ADVISORS
JULY 2020
ISSUE 97
magazine
AN INTERVIEW WITH
affinia
special needs financial planning
Narrowing the GAP
New conduct rules emerge
Family Values
Diversity and inclusion
Prepare for Good Times & Bad Holistic planning helps families
Erwin E. Kantor Michael Gordon Jude Scinta L. Guerrero
CEO & Publisher Managing Editor Editor-in-Chief Writer-at-Large
Eric Daniels
Billing
Sean Rome
Creative Director
Bobby L. Hickman Bram Berkowitz Joe Innace Harold Gonzales Lumi Subasic
Feature Writer Feature Writer Business Reporter Business Reporter Business Reporter
CONTRIBUTORS & GUESTS Steven Selengut IAR, Vitaliy Katsenelson CFA, Elaine Eisenman, PhD & Susan Stautberg, Tim Sheehan
AN ADVISOR MAGAZINE PUBLICATION Headquartered at: 3642 NE 171st Street, Suite 305, North Miami Beach, FL 33160 (718) 675 4060 Advisors Magazine is published bi-monthly and printed by Blurb, Inc. Reproduction of any material from this print issue or our digital issue or transmitted in any form of by any means without prior written consent of the publisher in whole or in part is strictly prohibited. Š2020 by Advisors Magazine. All rights reserved. For a free digital subscription email: editorial@advisorsmagazine.com To obtain a print issue, visit: www.magcloud.com/user/advisorsmagazine ADVERTISING advertising@advisorsmagazine.com QUESTIONS & COMMENTS info@advisorsmagazine.com LETTERS TO THE EDITOR editorial@advisorsmagazine.com
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ADVISORS MAGAZINE / 3
contents july 2020 on the cover
14
Beyond Advisors Meet three advocates for special needs financial planning
features
6
Regulation BI Narrows Gap Between brokers, advisors new market conduct rules arriving
10
Client Connections Target Personality, Risk, & Communication
24
Impacting Client Lives Appeal of the Financial Advisor
14 6
28
Financial Services and Family Values
BEYOND ADVISORS
When diversity and inclusion are close to home
ADVOCATES FOR SPECIAL NEEDS
32
consumer confusion between financial advisors and brokers
Preparing for Good Times and Bad Holistic financial planning helps families
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Consumers Confused by Financial Jargon Client education improves communication
CLIENT CONNECTIONS 4 / ADVISORS MAGAZINE
JULY 2020
10
made for you
30
Our picks from around the globe
by joe innace
Regulation BI Narrows Gap Between Brokers, Advisors New Market Conduct Rules Arriving
Consumer confusion concerning the fiduciary responsibilities between financial advisors and brokers seems likely to continue with a new Securities Exchange Commission rule narrowing the gap between both groups’ market conduct duties.
F
or decades, Registered Investment Advisors (RIAs) have been classified as fiduciaries, requiring them to act in the best interests of their clients – regardless of their own interests or those of their firms. Broker-dealers have long been held to what the SEC terms a “quasi-fiduciary” standard to make suitable recommendations to clients. An earlier effort by the U.S. Department of Labor to hold brokers to the same fiduciary standards as investment advisors was struck down in 2018 by a federal appeals court. The SEC is addressing that issue with Regulation Best Interest (Reg BI), effective June 30, 2020. Reg BI requires brokers to act in the “best interest” of their clients. While the new rules do not hold brokers to the fiduciary standard, Reg BI sets the bar higher than the previous “suitability” standard. The new rules do not change the duties of investment advisors (although the SEC has updated some details of the RIA fiduciary obligations). However, Reg BI does introduce additional disclosure requirements for RIAs as well as broker-dealers. Both types of financial professionals must provide clients with the newly-created Form CRS (Customer/Client Relationship Summary). The document discloses information such as fees, costs, compensation, conflicts of interest,
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and standards of conduct. Reg BI has drawn criticism from consumer advocates who maintain establishing another conduct standard will increase confusion among consumers who generally already do not understand the differences from an investment advisor, a broker-dealer, and a dualregistered advisor. Seven states plus the District of Columbia have challenged the standard in federal court, maintaining all parties should be held to the same fiduciary standard. SEC Chairman Jay Clayton defended creating different standards for different roles, saying that individual investors have specific needs that must be addressed separately. Distinguishing between brokers and investment advisors is likely to continue challenging consumers who often assume all roles carry the same client care responsibilities. Several investment advisors told Advisors Magazine there are some basic ways to tell the difference between those types of advisors. Two basic characteristics distinguish an investment fiduciary, a broker, or a dual registered advisor, according to Reggie Ford, CPA, founder and president of Rosecrete Wealth Management in Nashville, Tennessee. Those factors are the advisor’s fee structure, and the type of registrations and licenses they hold. “Investment fiduciaries work on
a fee-only or fee-based model,” Ford said. “The fee might be a flat or hourly rate; on a per-service basis; or on a percentage of assets under management. They are registered as an RIA, and typically hold a Series 63/65 or Series 66 designation.” Brokers work on a commissionbased model that normally pays for each transaction related to sales of investments or products,
he continued. Brokers (including stockbrokers, insurance agents, and registered representatives) typically hold Series 6 or Series 7 designations. Dual registered advisors are registered as both investment fiduciaries and non-fiduciaries, Ford said. They may receive compensation from either fee-based or commission-based models, and may hold a combination of licenses and/or registrations. “Legally, investment fiduciaries are held to an ethical duty of doing
what is in their client’s best interest, while brokers are only held to a responsibility of making suitable recommendations for a client,” Ford noted. However, the SEC’s recent approval of Reg BI is changing that distinction. “Laws are being enforced on broker-dealers and their associated persons, whether investment fiduciaries or not, to make recommendations that are in clients’ best interest and provide additional disclosures to better inform clients,” Ford said. “In response, many brokers are shifting to the fiduciary standard as a better way to adhere to the laws and regulations with less gray area.” Brokers typically focus on investment activities and transactions. However, for financial advisors, investments are only one part of their business. Advisors work with clients to identify their goals and plan strategies that address all aspects of their financial life, such as creating a budget, financing college, or planning for long-term care. Charles Massimo, CEO and founder of CJM Wealth Management in Deer Park, New York, said the best way to distin – not at what they call themselves. “We always focus on the goal – not on beating an index or finding the next Google,” Massimo said. “Having a deep understanding of a client’s needs well before you invest one dollar is the first part of mitigating risk, regardless of market or economic conditions.” He continued, “Our advice is consistent. We focus on the goal and the behavior of the investors themselves, rather than reacting to the directions of the market. We keep them engaged by communicating that message even more during volatile times through
blogs, webinars, and one-on-one calls. This may sound simplistic, but it’s very effective versus those who react almost weekly or daily to changes in the markets.” Advisors also need to be transparent about the structure of their business, according to Wayne Wagner Jr., ChFC, president of Vizionary Wealth Management in Wilmington, Delaware. He said the compensation structure of the clientadvisor relationship should not be the sole measurement of whether an advisor is acting in the client’s best interest. “We see a variety of areas where advisors present themselves as ‘fiduciary only’, and then use an investment product that actually performs worse for the client (net of expenses) relative to the exact same product on a brokerage platform that pays a commission,” Wagner said. “The advisor needs to be open and communicate the rationale for using the product type, the specific vehicle, and why it may be offered on one platform versus the other. Too often I see people waving their ‘fiduciary flag’ who are not acting in the actual best interest of the client.” While the meaning of the term “fiduciary” continues to draw broad discussion, he added, some advisors call themselves “fiduciary only” mainly to avoid FINRA compliance burdens. Reviewing their portfolio construction may uncover layers of fees, conflicts of interest, or commissions paid on some products. “How I am compensated shouldn’t determine whether I am acting in my client’s best interest,” Wagner added. “I should always, every day, in every situation, put my client’s needs first, and be able to articulate why a recommended course of action is in the client’s interest first. Ours seems to be the only industry where compensation somehow measures whether the advisor is acting correctly.” ADVISORS MAGAZINE / 7
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by joe innace
CLIENT TALK
CLIENT CONNECTIONS Target Personality, Risk, & Communication 10 / ADVISORS MAGAZINE
JULY 2020
INTERVIEW
At least half of Americans do not have a written financial plan. However, those who do have a plan say documenting their goals and strategies helps them better weather the current challenging economic climate.
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here are a myriad of technological tools and software programs today designed to help financial advisors serve their clients; some advisors deploy as many as possible, while others are more selective. It’s the difference between a shotgun-like approach and one that’s laser-focused. The selective approach works just fine for Matthew Senicola CRPC®, AAMS®, managing partner at Massapequa, NY-based North Shore Wealth Management Group LLC. He uses very few models and almost all portfolios are custom-tailored. In fact, his favorite financial software tool is akin to a radar gun. “Every investor has a different risk speed that needs to be determined, and I have a system to my planning which allows me to dig deep into their personality traits when it comes to investing,” said Senicola. Years ago, Senicola started using the program Riskalyze, and every client he takes on agrees to go through the process so he can determine their “risk number.” “I have found it very
helpful to keeping clients on course,” he said. Senicola first became interested in the stock market at the young age of 10 – back when his main tools were pencil, paper and erasers. “My grandfather had a love for investing and taught me how to pick and track a portfolio of stocks using graph paper,” he said during a recent interview with Advisors Magazine. “I loved the challenge and excitement of the market and I believe that started me on my career path to become a financial advisor.” Flash forward to today, Senicola and partner Edward Wells have been working together and building North Shore Wealth Management for the past 21 years running an independent advisory firm on Long Island and working closely with approximately 200 households across various age groups. Senicola’s relationship with partner Wells is also personal – they are step brothers. Wells, who
is a Certified Financial Fiduciary, has 23 years managing portfolios. His other qualifications include: FINRA General Securities Representative (Series 7) license; Uniform Securities Agent State Law Exam (Series 63) license; Uniform Investment Advisor Law Exam (Series 65) license; NY State Life/Accident & Health Insurance license, and CFDA® Certified Divorce Financial Analyst. He’s licensed to transact securities business in 25 states. The six-person firm takes pride in its “hands-on” approach. “We are clientfacing and I am a big believer in top-notch service which sets my team apart from the competition; we have a system to proactively stay in touch,” Senicola said, adding that it is imperative for an advisor to know each client’s personality. “For instance, some individuals may require more attention in periods of volatility because they have reactionary personality traits to negative headlines.” For example, when the COVID-19 pandemic started, Senicola created
ADVISORS MAGAZINE / 11
L/R - Matthew Senicola, CRPC®, AAMS®, Managing Partner Edward Wells CDFA®, CDFA®, Managing Partner
a “Sunday Market Update” letter to send out to clients, colleagues, family and friends. Most everyone was stuck in their homes. The news was focused on negative stories predicting an economic collapse and heavy death tolls. “As the economy shut down and unemployment mushroomed, people were scared. The headlines were rolling in so fast and I simply couldn’t spend as much time as I would like to update every household in my book, so I decided each day I would make notes of all the positive developments that were being underreported and compose them into a weekly letter,” he said, adding that he was reminding everyone of how important it is to stay optimistic. “The feedback I received was incredible. I feel it helped many through a very difficult time and reminded them that we should expect challenging times ahead.” It was also consistent with one of Senicola’s key principles, which is to stay as current and educated as possible. He feels this is an area where the industry at large needs to do 12 / ADVISORS MAGAZINE
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better. “Throughout my career the one thing I have learned is that clients can feel if their advisor really cares,” he said. Senicola noted that as feecompression continues, many advisors get further removed from the investment process and this can turn them into a commodity. “The big firms train their people to become asset gatherers and hand client money off to cookie-cutter discretionary computerized models wrapped in fees on top of fees,” he said. “Over time, advisors tend to get lazy with their relationships and send out the same canned quarterly newsletters, which go unread.” On the plus side, Senicola is a big fan of industry change that is able to reach a younger client base, and he considers technology as the biggest driver of evolution in the wealth management business. From a financial planning aspect, it has helped his firm run its book of business efficiently and manage client accounts. “One change I have noticed is the drastic increase in the number
of young investors that are now interested in the market,” Senicola said. “The rise of trading platforms such as Robinhood and Acorn have marketed themselves to a younger generation, which I think is fantastic.” He sees such platforms as “easy ways for younger generations to get interested in the markets and investing early.” In fact, the no-fee investing Robinhood app, according to FinanceMagnates.com, exceeded 13 million users in early May 2020. Acorn’s app, which allows people to invest spare change in the stock market, counts more than 7 million users, according to its website. As technology gets better, Senicola recognizes that there will always be a cheaper option or solution, and he thinks it’s great that investors have choices. That belief in choice and flexibility informed his decision to run North Shore Wealth Management Group as a “dual-registered” advisor. “Some investors that buy and hold individual bonds or do a low-volume amount of passive equity investing should not be in a fee-based account,” he insists. “It’s not economical for them and I feel I’d be limiting choices if I was a fee-only advisor.” Technology and automated processes, however, cannot always provide such wealth management insight. “Robots alone can’t understand human emotion and life change,” said Senicola, emphasizing that investors with real planning needs and who are busy with their own careers will continue to need the guidance from a trustworthy and competent advisor. For more information about North Shore Wealth Management Group, please visit: northshorewmg.com
FEATURE COVER
BEYOND ADVISORS
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by joe innace
ADVISORS MAGAZINE / 15
meet three advocates for special needs financial planning
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hey work as financial advisors, but they live as special needs family advocates. They are the wealth advisors at Burlington, Massachusettsbased Affinia Financial Group – John Nadworny CFP®, CTFA, Cynthia (Cindy) Haddad, CFP®, and Alexandria Nadworny (CFP®, CTFA). Recently interviewed by Advisors Magazine, the multigenerational team expressed that providing a full life for an individual with special needs is paramount. A financial plan – the money part – only goes so far. A comprehensive 16 / ADVISORS MAGAZINE
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plan must include the people and support mechanisms for a child with a disability. Those with a child or sibling with special needs find themselves facing many challenges; among the biggest is financial planning for not one, but two – sometimes more – generations. Caregivers for children with disabilities want to ensure secure financial futures – both for themselves, and for the family members who’ll require care long after. Affinia Financial Group, LLC provides the typical planning and investment advice, but
the lynchpin of the practice is its Special Needs Financial Planning practice. At the heart of the business, it’s a specialty that has been cultivated over some 25 years at other firms, and which now accounts for 65 percent of their business. For any advisor, financial or otherwise, client relatability is enhanced when the advisors can walk the walk. John is the father of James who was born with Down syndrome. Alex is John’s daughter, big sister to James. And Cindy’s brother has developmental disabilities.
Cindy recalls going to a workshop in her mid-20s with her mother for a session about how to pay for housing for family members with special needs. “The presenter stressed that ‘the magic solution was life insurance,’ and I thought ‘Oh my gosh, that’s not the whole solution, there’s so much more to this,’” Cindy says. “Who’s going to be there? What about government benefits? What about legal assistance, and more?” She visited a number of financial institutions at the time, driven by the desire to work with just such families. “I was shut down by many, many different companies,” Cindy remembers. “Oh, the state takes care of those folks, or they don’t live that long so why do you have to plan for the future? There’s no money in that,” she was told. Then she went to a firm and the principle said he didn’t have any clients he knew of that had a child with a disability. “I kept thinking, yes, he does; he just didn’t ask,” Cindy says. Turns out, at that firm was John Nadworny whose son was born with Down syndrome. That’s how the two were first introduced. They worked at that firm for many years, went to another, and then decided to partner-up and launch Affinia Financial Group in October of 2019. The vision was to have a multi-generational firm so planning for clients’ futures could continue. Enter Alex in September 2013. “Growing up with James, my little brother and the most
loving guy in the entire world, I knew there was nothing I wouldn’t do for him,” she says. “And I always envisioned him one day living with us, but I didn’t know about benefits for him or what his adult life would look like, until I started working with my father. I realized how important it is to communicate with the entire family unit.” John points out that he and Cindy have been building the “brand” for more than two decades, but he’s most passionate about their advocacy efforts. “Once you develop an expertise in an area, it can really have an impact on a system and the way the system works,” he says. “Our goal has always been to do that and it’s like a multiplier effect. There are so many families in need of really good financial advice that it goes beyond one firm like ours being able to serve, and we feel it’s really important that the broader financial community understands some of the intricacies that you need to have in planning.” A steady stream of educational workshops, conference presentations, newsletters, written- and videoblogs brings the firm’s clients to them. “Cindy and I set a policy at the beginning – we’ll do a presentation, and then families call or email us. We’ve never had a list of to-call families,” John says. “We offer different workshops to educate the special needs community as a whole,” Alex adds. “Whether or not someone becomes a client, we think it’s extremely important given our role as family members to pass ADVISORS MAGAZINE / 17
"
Whether or not someone becomes a client, we think it’s extremely important given our role as family members to pass our knowledge on to as many people as possible
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our knowledge on to as many people as possible, and if there’s a good fit, they will reach out to us.” Timing is everything Planning for two or more retirements hinges on strong communication, timing, and prioritizing. Parents that have a family member with a disability still need to plan for all the usual types of financial goals – buying a home, getting other children through college, paying off a mortgage, building up savings, and so on – while also planning for their child with a disability. Helping families navigate certain key milestones led the group to develop their Special 18 / ADVISORS MAGAZINE
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Needs Financial Planning timeline. One of the key moments in that timeline is when a parent opts to retire. “A lot of the different entitlements that a child receives during their school years end, usually at almost the same time that a parent retires, so they have to think about how they can supplement what the government can provide in addition to what they need for their own retirement expenses,” Alex says adding that a taxfavorable approach is also needed. “In many cases, our families are spending just as much in retirement and it’s really important to have a balance between different types
of assets in those retirement years. So, we look at things a little bit differently because of the timelines of families and what types of assets will make the most sense for flexibility purposes as well.” Families need to be mindful of the rules, and especially whenever there is a change in government services and support, Cindy adds. Age 18 presents a huge change in eligibility for government benefits. “This would include supplemental security income (SSI), but also making sure that assets are not in the child’s name so they can apply,” she says. Another consideration about
this time is the decision-making around guardianship for the child. At around age 21 or 22, often as the parents contemplate retirement, the child may be about to lose entitlements from the public school system. “When they are out of the public school entitlements, it becomes about where the child will live, what are they going to do all day, where are they going to work and how do we incorporate all that in planning,” Cindy notes. All three advisors understand full well that life can be
their place when they can no longer do all that they do? It’s vital to get at the core of a family’s dynamic: considering if there are family members such as grandparents or siblings to help, support agency options, and more. Alex says it’s okay if some siblings don’t want to be involved in a disabled brother or sister’s future. “That’s fine too, because there is always a way to set up the team. And if siblings are looking to be involved, they don’t necessarily need to take on the full brunt of what a parent does,” she says. • Emotional factors. “This is very important – the denial and
needs trusts, and lays out the specific legal documents families will need – especially for guardianship and alternatives to guardianship. • Government benefit factors. These address which benefits the child might be eligible for or entitled to, and how they can be protected and maximized. • Financial factors. Here the firm assesses what tools are available and the best fit. For example, should families use an ABLE account? The Achieving a Better Life Experience Act authorized states to establish tax-advantaged savings programs for persons with disabilities. Life insurance might also be considered,
extremely overwhelming when you have a loved one with special needs. Affinia Financial Group’s strategic timeline helps families to focus on the highest level of priority, and then move on to the next one, and as the process continues, families can feel a sense of progress. Overlaid with the timeline is the firm’s focus on five factors that are then integrated into financial planning. These are: • Family and support network factors. “In short, who’s who in the child’s life,” Cindy explains. “And that’s where Alex has been instrumental in helping to build the Team to Carry On™.” This is a trademarked planning service of the firm, which helps answer the parents’ foremost concern: Who will take
acceptance, where are they in identifying all that they need?” Cindy says. Toward this end, the firm helps families create a Letter of Intent. “Only the parents know who’s who, or what their child’s habits and hygiene are, so we created the Letter of Intent to help with the transition around the emotional supports,” she adds. • Legal factors. This area delves not only into the ADA – the Americans with Disabilities Act – but also all the legal aspects such as types of trusts, particularly special
along with virtually any type of savings vehicle to be incorporated into the family’s planning. For John, Cindy and Alex the practice provides their livelihoods. But the real rewards come with their work around family advocacy. And they are most proud of having been instrumental in shaping policy regarding how services are delivered to families of people with special needs. For more information on Affinia Financial Group, LLC, please visit: specialneedsplanning.com ADVISORS MAGAZINE / 19
satisfying a growing market’s thirst for knowledge
Nadworny and Haddad author “The Special Needs Planning Guide”
How to Prepare for Every Stage of Your Child's Life
T
he number of people in the United States with disabilities continues to grow exponentially. A CBS News report in 2017 noted that nearly 58 million people nationwide over the age of five identified themselves as disabled, collectively the largest single minority in the country. The Dreamscape Foundation (dreamscapefoundation. org) notes that one out of every five Americans lives with a disability, and more than 400,000 individuals have Down syndrome in the U.S. On average, it occurs in 1 of every 691 babies born. What’s more, Dreamscape points out that medical advancements have increased considerably the average lifespan of individuals with Down syndrome. In 1983, the average life expectancy was 25. Today, the average lifespan is 60. In some way, Down syndrome touches 25 percent of all U.S. families, according to Dreamscape. In March 2020, the Centers 20 / ADVISORS MAGAZINE
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for Disease Control and Prevention reported that about 1 in 54 children aged 8 years currently have an “autism spectrum disorder” or ASD, according to Kelly Piacenti, head of the MassMutual SpecialCare program. “Twelve years ago it was 1 in 88,” she said in a statement to Advisors Magazine. Add to that the fact that the lifetime cost for a person with autism averages between $1.4 million and $2.4 million, depending on if the person has an intellectual disability, according to Autism Speaks. In 2010, The American College created the Chartered Special Needs Consultant® (ChSNC®) designation as an outgrowth of MassMutual’s SpecialCare program. The financial services college wanted to take the program from a certificate program to a full designation. MassMutual held exclusivity of ChSNC® until December 31, 2013. In January 2014, The American College opened up the offering
of the ChSNC® designation to the financial services industry. As of April 2020, The American College had 436 active ChSNC® Alumni in the financial services industry, Piacenti said. As part of its course work, The American College relied on the 2007-published book, The Special Needs Planning Guide; How to Prepare for Every Stage of Your Child's Life. Its authors? John Nadworny and Cynthia Haddad founding partners of Affinia Financial Group, LLC. A second edition is slated for publication in spring of 2021.
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IN VE S TM ENTS
FEATURE INTERVIEW
IMPACTING LIVES
TALK
by joe innace
IMPACTING
CLIENTS LIVES Appeal of the Financial Advisor
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he exponential growth of online programs and handheld apps – from so-called roboadvisors to educational tools and mock-trading platforms – has created a challenge for today’s financial planner and smaller financial services firms. Tony DuBose, managing principal of Florida-based Legacy Wealth Management, recognizes that while a certain percent of the investor and retirementplanning population is comfortable with such types of applications, they do
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not represent the majority. People want to discuss money matters with a financial professional. “A portfolio that reflects a person’s goals and objectives requires a human sounding board,” said DuBose. That sentiment and notion of personal service has been with DuBose a long time. Growing up in Georgia in a middleincome family, he recalls regular visits by his parents’ insurance agent. As his interest in finance took shape over the years,
DuBose noticed that despite such visits, there were gaps in actual planning and systematic savings. “As I looked more into financial services, it became obvious that most financial professionals were productdriven,” he said. “My focus has always been on service, not products – on handholding, not handheld apps.” And that human sounding board he spoke of? The best quality is its sense of calm. “Think about how difficult it was back in mid-March – when the market was off 30 percent – to stay the
path and not capitulate, and sell into a market that’s falling apart. It’s tough to do that,” said DuBose. “And as professionals, we’re able to navigate these markets and be a trusted advisor for our clients and guide them.” One of the firm’s focus areas is educating clients about market volatility and financial uncertainty in the markets. DuBose maintains that if clients have the right portfolio for their situation, there is no need to panic. Most of Legacy Wealth Management’s business comes from word-of-mouth or referrals from existing
clients. The firm’s minimum requirement is $100,000; while DuBose’s is set at $1 million. Operating as a boutique wealth management firm, it counts eight advisors and five supporting team members. Combined, they have more than 150 years of financial service experience at two South Florida offices. “We are a remarkably diverse thirteen-person firm regarding our backgrounds and experience,” DuBose said, adding that all the associates tend to have a specialty. One of Legacy’s associates is a world-class,
open-water swimmer. “I had a prospect once that was involved in swimming and thought that would be a good match for her. Chemistry is important, and that should be the priority – make sure the personalities are a good match,” DuBose said, adding that he encourages all of his advisors to “work with clients they will enjoy working with.” The firm’s service philosophy is grounded in offering comprehensive solutions, tailored to each client. “We don’t take a cookiecutter approach,” says DuBose. “We want to create a positive impact for our clients and we strive to be a transparent, intelligent company. We have a deep-seated belief that everyone in the firm contributes to growth and success of not only our firm, but also of our clients.” DuBose does have some opinions about the direction of the financial industry. Among the chief concerns he shares is that the financial services sector includes a large subset of nonsecurities licensed individuals, mainly insurance distributors. “They are trying to be financial planners, and I think the industry really needs to ADVISORS MAGAZINE / 25
tackle that and establish some kind of standard for those practitioners who are operating without a securities license and trying to offer financial advice,” he said. As to how to select a financial advisor, DuBose stresses to make sure the advisor uses a third-party custodian. That’s been the case at Legacy Wealth Management since day one. DuBose started the firm initially with a partner in 1997 as they were working for a Fortune 500 financial services firm because they wanted to serve clients without conflicts, review calendar, and providing independent, unhave been proactive with biased financial advice. In both client meetings and 1997, DuBose became the communications,” said sole shareholder of the firm DuBose. The associates through a buyout, and has deployed a wide array of been with LPL Financial as a tools: teleconferencing, broker/dealer and custodian video conferencing through since that time. Microsoft Teams “or Legacy launched whatever the client its multi-custodian TEAM prefers,” he adds, Registered noting “it’s all been Investment Advisory As diverse a quite flawless.” Firm offering in team as we Aside from using 2015. that time to revisit Now in 2020, are, we are clients’ goals and and like so many unified in our objectives in their businesses, fundamental financial plans to Legacy Wealth make sure that Management has approach what has happened faced the challenge to wealth this year hasn’t of maintaining management: to disrupted their its high level of goals in the near service during a offer objective future, the firm pandemic. The investment is preparing for firm instituted its business continuity advice coupled a post-COVID financial services plan in early with a sound world. March. All 13 team financial plan “We’re members started implementing working remotely, that can better all the things we but remained more address our need to do to offer accessible than ever. clients’ goals. our clients a safe “We escalated experience when the normal 26 / ADVISORS MAGAZINE
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they do visit our offices,” DuBose said. This means putting safety features in place, even including filtration systems to help screen out viruses and bacteria. DuBose says it’s all about “keeping our environment safe for our employees, advisors and clients.” That’s vital in a business that cherishes personal interaction and values its role as a human sounding board. For more information about Legacy Wealth Management, please visit: lwmfl.com
Securities and Retirement Plan Consulting Program advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. Other advisory services offered through LWM Advisory Services LLC, a registered investment advisor. Legacy Wealth Management and LWM Advisory Services LLC are separate entities from LPL Financial.
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by joe innace
DIVERSITY TALK
INTERVIEW
FINANCIAL SERVICES AND FAMILY VALUES When diversity and inclusion are close to home
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bout one in five financial advisors are women, according to the Certified Financial Planner Board of Standards, Inc. (CFP Board) So how does a firm, aiming to serve an array of clients, cultivate diversity and inclusion and start changing a long male-dominated
industry? Scott Frayler, founder and president of Long Island, New Yorkbased Blue Line Wealth Management, has long believed that there should be more women in the field of financial planning. He not only says it’s time for women to take their place in the industry, but he also took action. And he didn’t need to look very far. “There are clear advantages of having a diversified workplace,” Frayler says, adding, “As more and more women are taking a more proactive role in their finances, they may be motivated and prefer to work with a female advisor.” Toward that end, Frayler kept it in the family. “At my company I’m very excited to have my sister Meghan in our office. She’s in the process of acquiring all the pre-requisites to be an advisor and I think she will be a tremendous success,” said Frayler. “Meghan can be a valuable resource, and having that female perspective can help shape the firm and build its client base.” After 18 years at a large firm, Frayler started Blue Line Wealth Management, mostly serving clients based on his own family experience. His initial niche: advising those in law enforcement and their families. He understood that there is a bond that unites
the police family. “My family has a long history of first responders, my grandfather, dad, and brother chose to become police officers while my great grandfather and a long list of cousins decided to become firemen. Those that choose to dedicate themselves to this line of work have a calling to do good. Due to the complex nature of the profession, it often places trials and tribulations on families,” Frayler said. “There are things that happen in this line of work that don’t happen in other lines of work.” Frayler believed that his understanding of the police family dynamic would help him in such a specific arena, as well as several others. “I’ve been exposed to the wonderful side of law enforcement, unfortunately, we have to deal with the downside of it, too. Dealing with families that lost a loved one in the line of duty is never easy,” he said. While the law enforcement portion of the firm’s business remains quite significant, the client base has also expanded to represent other professions including educators. Blue Line Wealth Management doesn’t hold fast to a minimum investment amount maintaining that anybody should be able to get involved with an advisor. “For the younger client that wants to get started in an investment plan, we’re certainly not going to say we’re too big for them, and we’ll get them started on something as small as a monthly contribution plan,” Frayler explained. Once a client engages with the firm, Frayler’s philosophy is to keep things simple. One approach is to send periodic emails
our mission is to provide a superior investment experience
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to advise clients, regardless of whether markets are soaring or crashing. The key is to inform rather than inundate. “We are not an ivory tower firm, we sit on the same side of the table with our clients and have an open door policy as we believe we are all a part of the Blue Line family. We respect our clients and want them to feel the value we put on each and every one of them. With the modern day marketing programs allowing you to touch a client every day via email we are the opposite. We don’t use a marketing service, rather we choose to provide our own client letters when they are needed. We want the client to feel like we are right there with them because we are. When they feel nervous, we want to assuage their fears,” Frayler says. “When we say things, we want to be targeted and we want to reach clients who are looking forward to our emails in good times and in bad, giving them insight about what we see in the market, and then setting up a time speak on the phone or in person if necessary. The firm always looks for opportunities that may not have been there in a previous market cycle.” Frayler’s knowledge of, and his relatable experience in law enforcement has allowed Blue Line Wealth Management to handle the financial planning for both the Nassau County and Suffolk County Police Benevolent Associations, along with several other police organizations. “It’s through these relationships, and over the course of my career, that I’ve been able to show we’re a trustworthy enterprise, and we have some unique philosophies on what works for them,” he said. But personal relationships underpin Blue Line Wealth Management’s broader client base, no matter the profession. “We are fortunate to have a wonderful client base, and I’m happy to be a partner on their journey – there’s nothing that
makes me happier then when their goals are met,” Frayler said. During the COVID-19 outbreak, Frayler fielded countless calls from clients as one would expect. But the conversations were not based in panic – they came from a place of caring and concern. “It’s remarkable when clients are calling you to see how you and your family are doing, before we have had a chance to call them” he said. “It’s a special relationship and one that I don’t take for granted.” For him, it all comes back to that sense of family and being able to relate to each other. “We follow a code of doing the right thing,” Frayler said. For more information on Blue Line Wealth Management, visit: bluelinewealthmanagement.com
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made for you
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In a world of fast food and one-size-fits-all sensibilities, how often does something feel made especially for you? The "Made for You" section celebrates those items that are created with such high quality of hand workmanship and degree of customization that they become individual to you. In each issue, our editors will endeavor to bring you special things from anywhere on the globe, choosing them solely on the basis of outstanding quality. Our goal is to give you guidance on the best of everything. 1 EKSTER PARLIAMENT — SMART WALLET The Ekster Parliament is a smart bifold wallet with RFID coating to protect its owner from identity theft and a patented mechanism to eject cards from its aluminum storage pocket by pressing a button. It has space for at least 10 cards, as well as a strap for carrying cash and receipts. Ekster has crafted the wallet from high-quality leather that’s available in a multitude of colors. An optional Bluetooth tracker for the wallet Is also available. The ultra thin gadget is powered by light, so it never needs a battery. It has a maximum range of 200 feet. ekster.com
4 BEST PREMIUM MOTORCYCLE — ARC VECTOR Everything about the Arc Vector is impressive. From its range of 387 miles in urban areas and 230 miles at speed, to its “neo-café racer” design and innovative chassis technology, it’s a bike made for lovers of the sport. With a price tag of around $110,000, you’d expect high quality components, and that’s exactly what you’ll find on the Arc Vector. It has a top speed of 125mph and can hit speeds of 60mph within three seconds. Much like most electric motorcycles on the market, it’s free of a clutch and gears, but has plenty of variable power modes and cruise control to supplement. arcvehicle.com
2 PEAK DESIGN — TECH POUCH The Peak Design Tech Pouch is a stylish and exceptionally made accessory that's a must-have for frequent travelers. It has enough pockets and compartments for small gadgets, charging cables, memory cards, and any other accessories you might own. Peak Design has crafted the exterior of the Tech Pouch using recycled nylon with a weatherproof finish. There are two colors to pick from: black and sage green. peakdesign.com
5 MAURICE DE MAURIAC — L2 DEEP BLUE Looking to make a statement with your scuba gear? This Maurice de Mauriac diving timepiece is guaranteed to rock the boat with its impressive bronze and leather profile and striking silhouette. Super-LumiNova markers enhance visibility while the bronze alloy case, slightly heavier than stainless steel, lends the watch a heftiness and reassuring solidity. It’s also anti-magnetic—plus will develop that much sought-after patina as it ages. the Maurice de Mauriac L2 Deep Blue is the perfect luxury dive watch for underwater exploration and making a style-statement simultaneously. mauricedemauriac.ch/en
3 CLASS AZUL ULTRA EXTRA — ANEJO TEQUILA Clase Azul offers the sort of tequila you’ll buy as a present and then want to keep for yourself. It’s a brand that offers enjoyment the entire way through, from the buying process of choosing a unique bottle to the sipping of what’s inside. This bottle is quite literally in a league of its own, produced in numbered batches of 100 per time. Each bottle is aged for five years in ex-sherry casks from Spain before being bottled and sold. The quality inside is also visible outside the bottle: hand painted with platinum, a silver agave medallion and a label applied using 24-karat gold. claseazul.com 30 / ADVISORS MAGAZINE
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6 PRIORITY EMBARK — BEST OVERALL ELECTRIC BIKE A smooth and quiet ride is exactly what you’ll get from the Priority Embark electric bike. Much like many other bikes produced by the brand, the focus is on ease of riding and low maintenance while offering a high quality journey and a sleek look. A smooth and quiet ride is exactly what you’ll get from the Priority Embark electric bike. Much like many other bikes produced by the brand, the focus is on ease of riding and low maintenance while offering a high quality journey and a sleek look. prioritybicycles.com
HOLISTIC TALK Doug Gjerde MBA, CFP®
Managing Partner, Wealth Advisor
by bobby hickamn
Preparing for Good Times and Bad
Holistic financial planning helps families At least half of Americans do not have a written financial plan. However, those who do have a plan say documenting their goals and strategies helps them better weather the current challenging economic climate.
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esearch by Charles Schwab found only 25 percent of people have a written financial plan, while an AARP survey indicated only 40 percent have a will or living trust. Fidelity’s Market Sentiment Study, released in May 2020, found 51 percent of those surveyed have savings and investment plans in place. However, 90 percent of those with a plan said it gave them greater peace of mind during times of financial uncertainty, Fidelity noted. Having a holistic financial plan that covers a broad range of financial considerations is critical to helping families handle tough times and prepare for the future. Doug Gjerde, CFP®, managing partner and wealth advisor at Heritage Financial Partners in Green Bay, Wisconsin, said his firm’s PLAN Driven Investing™ system uses checklists and other guides to create a detailed plan. The approach allows advisors and clients to better address investment, tax, retirement, estate, and related considerations. “I like to be able to sleep well at night,” he said. “Having that system and plan in place, and believing we're doing the right thing for our clients, has made this a lot easier for me.” Gjerde said this is the third economic crisis he has been through, including the dot.com bubble and the Great Recession. He said helping clients
through the pandemic-driven downturn has been less difficult than the other periods because his company has proven systems and processes in place to help guide their customers. “It’s a lot easier if you've put the time and effort into making sure your clients have a thorough and solid holistic plan and that they are educated on potential risks and threats to their plan. Also, if they are investing, that their plan is modeled against past market and economic crises, so they have a good chance to make it through future ones.” With its previous experience with economic uncertainty, the firm also understands that planning opportunities may arise in any environment. As Gjerde and his colleagues check in with clients, they also review planning opportunities, such as the recent changes allowing retirees to waive required minimum distributions. Gjerde added he believes that leading with opportunities rather than focusing on negative news gives people pro-active options during a period when many feel helpless. A former B-52 navigator who flew 11 combat missions in the Gulf War, Gjerde learned first-hand the importance of planning, coordination, and training. Whether the mission involves bombing a target or saving
towards retirement, success depends on having the right processes and systems to handle complicated situations. “That's why we created a process that we go through with all our clients. We systematically make sure that we're touching on everything. That helps them understand the situation, and keeps things from
with their attorneys to make sure other parties can legally access and close down accounts as needed. “We tell our clients the reason for an estate plan isn't just preparing for estate taxes and avoiding probate,” Gjerde added. “It's making your loved ones’ lives a lot easier after you pass away. They’re already grieving for you. It’s more complicated when
Gjerde said. “We really want to dive into the planning. We can't figure out somebody's best investments without knowing about their taxes and estate plans, and their goals and desires.” Education is an important element in helping those clients. Some clients want to know all the details of their investments, while “others just want
falling between the cracks. It's important to make sure all their concerns are addressed.” Heritage Financial Partners has several tools to help their clients plan ahead. One is the Family Estate Organizer. Clients use it to store legal documents, estate planning materials, information on insurance and assets, and a list of their advisors. The firm also provides a form where people can list their important online accounts (including usernames and passwords), making things easier for family members if they become incapacitated or die. They also encourage clients to work
they have to petition courts and hire attorneys to take care of things. You don't want to leave that to your loved ones.” Gjerde said nearly all the firms’ clients were referrals from existing clients. Heritage Financial did no marketing or advertising for 23 years, although it did start using videos and blogs in 2019. The firm takes a team approach to tax, income, estate, and risk management planning, and their ideal client is somebody who can benefit from its holistic planning services. “Someone who is only focused on investments is not a good fit for us,”
a 30,000-foot view,” he said. But regardless of how financially literate a client may be, the hardest issue for most people is understanding industry terminology. “We’re making the complex simple,” Gjerde said, “explaining things in a way that doesn't make clients feel uninformed, or like they're being talked down to. Being technically oriented, it would be easy for us to dive down into the weeds. We have to constantly avoid using jargon and make it as understandable as we can. The weeds just get people stuck and overwhelmed.” ADVISORS MAGAZINE / 33
Planning for retirement is another area that benefits from educating clients as advisors learn about their spending habits and cash needs. Building a retirement income plan means identifying cash flows over several decades, then factoring inflation and taxes, Gjerde noted. Planners also need to determine how much money will come from Social Security and pensions, and how much needs to be generated by investments. Gjerde said he does not believe anyone can create a set of investments for client retirement without knowing all the financial details contained in a comprehensive plan. Longevity is another significant issue in retirement planning, presenting a major risk that can be difficult to handle. The Social Security administration indicates that for a 65-year-old couple, there is a 50 percent chance one of them will still be alive at age 90. Set your planning expectations below that target, Gjerde suggests, and the client’s risk
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of running out of money is roughly equal to flipping a coin. Those plans also need to consider the needs of the surviving spouse. “People don't like to think about retirement in terms of a solo journey,” Gjerde continued. “There's one person; expenses aren't much lower, taxes are higher; and incomes are generally lower. That really has to be planned out.” Long-term care is another issue that presents a major risk, however, many people prefer to ignore it. For most Americans, it would be difficult to finance long-term care at a nursing home for more than a couple of years. Yet, according to Morningstar only 11 percent of adults 65 and over have long-term care insurance. “The people that bring it up to us during planning are the ones that have already had a parent or loved one go through it, and have seen the value,” Gjerde said. “We've been talking about long-term care since the 1990s.” Gjerde said the seed that set
him on the path towards financial planning was planted when he was 14 years old. After his father died, life insurance only covered the funeral costs. His mother had not worked outside the home in more than 20 years, and she had never balanced a checkbook. “As a 14-year-old, I had to jump in and learn about taxes and Social Security and mortgages, and to help her apply for Social Security survivor benefits,” Gjerde said. “I made a vow that this wasn't going to happen to people I cared about again. If I can avoid more people going through what my mother and I had to go through when I was 14, that’s the evangelical calling for me.” For more information on Heritage Financial Partners, visit heritagefinancialllc.com
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by bobby hickman
CONSUMERS CONFUSED BY FINANCIAL JARGON Client education improves communication
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any consumers are confused by financial industry jargon, making it more difficult for individuals and families to successfully plan for retirement, college, and other future needs. Recent surveys by the Empower Institute indicate most Americans do not understand a number of commonlyused industry terms.
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At least two-thirds of respondents were unclear about the meaning of such terms as asset allocation (69%), Social Security optimization (77%), rebalancing investments (66%), and Registered Investment Advisor (76%). The percentage of millennials who did not understand the last three terms was even higher. JULY 2020
Fundamental changes are already underway in the industry should address some sources of confusion, according to DawnMarie Corneau, founder, president and wealth advisor at Corneau Wealth Management of Beverly, Massachusetts. Fee disclosures and 401(k) marketing materials have come a long way in recent years, Corneau said. A SEC regulation requiring advisors to put clients’ interests first should help address confusion about advisors’ fiduciary duties. Still, she said, more
OUR GOAL IS TO ASSIST CLIENTS IN EVERY ASPECT OF THEIR FINANCIAL LIVES. TO EARN A REPUTATION OF PROVIDING THE MOST PERSONAL SERVICE AVAILABLE.
work is needed on communications. “More documents need to be in language that individuals can understand. There's so much more to be done to simplify the language. That would give clients the ease and comfort of understanding what a lot of those prospectuses or forms say,” she said. “It needs to be simpler and more direct -- in words everyone can understand. It's getting there, but I think it still has a ways to go.” Corneau said her firm communicates thoroughly with new and existing clients. They outline fees, their processes, and what services are delivered for what costs. Investment strategy clients also receive brochures that include advisors’ backgrounds and credentials. Educating clients about industry terms and best practices can also help them navigate
confusing situations, and to make better decisions. “Financial education is at the core of our service model,” Corneau said. “We're constantly providing education to every client, whether they're a high-net-worth client, a small business, or an average client who is receiving an inheritance. We constantly provide education through review meetings and workshops. We try to teach them that can trust us – that the knowledge we have can help them make informed decisions.” Many of Corneau’s clients are referred by existing customers. Clients often come in response to an immediate need, such as receiving an inheritance or nearing retirement. Some are business owners, or recently widowed or divorced women. Although one specific concern may bring the new client through the
door, the firm builds a big-picture plan to address their entire financial picture. The process begins with a face-to-face meeting, either online or in person. The firm presents its findings in a second meeting. After clients review their options, the third meeting decides what steps are needed to meet the identified goals. “In the first meeting, we have a really honest, paint-the-picture conversation with every client and every family,” Corneau said. “We're trying to learn what their financial strengths are, their concerns, their goals. Then we can put together a plan.” Corneau said she believes human interaction is one of the most important factors in financial planning. Consumers miss out on that factor when they use online robo-advisors or hybrid platforms. She added many platforms do not help clients address what they need to consider
in making informed decisions. “I also find that people who start doing that do not stay engaged in the financial planning process,” she added. “They lose that engagement if they get frustrated, or lose their jobs, or when something happens like the pandemic right now. They stop planning and just react. I don't want my clients reacting; I want them planning.” With any new client relationship, Corneau works to first establish an ease of communication with clients. The firm then provides transparency about fees and the process to strengthen client engagement. “Getting communication and engagement is critical,” she added. “I think a lot of that will improve as we get into these new fiduciary rules about serving the best interests of the client, plus other changes that will come down the road.”
www.corneauwealthmanagement.com
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