works with clients to find insurance solutions suited to their situation. He only provides products that he personally trusts. “If I’m not comfortable with it, then I’m not going to offer it to the client,” he said.
Freer remains available to clients from consultation, through purchase, and until the product is no longer used. Clients purchasing insurance through RF Insurance Masters can reach out to Freer at any time, he said. Access to medical professionals poses another major problem for health care consumers, according to Freer. As the industry moves towards an emphasis on health maintenance organization (HMO) plans, instead of the formerly more common preferred provider organization (PPO) plans, consumers can be shut out from seeing the doctors they want, or even from receiving care at their preferred facility. “If you’ve been seeing the same doctor for 40 “We’ll help you navigate the years and the HMO various options and choose gives you a choice of a plan that’s best for you. Let three in the Austin our experience guide you area, and none of them through our product offerings.” are yours, that’s a - Ray Freer problem,” Freer said. One client, after a liver transplant, was left “numb” after her HMO forced her to switch specialists seven times.
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It’s that sort of problem that should concern policy makers, Freer said. Freer added that he works with clients to find the best solution for their needs, and that he’s hoping to see some innovation in the health insurance space soon. Whether that means another law passed targeting health costs, or an expansion of Medicare to cover younger people, or something else, he’s not sure, but ever-expanding health costs really are not an option for most. “When you’re paying $12,000 a year [in premiums] and you have a $12,000 liability to cover your family, then you’re looking at $24,000 a year in health insurance,” Freer said. “It’s a pretty hefty price-tag to have.” For more information see: www.rfimasters.com
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by christopher parks
BIG INVESTMENT FIRMS
Leave behind smaller investors
I
Investment advisors at big-name firms and the investors they serve often find themselves in a tugof-war between the company’s recommendations, and the client’s own ideas. Clients might want to invest in a hot start-up like Tesla Motors, while corporate policies put the brakes on that plan. Frustration with not being able to let clients breathe is one of the reasons Gene Sulzberger struck off on his own. “They were getting so fearful of litigation that everything was just dumbeddown,” said Sulzberger, president of Sulzberger
“
requires “six figures” of investable assets to get started, but Sulzberger declines to set a hard minimum so that he can take on clients who fit well. Sulzberger spent some time in finance’s top firms, and he found that average investors—and particularly clients with $1 million to $5 million portfolios—were being left behind. At one company, Sulzberger recalled only being allowed two annual client contacts if the investors’ portfolio totaled less than $5 million, something he described as “obscene.” Boosting those investors’ access to reliable, tailored financial services became
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Capital Advisors, told Advisors Magazine during a recent interview. “They were fearful of officers not getting all the checks and balances in place if they were deviating from the portfolio a little bit.” Sulzberger Capital Advisors is a Miami-based firm that offers wealth management services to clients looking for a customized solution to help them reach their financial goals. The firm also works with traditional investment managers who can assist clients with capital preservation, income creation, and capital growth. Sulzberger Capital Advisors p.40
one of Sulzberger Capital Advisors’ key offerings. “I felt there needed to be more customization going on with client portfolios to really be helping them get satisfaction out of what they’re doing,” Sulzberger said. Would-be investors often struggle to get started in tackling their finances. Sulzberger said that a number of prospects take an “out-of-sight, out-ofmind” approach to their finances, but that he remains open to their questions and continually keeps them in the loop to make sure that their expectations are in line with
ADVISORS MAGAZINE - SEPT 2017
what the firm can achieve. And for clients who struggle with financial literacy— another barrier to getting started, Sulzberger noted— Sulzberger works to explain their finances in a way they can understand. Industry watchers have claimed that automated tools and the so-called “roboadvising” platforms will increase financial literacy and improve clients’ ability to manage their own money. Sulzberger, however, believes
those tools may be “too simplistic,” and that investors will eventually want to talk to an advisor who can provide personalized service. “Seventy-five percent of this job is almost like being a therapist,” Sulzberger said. “It’s about listening to people, being there for people, communicating with them, and understanding their situation and their issues.”
4500 Biscayne Boulevard Suite 205 Miami, FL 33137 305.573.4900 www.sulzbergercapital.com
SEASONED FINANCIAL PRO is still a teacher at heart by judy scinta
Carolyn Howard, CFP®, managing principal of SeaCure Advisors, LLC, was a science teacher for 17 years. During that time, she admits that she didn’t know the difference between a stock, a bond, or a mutual fund. But that all changed when she left the academic world and joined the financial planning industry.
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ow, her mission is to educate her clients about their own financial situation. “What I figured out was that I really liked financial planning, which was not unlike doing a lab experiment. You have a lot of data, you look at that data and work with the issues within the data, and then you create a plan. For me it was another way to problem solve and help others, and I’ve always been in the business of wanting to help others,” said Howard. With offices in Lexington, Kentucky, and Sarasota, Florida, SeaCure Advisors offers financial planning services to anyone
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seeking help, including singles and newlyweds looking to start a strategy to manage their finances, and those individuals who are more established and are going through transitions in their life. “Anybody who is wanting to get organized around their finances is a potential client,” Howard said, adding that as a general rule, she advises those clients who are just starting out to plan for emergency situations by setting aside three to six months of their income. SeaCure Advisors makes its mark as the third independent registered investment firm founded by Howard. Her first two businesses were in Boston, but when her husband passed away in
2008, she moved back to her home state of Kentucky two years later. Drawing on personal experiences to guide her advisory approach, Howard tells clients that when she first entered the financial world she felt overwhelmed – like she had been dropped in the middle of a foreign country and didn’t know the language. So for her clients, the former teacher breaks down the technical language and industry jargon into lay-terms to help make financial topics easier to understand. While people can educate themselves on financial matters if they put the time into it, they still must sort through a mass of information offered through cable business news networks and
online financial resource platforms. Howard decided to produce her own informational videos to help. “There is so much noise out there that people don’t know how to disseminate what they really need to be hearing. I started doing videos because we’re in a fast-lane world, whether it’s fast-food or drive-thru to pick up groceries. Nobody wants to read anymore, they want information as quickly as possible,” said Howard, adding that her videos help people understand different aspects of the financial industry. By studying her online analytics, Howard knows that thousands of people are watching her videos, but the return on her investment to produce them isn’t measured in dollars and cents. “It hasn’t gotten me any business, but people watch, and it’s good to help educate the general public.” Currently, Howard has just created “SeaCure Women” to help women in transition from a divorce or widowhood. She is producing podcasts and other platforms where women can feel safe to ask questions that they may be embarrassed to ask, or may not know how to articulate. It should come as no surprise that the former school teacher would advocate that children should be educated on money matters early on. “If we can teach kids how to interface with financial issues and concerns, and create a problem-solving interactive environment, I think that would be fabulous. It’s all about methodology,” Howard said. In her interview with “The Suit,” to emphasize the importance of educating the public, Howard light-heartedly reflects on an article she read recently that told of a financial professional who asked a client if they knew what a fiduciary was. The client, who was from California asked, “Is that some sort of a meditation?” Then Howard went on to clearly
define the term. “A fiduciary is somebody that has the best interest of a client, not just suitable interest – and there is the biggest difference. A fiduciary is always working for the client and with the client,” she said. “As I’ve always explained to clients, ‘My job is to sit on the same side of the table as you and make sure that everything that we do is in your best interest.’ And there is no deviation from that. I might not benefit from it at all, but the goal here is not benefiting me, it’s benefiting the client,” she said, adding that in contrast, the suitability standard supports that financial advisors may promote what is suitable for a client without having to be necessarily in their best interests. Howard does feel that the Department of Labor “has potentially overstepped their boundaries with new regulations that have been set in place over the last few years,” but, acknowledges that it still remains to be seen. And she calls the amount of paperwork now required by fiduciaries “over the top,” and “unbalanced” because it is heavily swayed toward retirement accounts only. Another component of the SeaCure Advisors process is to take the emotion out of money. For many, financial topics are difficult to talk about because such discussions can trigger nerves, worry, and fear. “Our job is to help the client stay on task, help them achieve their goals, help monitor their risk profile, and help them meet the time horizon for those goals,” said Howard. “We’re very goal clientcentric in terms of our philosophy. What clients want to know is, ‘Am I going to get from point A to point B in a risk-reward goal-centric manner.’ If they can see that they’re meeting those goals, they’re happy.” For more information on SeaCure Advisors, visit: seacureadvisors.com/
ADVISORS MAGAZINE SEPT p.43
Look closely at nickel stainless steels and you'll see both their brilliance and their beauty. But nickel's role in sustaining our planet is also well worth looking at. Most importantly, nickel in all its forms is recyclable. Beyond that, nickel improves the corrosion resistance of alloys like stainless steels. This means less maintenance and less expensive rehabilitation. And nickel's strength and ductility make it ideal for creating super alloys for turbines that burn biogases-from landfills, for example-to generate electricity. Nickel also helps to reduce green house gas emissions in many ways hybrid cars use nickel metal hydride batteries; waste-to-energy plants use corrosion-resistant nickel alloys for a long, maintenance-free operating life; and wind turbines use nickel alloy casting because they perform so well under cold operating conditions. Nickel. Take a closer look. You'll see so much more.
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THE SUIT MAGAZINE - MAY 2017
by martin frost
Helping Investors Sort
Through Information Overload
retirement is a journey,
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aking financial decisions always has been difficult, but the Internet’s democratization of information should allow investors to more easily make informed choices, right? Not really. Investors today instead find themselves dealing with information overload driven by the constant day-by-day — or hour-by-hour — drumbeat of financial headlines. At every retirement planning seminar, he gives, Christian Cordoba CFP®, RFC®, CFS asks attendees, “Is it easier today to make financial decisions?” “Hands go up for both but inevitably people think it’s actually more difficult today even though we have more information, and that comes back to trust,” Cordoba, founding partner and personal wealth manager at California Retirement Advisors, told “Advisors Magazine” during a recent interview. California Retirement Advisors provides comprehensive wealth management and financial planning solutions to investors, primarily those nearing retirement. The firm
not a destination.
travel with confidence. charges a 0.5 percent investment advisory fee based on $1,000,000 accounts (not included are additional costs such as planning or technology), and collects the same advisory fee even if total balances are lower; for example, one percent on a $500,000 balance. Trust matters at California Retirement Advisors. When Cordoba says that decisions are made harder because of trust, he means that investors increasingly distrust the information available to them. It takes a trained, professional wealth manager to help them sort out fact from fiction, and clients need to know their advisor has their best interests at heart. Cordoba first started California Retirement Advisors after working elsewhere in the financial industry and seeing less-than-exemplary client service; he founded the firm with a different attitude. “I committed to myself and my clients that I would always be there for them,” he said. California Retirement Advisors primarily works with retirees, but other investors are welcome. What Cordoba really looks for, is whether the client needs his services, and how he can help. “Although we specialize in working with
people who have retirement objectives, I keep circling back to three main criteria,” Cordoba said. “[Those are] people who do not have the time, knowledge, or desire to invest on their own … You can have two of those things, but even if you don’t have one you need to get assistance from somebody.” Increasingly, investors are seeking assistance from non-human sources, however, a trend that concerns Cordoba due to the possibility that some will be misled. “It’s going to really depend upon the integrity and the mission of those that are creating them … Every presentation can be tweaked,” he said, adding that ethically created, effective online tools could complement human advisors and be a “huge help” to investors, especially if the automated programs contributed to client education. Cordoba’s goals for the rest of 2017 and going into 2018 include tracking the evolving financial technology landscape and finding a way to position California Retirement Advisors to take advantage of it. The same goes for the rapidly changing regulatory landscape as well. The Department of Labor’s new fiduciary rule can provide benefits for both investors and advisors, Cordoba said, but his firm still needs to find where they fit in this new market. “[The rule is] creating a lot of opportunity for consumers to gain a lot of knowledge and also for financial advisors to better position themselves to help the clients as well,” Cordoba said. “But, I think that ultimately … With everybody being considered a fiduciary like we’ve always been, but they all weren’t before, how do you differentiate?” For more information see craretire.com
California Retirement Advisors 898 N. Sepulveda Blvd. Suite 740 El Segundo, CA. 90245 Phone: 310.643.7472 ADVISORS MAGAZINE SEPT p.45
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by matthew d. edward
Financial Security means more than just the 401(k) plan
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any corporations often bring in outside help to educate employees on how to best use their sponsored 401(k) plans. But there’s more to a secure financial future than a monthly 401(k) contribution. “I want to go in and educate them about the need for their legal documents, investment strategies, tax considerations, retirement projections, … [And] the need for different types of insurance products to cover these big risks so they don’t have this possibility of having a financial meltdown if there’s a sudden death or disability in the family,” said Ted D. Snow, CFP®, president of Snow Financial Group, LLC. “I want to teach them that all of these pieces need to be coordinated, so you can’t just concentrate on one thing (investing) without it affecting another area of your financial plans. It’s literacy but it’s also an overall view of how to be smart with their money.” Snow Financial Group, LLC is a Dallas-based wealth management firm that
provides comprehensive financial services such as investment, estate, tax, and retirement planning. The firm requires a minimum of $250,000 to sign on, but Snow cautioned that this threshold may rise soon. Snow Financial Group, LLC also can provide corporate training services to firms looking to upskill their employees in personal finance, a critical life-skill that even highly educated professionals lack. During a recent interview, Snow told “The Suit” that educating clients on how their finances work — as opposed to simply throwing jargon at prospects and expecting them to sign off — is what sets his firm apart. Having been a graduate school adjunct professor at the University of Dallas, I am a big advocate of educating my clients.
“There are no bad questions. You never had a user’s manual that came with the first dollar you made, so you’re going to have questions,” he said. New technologies, like the so-called “robo-advisors,” may be changing how people take their first steps into advising, but a real, living and breathing financial professional is still needed to guide investors and help keep them from unintended consequences. “I think [robo-advisors] may add some value in terms of helping people save money, but there’s no substitute for an actual educational curriculum, whether that’s in the universities or high schools or wherever, there’s so much more value in that than these apps,” Snow said, adding that he’s writing a soon-tobe-published book on the
basics of investing. “Financial education needs to begin as early as possible, he said, because by the time new graduates enter the workforce, or experienced professionals start looking to plan their retirements, the learning curve they face is that much steeper.” “Financial literacy should start, maybe even in a lower school, fifth or sixth grade,” Snow said. For more information see www.snowfinancialgroup.com
Ted D. Snow, CFP®, MBA Founding Principal Snow Financial Group, LLC 469-522-4056
ADVISORS MAGAZINE SEPT p.47
by matthew d edward
D
espite the financial blogs’ assurances and the TV personalities’ loud declarations, few people, if any, can beat the market. And when clients walk into National Financial Services Group’s (NFSG) office looking to outperform the S&P 500 years over year, it is their job to pour cold water on those fantasies. “What the client understands [about returns] is ‘Can you beat the market?’ and we’ll have to tell them, ‘That’s not what we do,’” said Jim Cook ChFC®, CFS, the chief executive officer of NFSG. “If you want to work with us, we’re not going to beat the S&P 500. What we want to do is provide a reasonable rate of return with a less than reasonable rate of risk.” NFSG is a Georgia-based firm that provides comprehensive wealth management and retirement planning services to high net worth individuals, business owners, and to America’s underserved middle market. The firm does not maintain a minimum to invest. Cook’s belief in growing with the market emerged from his experiences in the 1990s. Then, Cook said, prospective investors would ask--with a straight face--for a 12 percent rate of return. Investors in that decade were “being promised things that couldn’t happen,” Cook told The Suit during a recent interview. Cook added that NSFG “lost clients” in the 1990s because of those promises being made by other firms, syphoning away investors to advisors elsewhere who likely never delivered. And when the 2008 financial crisis roiled markets, NFSG’s bet on stability paid off, with their clients coming through with less significant losses than those at other firms. “We protected clients’ money as best as possible,” he said. Investors believing the market is a game they can win remain incredibly common. A lack of financial literacy among savers may be partly to blame for this, with few prospective investors understanding even the basics of how the market works. Advisors often need to address this through client education, Cook said, adding that he participates in the GAMA International, an industry group that promotes improving financial literacy training in schools. “We believe that [financial] education p.48
ADVISORS MAGAZINE - SEPT 2017
SLOW AND WINS THE RACE needs to start at the elementary level,” Cook said. “It needs to start in elementary school with the basic fundamentals of saving money.” In addition to teaching students the value of money, schools also need to demonstrate that financial services is a viable career path, Cook said. The average age of a financial advisor is 50.9 years old, and 43 percent of advisors are over 55, according to a report by Cerulli Associates. Further, 8,600 advisors plan to leave the profession each year for the next decade, meaning a full third of the industry will retire within 10 years. With 10,000 baby boomers retiring per day--and 10,000 millennials turning 21 each day--there are plenty of retirees and
MANAGING MONEY MATTERSSM Our team approach helps ensure that we offer creative customized solutions for even the most complex financial issues.
STEADY
emerging investors for the industry to take care of (Sen. Rob Portman, R-Ohio, The Wall Street Journal, July 22, 2014). The question is, will there be enough advisors to handle the next generation? New talent, it turns out, may be a long time coming. The consulting firm Accenture found that only 5 percent of advisors are under the age of 30. Cook added that few young people seem to be aware that financial services careers are available to them, financially rewarding, and can provide a sense of accomplishment. “When I was in high school in the 1970s, nobody ever said, ‘Do you want to be a financial planner or a stockbroker?’” Cook said. The financial services industry, despite its size and ubiquitousness in public life, also struggles to band together to protect its interests, Cook said. He pointed to the recent Department of Labor fiduciary rules that required all financial services professionals, including stockbrokers and insurance agents, to serve client interests without regard for commission or fee yields. The industry struggled to communicate with policy makers about the rule’s numerous downsides, Cook said (he noted that NFSG already is working to comply with the final requirements of the rule before it fully goes into effect). “There’s no American Bar Association, no AARP, no American Medical Association, no national organization to represent this industry,” Cook said, adding that the financial services industry is represented by several groups. “I think these congressmen and
senators were saying, ‘Where is the spokesperson? Where is the one voice coming from the financial services industry?’” “We need to band together so that Congress knows what we do,” he said. Education is the key to success, whether that’s an investor achieving financial goals or policy makers understanding the industry’s role in society. Cook said that investors today especially need to be well-educated in finance given the overwhelming amount of misinformation and the number of competing voices in the media. Advisors no longer hold a monopoly on information and instead have to help clients sort through the noise, and reassure them that the negative drumbeat about the financial industry in the press is not always an accurate representation of reality. “When I got into the industry knowledge was king, information was king, and now it’s not,” Cook said. “Now it’s wisdom and implementation. We have an innate need to educate our clients and get them feeling comfortable with how we do business. We feel that the more educated a client is the less likely they are to leave.”
For more information see www.nationalfinancialservicesgroup.com/ Securities and investment advisory services are offered solely through Equity Services Inc., a broker-dealer and registered investment advisor. 1050 Crown Point Parkway, Suite 1700, Atlanta, GA 30338 National Financial Services Group is independent of ESI. TC96676(0817)1 Standard and Poor’s®,” “S&P®,” “Standard and Poor’s 500,” and “500” are trademarks of Standard & Poor’s ADVISORS MAGAZINE SEPT p.49
by matthew d. edward
jeff gollehon clu©, chfc©, president jg financial consulting
‘Stock Jockeys’
CAN’T HELP SERIOUS INVESTORS
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Recent revelations that Wells Fargo sales teams created up to 3.5 million fake bank and credit accounts as they struggled to meet what the company now describes as “unrealistic quotas” have, once again highlighted how high-pressure financial services firms often fail to put clients first. The Wells Fargo scandal — originally thought to encompass 2.1 million fake accounts, a number that climbed higher as subsequent audits found more —
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prompted an apology from the company’s chief executive officer and a sharp rebuke from Senator Elizabeth Warren (D-MA), a long-time Wells Fargo critic. And while Wells Fargo’s latest troubles stem from bank and credit card accounts, other financial products likely are not immune from the same high-pressure sales environments and quota systems. “My big complaint about the
industry has always been that most people in the industry are salesmen,” said Jeff Gollehon, CLU, ChFC, the president of JG Financial Consulting. “They’re not advisors. If you put somebody’s tax return in front of a, supposedly, financial advisor, most of them wouldn’t be able to interpret a simple tax return.” Based in Aberdeen, North Carolina, JG Financial Consulting provides retirement planning and wealth management for senior clients either in, or close, to retirement. The firm has no “hard and fast” minimum, but Gollehon prefers clients with $250,000 in investable assets. JG Financial Consulting holds itself to a fiduciary standard, meaning that clients’ interests come before commissions and firm profits, Gollehon told “Advisors Magazine,” adding that he takes his fiduciary responsibility seriously, and has developed a comprehensive knowledge of investing, estates, Social Security, and taxes, so that clients can receive tailored advice. “I am not an estate attorney or a CPA, but I have enough experience to be able to identify a potential problem and refer them to a local professional who is,” Gollehon said. “To work with someone who’s strictly a stock jockey, they aren’t doing those people any favors.” JG Financial Consulting has “two sides” to it, according to Gollehon. The first is the “low-risk, fixed” side that serves soon-to-be and current retirees with safer investment products such as fixed and indexed annuities; the goal there being to protect wealth and pass it on to the next generation. The second side of the business is the moderate-risk, moderatereturn AUM side, and JG Financial Consulting works with several wealth management firms who work to help clients manage their retirement savings and give them a better chance for successful results. Market collapses like the 2008 financial crisis pose the biggest threat to clients’ retirement funds, he added. That is especially true now that lifespans are growing, and many
retirees realistically may live to 90 or even longer. “The biggest thing that can derail somebody’s perfect plan for retirement is if there’s another 2008 or 2001 where the market corrects 40 or 50 percent,” Gollehon said. “In 30 years of retirement, it’s likely you may go through three, or four, or even five recessions where even a 15 or 20 percent correction will be bad.” Even smaller, but significant, downturns can badly mangle carefully laid retirement plans. “If you have a traditional brokerage account … And your 100 % invested in stocks or stock mutual funds, and you’re drawing 4 percent a year or 5 percent a year to supplement your pension or social security and, all of a sudden, the market corrects 40 percent, and you’re $1 million portfolio that you were drawing $50,000 on is now a $600,000 portfolio, you still need to withdraw $50,000,” Gollehon said. “Now, all of a sudden, your draw percentage went from 4 percent to 9 percent, and that’s not sustainable at all. No matter how long it takes the market to recover, you will never recover.” Gollehon often finds himself serving as a teacher to clients who struggle with the complexities of retirement planning. “Part of my job is to be a teacher, I tell them what we have, why, and explain to them how it works. We try very hard to be different from our competitors,” he said. “Ninety percent of the public doesn’t know what they’re doing … That doesn’t make them different from anyone else, that’s why they’re talking to me. We try to guide them through the choppy waters.” Each client has different needs, and JG Financial Consulting works to develop customized solutions that can help investors reach their financial goals. Gollehon works to present clients’ their financial plans in “plain English,” eschewing much of the
industry jargon that litters advisor-client conversations, making life more difficult for lay-investors who already feel unsure of what to do. Setting client priorities also matters, he said. “First and foremost, safety,” Gollehon said. “The return of your money, when you’re 75, is much more important than the return on your money.” JG Financial Consulting also communicates frequently with clients, helping to ensure their plans stay on track. “We don’t forget about them, we don’t desert them. I tell my clients they might get sick of me,” Gollehon said. Frequent communication, a broad knowledge of different financial products, and a commitment to a fiduciary standard is what sets JG Financial Consulting apart from its competition. The new Department of Labor rules stipulating that all financial professionals act as fiduciaries was welcome news to Gollehon, who believes that the industry now can focus on providing more thorough, honest service. “I think that’s why the DOL rule is good, because it’s going to force these people to either be compliant or get out of the industry,” Gollehon said. “If you take care of the client first, then eventually you will also take care of yourself.” For more information see www. helpingseniorsplan.com
JG FINANCIAL CONSULTING
150 Magnolia Square Ct. Aberdeen, NC 28315 910.944.0575 jeff@jgfinancialconsulting.com www.helpingseniorsplan.com Investment advisory services offered through Horter Investment Management, LLC, a SEC-Registered Investment Adviser. Horter Investment Management does not provide legal or tax advice. Investment Adviser Representatives of Horter Investment Management may only conduct business with residents of the states and jurisdictions in which they are properly registered. Insurance and annuity products are sold separately through JG Financial Consulting. Securities transactions for Horter Investment Management clients are placed through Trust Company of America, TD Ameritrade, and Jefferson National Life Insurance Company.
ADVISORS MAGAZINE SEPT p.51
Social Investing Still Requires Business SENSE
BY HADRIAN SCOTT
Millennials—the generation born between 1980 and 1994—take a different approach to investing than their parents or grandparents.
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study by the Responsible Investing Association found that 58 percent of millennials want their portfolios to produce social impact, meaning they want their money to benefit environmentally friendly companies, social causes, or firms seen as creating social good. For wealth managers, however, this philosophy presents a challenge. “Sometimes, great ideas, those businesses are not profitable, or they don’t make money, or they’re highrisk,” said Derek J. Moffatt, president and financial advisor at Moffatt Financial Strategies, LLC. “So you have to educate clients that the cause is good, but it has to be a good business decision as well to allocate capital to that.” Moffatt Financial Strategies, LLC, based in Fort Worth, Texas, is a comprehensive wealth management firm that assists clients with reaching their financial goals. The does not require a minimum to invest, but Moffatt said he works with clients who need “comprehensive” assistance with everything from investing to estate planning to taxes. Moffatt works with few millennial investors, but his experience with retirees, professionals, and clients struggling with financial literacy have prepared him for the new generation of investors. Financial education, especially, is key, even with older clients, Moffatt said. And while new tools such as the so-called “robo-advisors” may benefit clients, the traditional advisor still serves an important role, helping investors sift
through the overwhelming amount of information they are bombarded with daily. “There’s definitely always going to be independent investors … But there’s always going to be, I think, a market for personalized advice,” Moffatt said. “They would rather someone be the tour guide for them and help them navigate those markets.” Moffatt Financial Strategies, LLC, works to guide every client through financial goal creation, planning, and then implementation. The firm is a fiduciary, meaning clients’ interests come before commissions or profits. Moffatt said he builds authentic client relationships by presenting a realistic wealth picture for investors, and in preparing them for eventual market fluctuations. “I think being conservative, being realistic, knowing unforeseen circumstances will happen,” Moffatt said. “Being surprised by market downturns in Texas is like being surprised by the first 100 degree day … We don’t know when, but we know it’s going to happen.” For more information see: moffattfs.com
by jude scinta
NEWLY RETIRED ATTRACTED to wilmington, north carolina firm
David Shucavage, president of Carolina Retirement Planners, strives to make complicated financial concepts simple for his clients — a trait he defines as a core competency, and one that originally led him to earn an engineering degree from Cornell University.
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ometimes, he resorts to drawing pictures to simplify intricate financial models. As a fiduciary advisor, one subject he often finds that many people don’t understand is the role of a fiduciary and why it is an important issue for them to grasp. “Consumers should be educated, because if they understood the differences between a financial advisor held to the fiduciary standard, a fee-based advisor, and a commission-based advisor, they could better choose who they work with and understand how their financial professional is getting paid,” Shucavage said, adding that the concept of a fiduciary “is almost like a secret in the industry.” Shucavage, who teaches classes in retirement planning at local universities and community colleges in the Wilmington, North Carolina area where Carolina Retirement Planners is based, would like to see financial education begin before adulthood. “In general, the more and the sooner you can educate people, the better. It’s a shame that there’s many things we educate students on, but somehow the basics of how to handle your financial life is not one of them. That should be a core curriculum that everyone gets, it would give people a big advantage as we go off into life,” Shucavage said. Working almost exclusively with retirees or those nearing retirement, the majority of people that Shucavage helps are people who have recently moved to the area to enjoy Wilmington’s historic downtown riverfront and scenic island beaches. The Carolina Retirement Planners team helps clients financially adjust to retirement by advising on such issues as Social Security and pension strategies, tax-efficient strategies, and estate planning. “I’ve developed a system that caters to that kind of individual, the one that is just at that
cusp of life where they’re trying to figure out how to live the rest of their life with what they have,” said Shucavage, adding that he partners with attorneys and accountants to help guide clients as legal and financial issues are “highly intertwined.” “What has also evolved is the integration of a full-blown wealth management plan to include investments, income, tax and inheritance planning, and protection against things like long-term care,” he said, adding that his independence from a large financial corporation helps him to build strong
relationships with clients based on trust. “Some 16 years ago, I decided to shift careers and instead of helping big companies make more money, I decided to help individuals and families instead,” said Shucavage, the former engineer and management consultant turned investment adviser representative. For more information on Carolina Retirement Planners, visit: www.carolinaretirementplanners.com
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Carolina Retirement Planners are not affiliated companies. AW09174140
ADVISORS MAGAZINE SEPT p.53
AUTHENTIC APPROACH Wins the Game Forget the standard financial advisor image featuring the guy wearing the perfect suit with the perfect hair walking stoically across a marble-floored lobby to present a client with a stiff
handshake. That isn’t how Matt Logan rolls. As president of his own firm – Matt Logan, Inc. – based in Greensboro, N.C., Logan believes he and his clients are better off when he, as an advisor, is who he is: a regular guy. “Clients are looking for an advisor that speaks their language and is here to help,” Logan said. “In an industry that can still be seen as boring, I approach my job by being myself and having fun and clients respond to that. It is a neat opportunity.” Logan believes in developing strong client relationships. He takes his time getting to
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know new clients – their current situation, their dreams, their goals. Client education – Financial 101 as he calls it – is a major part of developing that relationship. It is how Logan ensures that he and the client are on the same page when talking about and planning for how to best manage the client’s financial future. “We talk about their relationship with money and how that changes over time,” he said, noting that the uncomfortable conversations regarding longevity and longterm care people often attempt to avoid are the essential ones he steers clients toward. Long-range planning is his focus. He isn’t looking for the quick fix. He wants to provide clients with plans with longterm stability as the measure. He points out that even Barry Bonds – one of professional baseball’s homerun kings – also has a rather high strike-out percentage. Yet, Bonds’ overall career remains an example that young hitters want to emulate. Not every investment is a hit out of the park. But with a consistent stream of base
BY AMY ARMSTRONG
hits, doubles and triples, an investor wins the game. “Every client has a different risk tolerance and a different time horizon for accomplishing his or her goals,” Logan said. “That is why the long-term approach customizing for each of those specific parameters is always the best approach.” Learn more about Matt Logan, Inc. online at www.mattloganinc.com
www.mattloganinc.com Matt Logan Inc. is an independent Þrm with securities offered through Summit Brokerage Services, Inc. Member FINRA & SIPC, and advisory services offered through Summit Financial Group, Inc., a Registered Investment Adviser.
Matt Logan Inc. is an independent firm with securities offered through Summit Brokerage Services, Inc. Member FINRA & SIPC, and advisory services offered through Summit Financial Group, Inc., a Registered Investment Adviser. 3824 North Elm St. Ste. 101 Greensboro, NC 27455 336-540-9700
by matthew edard
HELPING CLIENTS TO PRESERVE AND GROW THEIR WEALTH A good, healthy retirement requires an active lifestyle.
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nd for some would-be retirees, that means finding a job. “I should be retired now,” said John G. Rumbold CFP®, EA, the proprietor of Rumbold Financial & Tax Advisory, who certainly is not retired. “I stay active, I stay alert, it keeps the mind alert learning new laws and regulations.” Rumbold encourages his clients to seek new opportunities after they retire so that they can build a reliable income stream, in addition to their investments. Clients often take his advice and start a small service business, or sell handmade crafts to provide a trickle of money — and as an activity to occupy their time, energy, and mind — while others take the non-remunerative route and volunteer. Rumbold Financial & Tax Advisory, based in Tustin, California, provides services in income tax preparation, IRS and state audit representation, payroll reporting, QuickBooks setup and support, and business startup services. The firm also provides personal financial planning and investment advisory services, and requires a $25,000 minimum investment.
Financial literacy remains a challenge for advisors and planners who often struggle to explain the basics to their prospective clients. Taxes are no different, with the government presenting taxpayers with a byzantine code of rules and regulations to follow. The average person attempting to prepare their own tax return spends roughly eight hours trying, and then often deals with the anxiety that comes from fearing they missed something minute. Arguably, investing and retirement planning, are even more complex. Clearing up misconceptions about the market usually is Rumbold’s first step with many prospects. Often prospects approach him hoping to beat the market, and are disappointed to find out that aiming to outperform the S&P 500 typically amounts to a fool’s errand. “Clients are really best-suited by helping them to build their wealth through their own careers and businesses,” Rumbold told “The Suit” in a recent interview. “Once they have some wealth established I can help them to preserve that wealth and grow it at a normal pace.”
John G. Rumbold, EA, CFP® Main Office 17461 Irvine Boulevard, Ste G Tustin, CA 92780 Main Number 714-425-7202 Email jrumbold@rfta.biz
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Rumbold points to a friend who sold a small business for $5 million and then asked how to grow that money by beating the market. “I told him, you know how to build wealth more than me,” Rumbold said. “My goal is to help clients preserve and grow their wealth, in that order.” Many clients, however, come to Rumbold after working with another advisor, often to poor or even disastrous results. “When I help a client who isn’t one of my financial planning clients, I see the results of bad decisions,” he said. Investors often lose money because their advisors neglect to consider tax implications, costing the estate enormous sums of money. Soprano’s actor, James Gandolfini, notably fell into this category when his estate planners failed to properly protect his assets from taxes; in the end, the government raked in $30 million from Gandolfini’s estate. And some elderly savers simply fall victim to bad information. Rumbold offered the common example of an elderly
person transferring the deed to their home to their children before they die to “make it easier” for the family. It’s a bad idea, however, because it leaves the transfer vulnerable to significant taxes. Investors’ inability to sort their own finances often leaves them with no way to determine whether an advisor is leading them in the wrong direction. A lack of financial literacy, coupled with misconceptions and the fear of asking the wrong questions, can drive would-be investors into financial blunders that can be difficult to recover from, or, in some cases, prevent them from ever getting started at all. “I don’t have the answer to reach these people and make them ask for advice,” Rumbold said. Rumbold said he assures new clients that the industry is complicated, and that a lack of financial know-how is fixable. He added that he is a fiduciary, meaning client concerns come before commissions. As a result, he tries to help his clients sort through the ever-changing morass of
rules and regulations so that they can effectively protect their assets from taxes, and grow their wealth through investment. “[Regulations are] even very complicated for somebody like me who’s been trained in the industry,” he said. Many would-be retirees continue working after 65, and sometimes it’s because their planning went awry, or never happened. Rumbold sees several people each year who can’t afford his services, but as a fiduciary advisor and member of the community, he still provides them with advice before referring them to free or low-cost community services that can help. “When people come in and don’t have enough money to pay, I give them advice anyways and then send them over to the senior center,” Rumbold said. “I feel compassion for people who don’t understand finance … I’m willing to give back to the community in that way.” For more information see www.rfta.biz
RUMBOLD TAX ADVISORY
Tax Preparation & Audit Defense For more information see www.rfta.biz
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MONEY MENTORS: EDUCATION IS KEY Everybody could use a mentor – that is, particular guidance for some aspect of their lives. Potential financial investors can especially benefit from a mentor when navigating through the maze of investment options and regulations, and understanding current financial markets and trends.
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ince education can be pivotal when it comes to investor decisions, many people seek out financial advisory services to help achieve positive results and, ultimately, success. Six Figure Club is one company offering the kind of mentorship that empowers clients – both rookies and pros – educating them on managing portfolios, budgeting their assets, eliminating debt, or getting started in new and exciting ventures aimed at amassing wealth. After over 40 years of experience in the financial markets and in sales, James S. Davis Jr. Founder and Nationally Published - Syndicated News Columnist, noticed an unfortunate trend. “I found that very few people or companies in the public understand that there are resources out there for obtaining outstanding returns and financing,” he said. After developing investment resources and sales rela-
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tionships over the years, Davis also noticed that many of his clients – whether individuals, families, small business owners, or corporations – never had a reliable financial mentor who could advocate for them and help them navigate through the complexities of the market. Determined to alter this course, Davis set out with a mission. “(My) mission has always been to become a reliable resource for educating the public on the financial world, and helping more people achieve six figure incomes than any other enterprise in history!” he said. “Specializing in developing markets that produce “Real Assets and Serious Monthly Income” nowa-days is difficult to produce, but the risk reward-ratios have created new market shares in multiple profit centers worldwide for our “Private Members.” The top 400 wealthiest Americans earn at the same rate our partners do…why do you think I SEPT 2017
named the company… Six Figure Club?” As the plague of economic uncertainty continues to spread worldwide, many are hesitant to invest their money or even move their assets to a more advantageous position. SFC knows the risk, and offers unique programs to help clients gain a steady stream of substantial income. One program, called Programs, Products, Services, and Projects (PPS&P), promotes positive returns by encouraging investors to invest in avenues of public necessity that are therefore extremely desirable, reliable, and worthy. “The Addiction Factor is the ultimate solution that everyone will pursue 24 hours a day because … 95% of the public can qualify and receive our labor free substantial Monthly Passive Income Rivers… The other 5% already has!” SFC has also developed a community of lenders to help clients finance investment portfolios and take advantage of unique, yet, finite business opportunities. “We have built a financial lending and leveraging network globally, so that if (the client) just doesn’t have the money to invest in our programs, we have the solution,” said Davis, noting that over his career he has had active relationships
with over 3,000 private and public lenders. SFC also offers clients specialized financing and re-allocation programs for businesses and individuals alike who wish to eliminate debt and gain financial independence. Using their three-pronged solution program, Davis and his team show clients how to reduce or even eliminate fixed monthly expenses, create a simplified and timely debt payment plan, and educate them on how to remain clear of financial distress and how to amass new wealth. “Education is what we do and the end result is the reward you will receive in PASSIVE INCOME,” said Davis. “Most of our Private Members, in a few short years, will earn $100,000.00. Many will earn six figures annually! Yes, we even have members earning, in excess of $100,000.00 monthly.” “The true bottom line,” Davis continued, is to master the use of O.P.M – other people’s money –with leverage and reallocation of poorly performing assets, investments, and retirement-funds into multiple monthly income streams removing risk along the way. Earning 24/7 our private members say, never gets old!” For a free review please complete our Total Needs Analysis form, visit the website and fill out the form to review your net worth and financial position. Our Global Mission is to become the world’s first … www.SocialFinancialNetworks.com for securing (HYRPIP) High Yield Return Passive Income Programs Check out our YouTube videos To receive additional info and to speak personally with Mr. Davis please complete this Contact Us James S Davis Jr. online at: info@ SixFigureClub.com
1 ACROSS Economist and co-director of the Center fo Economic and Policy Research, Dean...
4 8 9 11 14 16 18 21 22 24 25 26 27 30 33 34 35
Promotes and sells Special position Numbers expert Encourage to grow AP department’s responsibility Division word Factor in any successful company Dollar Have a debt to And all the rest..., 2 words Shortfall Intelligence measurement Took to court Large store First name of Yahoo’s CEO Jogging circuit Commercial imbalance, 2 words
Crossword by Myles Mellor
DOWN 1 Compensation in addition to salary 2 Cause a business to get going rapidly. 2 words 3 Whiskey or bread 4 Entrepreneur’s degree 5 Consumer’s price 6 They set emissions targets, abbr. 7 Reports 10 Symbol showing the trend of a stock 12 Loneliest number? 13 Clancy or Hanks 15 Starting a new business 17 SNL segment 19 Creature in a Wall Street trading film title 20 Wrong color for the books 23 Be able to pay for 24 Identical in value 26 Ending for capital
28 Period 29 Small drop 30 Guinness book suffix 31 Spoil 32 GPS feature
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ACROSS
