Copyright © 2014 by Phillip Scott Wood...Securities and advisory services offered through SII...

Copyright © 2014 by Phillip Scott Wood

All Rights Reserved.

For information contact: Phil Wood / 855-331-0371

978-0-692-28720-0 – hardcover978-0-692-28721-7 – eBook

Library of Congress Control Number: 2014915826

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All investing involves risks, including the possible loss of principal amount invested, and there is no guarantee that your investment objectives will be met.

The tax and legal information presented in this material is general in nature and should not be construed as tax or legal advice. SII Investments does not provide tax or legal advice. Please consult your tax and legal advisor for guidance regarding your particular situation before making any changes.

The scenarios presented in this material are hypothetical in nature and are not intended to portray any past or future events and your own experi-ence may vary.

A story of how two very different familiesdiscover just how much the right financial advisor

can make a difference, from the early stages ofaccumulation to the later needs of maintaining wealth

and generating retirement income.

l

About the Book

How do you begin to choose a financial advisor when, at first glance, they all look the same? “Gut feeling” can only get you so far, and when your family’s future is at stake, there has got to be more to go on than whether or not your current or prospective advisor seems like a nice guy. Now, there is. The Acorn and the Oak is the story of two families with very different financial situations who learn that there are concrete, measureable differences between financial advisors. They discover the right questions to ask to help them make an informed decision that may ulti-mately save them time and money and help set them on a track to building wealth and financial security.

Follow their story and find out how, with the help of the right financial advisor, it may be possible for you to grow from an acorn into an oak.

Introduction 1

Chapter 1 The Acorn 13

Chapter 2 The Oak 23

Chapter 3 The Big Question 29

Chapter 4 Not All Financial Advisors Are the Same 37

Chapter 5 Menu of Services 45

Chapter 6 A Strong Support Team for a Limited Clientele 59

Chapter 7 Fair and Transparent Pricing 71

Chapter 8 Professional Management Strategies, Clearly Communicated 85

Chapter 9 Acorns Become Oaks… and Oaks Keep Growing 97

Chapter 10 Shall We Continue the Conversation? 105

About the Author 112

Contents

— 1 —

Introduction

“Can you explain your fees to me?”Three years ago, my client—who also happened to be

a very good friend—was sitting across from me, asking that very reasonable question that every financial advisor is used to answering over and over again.

“Of course,” I said. I had given the question much consideration over the course of a decades-long career, so I had a ready answer.

Like most financial advisors, at that time my fee was a percentage based on the value of my clients’ accounts. The typical advisor charges somewhere between 1 and 1.5 percent, and I was no different—in fact, I was right in the middle, charging 1.25 percent. As clients’ accounts got

— 2 —

The Acorn and the Oak

bigger, I would lower their percentage rate. This meant that clients with significant portfolios were being charged a discounted rate, but they were often writing bigger and bigger management fee checks as their wealth accrued.

This is what my friend was particularly curious about—because he happened to have invested a substan-tial sum of money with me.

“My percentage rate is lower, and I appreciate that,” he said, “but I’m writing a bigger check every year because my portfolio is getting bigger. Can you tell me the reason-ing behind that?”

Without any hesitation, I gave him the “party-line” answer.

“There are three reasons,” I said. “The first is what you’ll often hear from financial advisors: It’s our incen-tive to do a good job for you. If you make more money, I make more money. If your portfolio decreases in value, my compensation decreases, too. So, the percentage-rate-based system keeps me working hard for you and is very much like a partnership—we’re both on the same side of the table.

“Second,” I continued, “as your portfolio grows, I have to devote more time and resources to it. It takes more time

— 3 —

Introduction

and effort to manage a bigger portfolio, so my compensa-tion grows correspondingly.

“And third,” I finished, “it’s an industry standard. Most financial advisors charge for services this way.”

My friend was satisfied with that explanation, but as the meeting ended and I continued with my day… I began to realize that I wasn’t. For years, I had felt like—for lack of a better term—“just another financial advisor.” I don’t say this disparagingly, as there are many compe-tent financial advisors out there. I had acquired significant experience, skill, and knowledge over the course of a long and successful career. I was very confident in my abilities, and my clients were equally satisfied with our relationship. But the thing was—that’s how most clients feel about their financial advisors.

There was no glaring reason for me to feel like my firm was anything other than successful. Since I founded my own investment firm in 1992, I had hired staff and built a team that I trusted. We were offering services to a broad range of clients, and not only did I feel that we were putting strong minds to good use, I also felt that we were making a genuine difference in our clients’ lives. We were helping them achieve their goals and design the lives

— 4 —


and livelihoods they envisioned for themselves and their families.

But that conversation with my friend about pric-ing started some wheels turning for me, and I began to discuss my firm’s practices with my family and staff in a more deliberate and critical way. In particular, I wanted to investigate that last reason I had given my friend: It’s just the way things are done in this industry.

“That’s just the way it is,” in and of itself, is never a very solid reason to do anything. And I was starting to think that falling back on the way things have always been done wasn’t particularly productive for financial advisors—and, by extension, for their clients. I had to acknowledge an uncomfortable reality: Advisors have largely become com-modities in the investing public’s mind.

I’ll admit, it is difficult to compare one advisor to the next. We all sound alike when we talk about our portfo-lio performance numbers and the excellent service levels we provide our clients. Our fee schedules are all pretty much the same. Because we all talk the same talk, inves-tors often have no meaningful way to compare advisors. So, they choose an advisor based on more subjective crite-ria; they go with the person they like and trust, or perhaps

— 5 —

Introduction

were referred to, without really going through any due diligence process. I think most investors take more time and care in choosing their next car or planning their next vacation than they do in selecting someone to guide them through their financial future.

Imagine that you are meeting with a new prospective advisor. He explains his services to you, and he seems like a competent and nice guy. What would motivate you to go through the process of leaving your current advisor’s firm and transferring to his? Unless your current advisor has done something pretty egregious to make you lose faith in his services, there usually isn’t much reason to make a change.

Most advisors hear prospective clients reply with, “Well, I’ve been with my current advisor for years, and I like him. It sounds like the two of you pretty much man-age money in the same way and charge about the same fees. So, I’m not going to rock the boat. I’m going to stay put.”

Up until about three years ago, I wouldn’t have had an effective response to that statement. Prospective clients were more or less using a reasonable rubric when they told me that their main criterion in choosing an advisor was

— 6 —


simply, “Whom do I like and trust? Whom do I have a ‘good feeling’ about?”

But I, and the other hard-working and passionate advisors on my staff, decided that we weren’t satisfied with that as the sole qualification anymore. Sure, a rapport with your advisor matters a great deal. It’s undeniably impor-tant to feel comfortable on a personal level with anyone who is helping you build wealth. But my team wanted to be able to offer people a more objective reassurance that we were the right fit. After all, we’re dealing with the hopes, dreams, and futures of our clients and their families. We weren’t satisfied with being commodities; we weren’t satis-fied with, “Well, that’s just the way it’s always been done.”

My team became excited about changing our approach. The reality is that if you’re just about the same as everyone else in your field—if you truly are a commodity—life gets really boring. We were ready to shake things up. Our cli-ents deserved that.

We began to analyze every level of the practice, with-out taking anything for granted. We started asking, “Why are we doing it this way?” about every detail we could think of, and, “That’s just the way it is,” was never a per-missible response.

— 7 —

Introduction

Very quickly, we learned that the old 80/20 rule that we so often hear about in business applied to my firm with uncanny accuracy. In short, business people often observe that 80 percent of their revenue comes from 20 percent of their customers. I did an analysis and discovered that 79 percent of my income was coming from 21 percent of my clients. No kidding!

In essence, I had a group of people representing 21 per-cent of my clientele whose portfolios I definitely needed to pay attention to since they accounted for the majority of my assets under management and income. They deserved more of my time and effort due to the benefits I received from them. However, the dilemma was how to handle the remaining 79 percent of my clients. I wanted to provide a high level of service to everyone, but logic dictated that I couldn’t afford to provide the same level of service to the 79 percent of clients who only generated 21 percent of my firm’s revenue.

It really wasn’t fair to anyone. The time I should have been devoting to my larger clients was being diluted by the needs of my smaller clients. Because of this and with no intentional plan, we did what most advisors do: We became reactive to the needs of our smaller clients instead

— 8 —


of proactive. It wasn’t fair for the clients with smaller port-folios, who were getting disproportionately less of my time, and it also wasn’t fair for clients with large portfolios, who were paying a higher price for my time and resources.

It also wasn’t particularly viable for me and the other advisors on my team. Just as I was making the discov-ery of the 79/21 split in my revenue, I happened to read Malcolm Gladwell’s best seller, The Tipping Point. In it, he discusses anthropological and neurobiological evidence that human beings max out their social groups at around 150 connections. What this means is that our brains are wired to effectively manage about 150 relationships—this includes our family members, friends, coworkers, fel-low church or club members, and our clients. Everyone. Beyond 150, we have to get pretty selective in how we deal with other people because we just don’t have the time or neurological resources to go very deep in the relationships.

At that time, like many other financial advisors, I had approximately 800 clients—and was feeling the stress related to trying to help that many people. I had always wanted to help anyone who needed it, never turning any-one away. While this initially gave me a good feeling, it

— 9 —

Introduction

was now unmanageable. I had let my business control me instead of me controlling my business.

In keeping with our philosophy of no longer doing anything solely because it’s standard practice, my staff and I decided to challenge those very standard numbers that had arisen in our firm almost of their own accord: 79/21 percent and 800 clients.

First, we set up a new division within our firm called One Price Portfolio, with a cap on annual fees charged to clients. Once our revenue from a client’s portfolio hits a certain value for the year, we cap their fee. Their wealth might continue to grow and grow—but our fee does not grow correspondingly because our actual workload doesn’t increase significantly as the portfolio grows. Make no mis-take: This doesn’t make us a discount firm. We cut no services to be able to provide this pricing structure. We simply did the research to find out how we could continue to be profitable without continuing to charge a higher and higher price to our clients, like most advisors do.

And we also decided to reduce the clientele of each advisor on the team, so that we could offer more person-alized services and attention. There was no way we were

— 10 —


going to start dropping clients left and right; that simply didn’t line up with our values. Instead, we wanted to very thoughtfully ask if our goals and values were the best fit for each client.

We came up with a four-question evaluation to deter-mine whether we were genuinely adding value for clients. This allowed us to come to a mutual agreement about whether or not the relationship was good for both par-ties. Over the course of several years, we managed to bring our client-to-advisor ratio down—not so that we could all take long weekends and go golfing, but so that we could work more proactively and really nurture a long-term rela-tionship with each client.

These changes not only revolutionized my firm and the professional satisfaction of all of the advisors on my staff, they also increased our clients’ level of satisfaction and confidence in our services. Clients tell us that they now feel like they are in an evolving relationship—they know that we are long-term partners on a mutually ben-eficial journey.

All of this might sound fine in the abstract, but how does it apply to you? How can you take the lessons my firm learned about matching clients with advisors and

— 11 —

Introduction

apply them to your own search for an advisor—or to your process of evaluating your current advisor, as you should periodically do?

That’s why I’ve written this book. I’d like to introduce you to two couples with two significantly different finan-cial situations, both of whom develop a relationship with a financial advisor that adds value beyond anything they knew was possible in an otherwise commoditized indus-try. Over the following chapters, you’ll meet Kevin and Angie, the young owners of a small business who are look-ing toward the future and curious about how they can make the best choices for building financial security. And you’ll meet Rick and Celeste, who have attained what many of us would describe as “success” and want to both safeguard their wealth and continue to engage proactively in the marketplace.

If you’re looking for a new advisor or wondering if your current advisor is still a good fit for you, you may see your life and decisions reflected in the stories of these two couples. You might be surprised to discover why they ultimately choose to change financial advisors—and how their new advisors meet their needs in a more meaningful way.

— 12 —


So, read on to learn how your relationship with your financial advisor may be more complex than you origi-nally thought. Take this opportunity to determine what is important to you in a client-advisor relationship and to make sure you understand and are getting what you’re paying for when it comes to your financial future.

— 13 —

C h a p t e r 1

The Acorn

“look at this,” Angie said, plopping the Business section of the daily newspaper down on the counter next to her hus-band Kevin.

It was 6:45 a.m. on a Wednesday, Kevin was bleary-eyed and leaning over the new espresso machine he’d bought on a whim. He had been uselessly pressing but-tons and clicking the steamer in and out of place for much longer than he’d care to admit, and still the coffee grounds didn’t seem to be any closer to becoming a latte.

He blinked at the headline across the front page of the newspaper section Angie had just given him: “Gable, Inc. and Dynamic Systems Reach Merger Deal,” it announced in large, bold letters. The photo showed two suited CEOs

— 14 —


holding a firm handshake and surrounded by smiling and applauding colleagues.

Kevin turned from his espresso deadlock and picked up the paper to get a closer look. “Hey, this is good news, right?” He said to Angie.

“You bet it is!” She called from behind the refrigera-tor door. She was busy pulling out fresh berries and whey powder for her morning smoothie. Never much of a coffee drinker, she had shrugged noncommittally when Kevin came home with the espresso machine, and as each morn-ing passed without so much as a drip of coffee coming out of the thing, Kevin could swear she was becoming more and more amused by his predicament.

“I’m pretty sure we have a chunk of Gable stock,” Angie said, dropping a handful of blueberries into the blender. “I skimmed that article, and it looks like everyone is convinced this merger is going to be a runaway success.”

Kevin scanned his memory. He always opened the monthly statements from his financial advisor, but he had fallen out of the habit of reading the details. He usually just glanced at the big, bold number at the top of Page 1, the “Total Account Value.” If it was bigger than the month before, even just slightly bigger, he popped the sheaf of

— 15 —

The Acorn

papers into a binder labeled “Retirement Investments” without a second thought.

“We do have stock in Gable, right?” Angie called over the whirring of the blender.

Kevin was silent for a moment. For the third morning in a row, he pressed the “Power” switch on the espresso machine, turning it off unused, and pulled his faithful, uncomplicated French press out of the cupboard instead.

“I think so…” Kevin said, as he scooped fresh grounds into the press. “I’m trying to remember the last time we saw Dean.”

Dean was the couple’s financial advisor. They had met him six years before, right after they bought a second loca-tion for the running supply retail store they had opened together. Kevin and Angie met when they were both just out of college and recent transplants to a mid-size Nebraska city. They happened to join the same running club, and by their second early morning run, Kevin had already done everything in his power to strike up a conver-sation with Angie. Through sheer luck, as far as he could tell, she let him tag along beside her for a few miles… and by the end of the summer, they were a couple. Within a few months of their marriage, they turned their mutual

— 16 —


passion for running into a business, opening a shoe store near the campus of a small liberal arts college in town. The college kids were loyal and regular customers, and Kevin and Angie were quickly able to add clothing and other gear to their offerings. Soon enough, they opened their second location downtown—just before welcoming their second son into the world.

With two kids and two retail stores, Kevin and Angie were starting to feel like they might need a little help decid-ing how to invest their moderate savings. They both had IRAs that they had been managing on their own online, without much more guidance than the Business section of the paper and the occasional nudge from Kevin’s dad, who had an instinct for that kind of thing. But when their accounts started to gain momentum, Kevin decided it was time to get a professional on board.

They found Dean through their family dentist, who also happened to take a weekly morning run with Kevin and was a regular customer at the downtown store. Dr. Tom, as Kevin and Angie’s boys called him, was about fif-teen years older than Kevin, and he and his wife had a moderate-sized portfolio. Kevin felt confident that Tom could give him a good referral.

— 17 —

The Acorn

When Kevin had asked him if he had an advisor he’d recommend, Tom said, “Oh, absolutely! My guy Dean is always on top of things—and if you get a morning appointment, there are usually some cheese Danishes in the reception area.” Tom paused. “Don’t tell my hygienist I’m letting you eat Danishes.”

Dean had walked Kevin and Angie through what seemed like a conservative but goal-oriented investment approach—exactly what they were looking for. They didn’t want to take a lot of risks. Their main concern was to get the boys through good colleges. Apart from that, they wanted to keep their business secure, have enough of a retirement cushion to do some traveling, and pos-sibly invest in real estate for the family’s use. Kevin and Angie both felt that the running stores had a lot of poten-tial, and they wanted to continue growing the business, but while the boys were still young, their focus was on financial security. Dean understood this; he was friendly and reassuring… and those Danishes were as good as Tom promised.

Now, Kevin was blowing on the rim of his hot mug of coffee. “When was our last appointment with Dean?” He asked Angie. “Last summer?”

— 18 —


“No, it couldn’t have been,” Angie said. “I remember I forgot my gloves in his office. So it must have been in the winter some time.”

“More than a year ago! Jeez,” Kevin said, “good thing we’re in such good hands. I’m almost sure he said we owned stock in Gable.”

“I hope so,” Angie said. “Seems like this could be a jump for us.”

“Yeah,” Kevin agreed. He knew they were both think-ing the same thing. They had been talking about buying a small lake cabin for summer vacations—but had agreed to hold off until their investment account hit a certain benchmark. “I’ll call Dean this afternoon,” Kevin said.

“Good idea,” said Angie, and clinked her smoothie glass against Kevin’s coffee mug.

• • •

Dean had barely replaced the handset in the receiver when his phone rang again. It had been like that all day. Call after call after call. An email inbox that made his brow sweat. And he had a meeting with a major client coming up at the end of the afternoon that he hadn’t had much time to prep for.

— 19 —

The Acorn

He glanced at the clock. 2:17 p.m. He had intended to take lunch out with Allen, an attorney who rented the other office in his suite, well over an hour ago. For a moment he considered letting the call go to voicemail and rushing down the hall to see if Allen hadn’t chewed through half his filing cabinet yet and still had room for lunch.

But a little nagging voice in his head got the better of him. “Just see who it is. It might be important.”

He picked up the phone. “Yeah, Rachel?” He and his assistant were on friendly, joking terms, so he knew on a swamped day like today he could dispense with formalities.

“I’ve got Kevin Martin on line one,” Rachel told him. “Owns the running stores. Two little boys. His wife Angie beat you in the half marathon last summer.”

Rachel was nothing short of a godsend to Dean. She was his only employee, and he didn’t know how he’d stay above water without her. For years, he had been on his own, but after a decade of hard work, his clients’ portfo-lios were starting to get somewhere, and the referrals were starting to roll in.

Dean accepted just about all of the prospective clients who came to him. He liked to help people, and he usu-ally felt he had something to contribute toward investors’

— 20 —


goals. But he still wasn’t in a position to take on more administrative help, so that meant that even with Rachel working full time, he had to wear a lot of hats that didn’t always involve advising his clients. Between keeping up with bills for overhead, accounting, wooing new clients, and time spent on research and management, it seemed like there was never enough time and always too much work.

Dean had started out with under a hundred clients, but every year, his client load kept climbing up and up. Just a few weeks before, he had come in on a Saturday to do an analysis of his 816 clients, very carefully reprioritiz-ing his time so that he never missed a detail in the larger portfolios. That meant drawing up a list of over 650 cli-ents whom he just couldn’t devote much time to.

Dean was always careful to sit down with any cli-ent who had questions that required in-depth responses or who wanted to make a major financial change. But if things were humming along fine, he was lucky to spend an hour or two a year looking over smaller accounts—just to make sure nothing egregious jumped out at him.

More times than he could care to remember, Dean had gone through the embarrassing ordeal of not being able

— 21 —

The Acorn

to place a client’s name with a face. It was always one of those 650 smaller clients, never one of the major inves-tors. Finally, Rachel had come to the rescue. She started a spreadsheet with little notes on all the clients to give Dean a quick reminder of who they were.

The only problem was, she never missed a chance to tease Dean. He was constantly getting reminders like, “You know, the guy who married your prom date.”

“Haha, Rachel, how could I forget?” Dean said jok-ingly now, remembering all-too-well the blisters on his feet after that ill-fated half marathon when Angie had eas-ily beaten his best time.

Rachel laughed. “Should I put Kevin through?”Dean sighed. This was a small account; it couldn’t be a

complicated issue. The call might take five minutes tops. Plus Dean liked Kevin—he wouldn’t mind catching up with him and hearing about how his sons were doing and if he had any new plans now that his business was doing so well.

But just as Dean was about to accept the call, Allen stuck his head in the door of Dean’s office.

“Dean,” he said curtly. “I’m going to eat you if we don’t leave right now.”

— 22 —


Dean laughed. There was his answer. He was sure Kevin just had a quick, simple question. Maybe he could even shoot him an answer via email rather than calling back. He’d get to it later that afternoon, after the impor-tant meeting with a client whose father had just left her a substantial sum of money. And after he’d bought Allen lunch to make up for his delay.

“Actually, Rachel,” Dean said, “put him through to my voicemail.”

— 23 —

C h a p t e r 2

The Oak

“Morning, adaM!” riCk called cheerfully as he pushed through the glass doors of his office suite at eight o’clock on Wednesday morning. Adam, his executive assistant, was standing at the ready with the morning paper under one arm and holding a fresh, steaming latte in a cup and saucer embossed with the company logo.

Rick took the newspaper and the latte approvingly. “It was a good idea to get that espresso machine,” he told Adam. “Nice to have it fresh right here in the office—and I’m sure you don’t mind skipping the trip to the coffee shop.”

“Oh, I never minded,” Adam said. He was already back at his desk, putting on his headset to listen to the morning’s voicemails.

— 24 —


Rick paused just before passing beyond Adam’s desk to his inner office. “Hey, isn’t my niece Angie’s birthday com-ing up? Pretty sure it’s the first week of May.”

“Yes, it’s tomorrow,” Adam said, pulling up Rick’s calendar on his computer. “I’ve got you down for the afternoon with Kevin and Angie and the boys on Satur-day. They invited you and Celeste to a picnic lunch to celebrate. But do you want me to remind you to call her tomorrow so you catch her on her actual birthday?”

“Yes, please do,” Rick said. He made a mental note for himself too, but knew it was futile. Without Adam, he’d be a lost cause.

Rick left his office door open as usual and made his way past the couch and overstuffed chairs to his large oak desk. One of the perks of being promoted to an executive-level position at a Fortune 500 company was that he got to design his own office. Half the time he did his work in a large, cozy leather couch by the window rather than at the stuffy desk.

But today he had a long to-do list, so he sat down at his desk where he could have easy access to his two large desktop monitors. He set his latte down and pulled the Business section out of the newspaper. “Gable, Inc.

— 25 —

The Oak

and Dynamic Systems Reach Merger Deal,” the headline declared.

Rick whistled lowly. “Hey, Adam,” he called through his open office door. “Can you get my financial advisor Diana on the phone, please?”

A moment later, Diana’s sunny voice was calling through the speakerphone on Rick’s desk, “Hello there, Rick! You were first on my list of people to call. Have you heard the news?”

“Just saw the headline,” he said, “I haven’t had a chance to read over everything yet, but it looks pretty good for me, right?”

“Another win!” Diana agreed. “You were right to go aggressive on this one.”

Rick smiled to himself. Diana always had a way of making it sound like well-timed investments were his idea, but really he just turned everything over to her and her team’s research and let the chips fall where they may. And once again, she hadn’t disappointed.

Rick had had his portfolio under management with Diana Westerman—the Westerman of Newell & Wester-man Advisors—for fifteen years, and he was quite pleased with the progress they had made together. When he had

— 26 —


first brought his account to Newell & Westerman, he was still working his way up the corporate ladder, so to speak, and his portfolio was a simple affair. In fact, in those early days, he didn’t work directly with Diana but with one of the five or six junior advisors on her team.

But then he’d been promoted to vice president of mar-keting at his company a decade before, and since then, his assets had grown exponentially. He owned a condo down-town and a large country house, but most of his wealth was in the market: Rick was the kind of guy who liked to always be working toward a goal. And thus far, Diana had been a solid ally. They had worked out a plan that secured his financial future while also allowing him to go out on a limb here and there. He didn’t mind a little calculated risk—and this time around it looked like they had done well with the Gable investment.

“Well, this is fantastic, Diana,” Rick said. “I don’t have a ton of time in the next few weeks, so I’ll count on you to keep an eye on this for me and let me know if it needs my attention.”

“You got it!” She said.Rick hung up the phone feeling a hum of content-

ment. As had been true for years, he was extremely satisfied professionally—every day was a challenge, and so

— 27 —

The Oak

far he’d been able to meet each challenge and continue learning. He felt like he had something unique to offer his company, and his colleagues recognized his hard work and contributions.

And now things were getting even better. After fifty-seven years of content bachelorhood, Rick’s life had thrown him a curveball. A year and a half before, he had met Celeste at an executive leadership conference. She was the founding CEO of a company that imported deluxe, exotic teas. Her business had quickly grown regional and then national, and like Rick, she loved her work and was very good at it.

Her kids were adults starting families of their own, and years after her divorce, Celeste wasn’t looking to meet a partner any more than Rick was. But each was very pleas-antly surprised by the other. What started out as a few lunchtime conversations at the conference grew into a romance, and now they were planning a wedding for the following summer.

Rick leaned back in his chair, warming his hands on his steaming cup of latte. An exciting list of projects awaited him, followed by dinner with Celeste. It was going to be a good day.

— 29 —

C h a p t e r 3

The Big Question

“i’M glad you guys could make it!” Angie exclaimed, open-ing her arms to embrace her uncle Rick and his new fiancé Celeste one by one. Kevin was standing by to give Rick a warm handshake and Celeste a kiss on the cheek.

“Happy birthday!” Rick told Angie. He handed her a big package wrapped in lavender paper and tied with a silver bow. Angie accepted it, “ooing” over the lovely wrapping, and Rick gave her a knowing wink—they both knew his assistant Adam had taken care of the giftwrap-ping. If it had been Rick’s handiwork, it would have been a plastic bag tied in a lopsided bow.

Kevin and Angie’s two sons came running up to hug their great-uncle. Rick had been like a second father to

— 30 —


Angie growing up, and now that her parents had passed away, she was glad to be living in the same town as Rick. Kevin’s parents had moved to Florida, and so Rick and Celeste were the primary “grandparent” presence in the boys’ lives.

The family made their way to Kevin and Angie’s back-yard, where charcoal was already smoldering on the grill and the patio table was set with colorful plates and nap-kins. The two boys went running off to kick their soccer ball around the wide lawn, where Kevin had set up a small practice net.

“I’m sure you’ll want a burger?” Kevin called to Rick as he assumed his post at the grill.

“You know me!” Rick answered.“Celeste? You too?” Kevin asked.“Count me in,” she answered.Pretty soon, the whole family was settled into a com-

fortable picnic lunch that lingered well into the early afternoon. When the burgers and salad were gone, Kevin told Angie to close her eyes and hurried the boys inside the house mischievously. The three of them reappeared a moment later with a cake blazing with candles.

“Happy birthday to you,” Kevin started the song, and

— 31 —

The Big Question

everyone joined in. Angie laughed with delight when she saw the cake. It was obviously a labor of love that Kevin had put the boys up to. It was a bit slanted on one side, with uneven frosting drooping around the edges.

“We made it ourselves!” Matt, the older of the two, said proudly.

“I picked the candles!” Peter chimed in, pointing out the dinosaur candles poking at odd angles out of the frosting.

Angie gave him an impressed smile. “They’re awe-some,” she told him.

“Make a wish!” Shouted Matt.Angie closed her eyes, thought for a moment, and then

blew out all the candles in one puff.“What’d you wish, what’d you wish?” Peter asked.“Oh, something boring,” Angie told him. She gave

Kevin a rueful glance. “I wished for some Gable stock.”“You read about the merger, huh?” Rick asked. The

word “merger” was the boys’ cue to beat a hasty retreat, and as soon as Kevin had cut the cake and handed them each a piece, they went rushing off to eat in the hammock at the edge of the yard.

As the rest of them dug into their cake—which was

— 32 —


surprisingly good despite its asymmetry—Kevin explained to Rick. “We thought we got in ahead of the merger, actu-ally, but no luck. We read the article this week, and I called our financial advisor right away. Boy did I get an apolo-getic voicemail.”

“Turns out we had some Gable stock once upon a time,” Angie explained, “but our advisor sold it a couple years ago when the company wasn’t doing so well. Some-how he missed the news about the merger talks and didn’t buy again. So we’re left out of the party.”

“Tough luck!” Celeste commiserated.“Ah, we’re not too worried about it,” Angie said. “It’s

not like it would have made a boom or bust difference. We were just kind of surprised Dean wasn’t on top of it—he’s usually pretty great about that stuff.”

“Dean’s your advisor?” Rick asked.“Yeah,” Kevin said. “Real nice guy. I think he just got

overextended. But like Angie said, we’re not worried about it. We’re still on track, and I’m sure he’ll catch the next opportunity for us.”

“Well,” Rick said, “I know you guys have been doing pretty well with the second store location. It might be time for you to think about taking a step up—I bet Newell &

— 33 —

The Big Question

Westerman Advisors would be happy to have you. I could set up a meeting with my advisor Diana or one of her colleagues.”

“Oh, I don’t think we’re there yet,” Angie said. “We really are pretty happy with Dean.”

“Hold on a sec,” Celeste jumped in, a teasing smile playing across her face. “Who’s this Diana I’m hearing about for the first time?”

“You know Diana,” Rick said. Then he paused. “Wait a minute… Do you know Diana?”

“Nope,” Celeste answered, still giving Rick a bemused smile.

“Oh! Well, I should really make an appointment for us sometime soon. I mean, the wedding’s in July for good-ness sakes, we need to get on top of this!”

Celeste crossed her arms very slowly. She was clearly enjoying the build up to her bait and switch. “And why exactly would we need an appointment with Diana?”

Rick was oblivious. “I don’t think we could do it over the phone, do you? I mean, when we merge our assets, our investments are going to have to change some. I imagine our joint portfolio is going to look pretty different. We’ll need to sit down with Diana in person.”

— 34 —


“Oh, I’m not questioning making an in-person appointment,” Celeste said. “I’m just wondering… When did we decide it would be with Diana and not with Jim?”

“Jim? Who’s Jim?”“My financial advisor.”Kevin and Angie, who had been thoroughly enjoying

this little exchange, couldn’t contain their laughter any longer. Rick, on the other hand, was flummoxed.

“Oh…” He said. “I—I didn’t think about that. But Diana is phenomenal. I know you’ll love her. I mean, she’s the Westerman of Newell & Westerman. She’s excellent; she’s extremely experienced. And—” Rick paused and turned somewhat sheepishly to Angie “—not bragging here or anything, but she did do the research and she got the jump on that Gable and Dynamic Systems merger.”

Celeste grinned. “So did Jim. I’m coming out of last week looking pretty good.”

“Okay, truce!” Angie said. “Why don’t you guys meet with both Diana and Jim, and see who makes the most sense?”

“That is a fantastic idea, Angie,” Rick said. “I’ll get Adam to call Diana first thing Monday morning.”

“I’ll do you one better,” Celeste said, picking up her

— 35 —

The Big Question

purse, which she had slung over the back of her chair. “I’ve been meaning to ask you about this anyway.” She pulled an embossed card out of her purse and handed it to Rick. “Jim’s having a wine and cheese tasting at his house next weekend. Wanna come?”

Rick took the card, an odd expression on his face. “I mean… I didn’t realize he was also a friend. I’m sure it would be fun to go to his party, but I don’t want to intrude on the evening with business.”

Celeste smiled. “Look at the invitation. Jim often invites his top clients to bring their friends to social events. It’s a way for him to get to know people—but no pres-sure on anyone to talk figures or make agreements. It’s just social, and you really do get to meet a lot of interesting people. He does golf pro workshops, cooking classes… I figured this one’s perfect for us. Look at the wine list on the back of the card.”

Rick flipped the card over. On the back were printed a few of the offerings Jim would have for his guests. Uncon-sciously, Rick’s eyebrows rose. He had always been a bit of a wine enthusiast, and he had to admit he was impressed.

“Diana never offered me a glass of Tignanello,” he said, and they all laughed.

— 37 —

C h a p t e r 4

Not All Financial AdvisorsAre the Same

“hi, Celeste, great to see you!” Jim exclaimed as he opened the door for Rick and Celeste. The front door opened into a wide, high-ceilinged entryway, beyond which could be heard the sounds of laughter and clinking glasses.

Two terriers came running up to inspect the couple, and Rick was instantly charmed. He bent down to give the dogs a pat, and both tails started wagging wildly.

“Well, look at these two,” Rick said. “Norwich terriers?”“That’s right,” Jim said. “Fitz and Fergus. They’re

about three years old.”“Fantastic. I’ve always been a big fan of terriers,” Rick

said, already starting to feel very pleased that he’d agreed to come to this event.

— 38 —


Celeste introduced Jim and Rick just as Jim’s wife Maggie came up to say hello. She and Celeste had met before at another one of Jim’s events, and they exchanged a warm handshake before Maggie turned to greet Rick.

“Follow me, folks,” Maggie said, and led the way into an open sitting room where about twenty people were milling around. Long tables on either end of the room had been set out with wine and cheese pairs.

“Rick is a wine connoisseur,” Celeste told Maggie, “so I knew this would be a great chance for you to meet him.”

“I don’t know if I’d call myself a connoisseur,” Rick said. “But I do like the stuff!”

“Well, let me show you what we’re offering this evening,” Maggie said. She began to lead Rick through the selections, explaining where each wine and cheese came from and why she and Jim had chosen to pair them together.

The evening unfolded in a leisurely, pleasant way. Celeste didn’t know many of Jim’s other clients, and so he took her and Rick around the room to make introduc-tions. Celeste was particularly delighted to meet a couple whose business, like hers, sold imports, and they immedi-ately fell into conversation.

Much to his delight, Rick met a fellow alum of the

— 39 —

Not All Financial Advisors Are the Same

small Midwestern college he had attended, and the two got absorbed talking shop about their school’s basketball team for well over a half hour. Jim, an avid fan of college basketball, joined in.

A couple hours into the evening, Jim clinked a fork against his glass.

“Hello, everyone,” he said. “I promise I won’t bore you all with a speech. Maggie and I just wanted to welcome you all again to our home and tell you how nice it is to have you here. If there’s any particular wine or cheese that interests you, let us know and we’ll tell you more about it. And in the meantime, bottoms up!” He raised his glass and everyone in the room followed suit happily.

Fitz and Fergus took the opportunity to come trotting over to Rick again, who had become their particular favor-ite. He gave them both a friendly tousle.

As he was straightening up, Rick turned to Celeste. “Gee, I’ve been having such a good time, I forgot to even ask Jim any questions about his firm.”

“Oh, I wouldn’t worry about it,” Celeste said. “There will be plenty of time for all that down the road. This is really just for you to get to know the guy and see if it clicks—see if you might want to work together.”

— 40 —


“Well, I’m definitely impressed with his approach,” Rick said. “This has been a lot of fun—which is not usually the word I use when I’m talking about financial planning. But of course I’d have a lot of questions. I can’t really decide about an advising relationship based on wine and cheese.” He paused and peered into his glass of dessert white. “Even if it is amazing wine.”

“Of course,” Celeste agreed. “I want you to be able to ask all the questions you have. I know you’ve been with Diana for a long time, and she’s always done a great job for you. I’m definitely not asking you to make a change just because Jim hosted a fun party. We’ve got to come to a decision that makes financial sense.”

“I’m relieved to hear you say that,” Rick admitted. “It just seems like we might be in kind of a tight spot here. Jim’s a nice guy, and Diana’s a nice woman. I’m sure they both do good work. How do we choose between the two of them?”

“I definitely agree that Jim’s a nice guy,” Celeste said. “And I bet I would like Diana if I met her. But here’s a question: Is Diana likable enough to be worth an extra fifteen thousand dollars a year?”

— 41 —


Rick raised an eyebrow, confused. “What do you mean?”

“I think there’s a lot that’s special about Jim’s firm,” Celeste said, “and I hope you get a chance to sit down with him and hear all about it. But the main thing that’s differ-ent—and that I know Diana isn’t offering—is that he has a fee cap for larger sized portfolios.”

“How does that work?”“Probably just like Diana, Jim charges a percentage for

his services. So as you make more money, he earns more money. I imagine that Diana lowers her percentage rate as portfolio sizes grow.”

“Exactly,” Rick said.“But even though your percentage rate might go

down, you’re still writing her a bigger and bigger check every year.”

Rick paused. “That’s true. I guess I assumed she’s earn-ing her keep. It’s an incentive for her to work harder for me.”

“Right, I think Jim would agree. But the thing is…he told me that he and his colleagues figured out that they could cap their fee and continue to be profitable. So

— 42 —


that’s what they do. That way people whose portfolios are growing aren’t paying a disproportionate chunk of money compared to smaller clients.”

Rick nodded slowly. He was starting to see Celeste’s point.

“So…when I say do you like Diana fifteen thousand extra dollars’ worth, I mean it literally. Because with Jim, you’re never going to pay over a fixed price. And that could mean a lot of savings for us when we combine our assets into one portfolio.”

“Are you sure this fee cap applies to us? I mean, we’re doing well, but maybe our definition of ‘wealth’ is differ-ent from Jim’s.”

“The cap is eleven thousand dollars,” Celeste said. “I’m willing to bet you already paid Diana more than that last year.”

Rick was flabbergasted. “I did,” he said.“But we don’t have to do guess work,” Celeste went on.

“Jim has a fee calculator right on his website. All we have to do is type in the size of our portfolio, and it’ll give us an easy estimate of what we’ll be paying. There’s no need for us to turn over any statements or other private documents to Jim right now.”

— 43 —


Celeste set her wine glass down, pulled her smart-phone out of her purse, and typed in a few numbers. In an instant, the screen came back with a comparison of the industry average price and Jim’s price. She turned the phone’s screen toward Rick, and he whistled lowly.

“Let’s set up an appointment with Jim,” he said.

— 45 —

C h a p t e r 5

Menu of Services

a reCeptionist was waiting to meet Rick and Celeste when they arrived at Jim’s office late the following week.

“Welcome!” She said brightly. “Would you like any-thing to drink? Water? Coffee?”

Within moments, Rick and Celeste were set up in a conference room, each with steaming cups of coffee. The room was outfitted with wide, comfortable chairs and a long table. They barely had to wait a minute before Jim appeared with a colleague.

“Hello again!” Jim said warmly, shaking Rick and Celeste’s hands in turn. “I’m really glad you guys could come in. This is one of the advisors on my team, Patrick.”

— 46 —


Patrick, a sandy-haired man in his early thirties, shook hands with Rick and Celeste in turn.

“So, Rick,” Jim said as he was taking his seat, “just like last Saturday evening, I don’t want you to feel any pres-sure in this situation. Don’t think of this as my sales pitch; instead, it’s just fact-finding. I really believe that an advi-sor and a client have to be a good fit on both sides. Celeste and I happen to have been a good team for some time, but she’s told me that you’re pretty happy with your current advisor Diane. And that doesn’t surprise me—Diane and I know each other well, and she does a fantastic job. So if it turns out that you and Diane are the best match, then I want you to stick with her. I’m most interested in what makes the most sense for your financial future.”

Rick was pleasantly surprised. As a marketing special-ist, this was the kind of consumer-oriented approach he wished he saw more of in any industry.

“I appreciate that, Jim,” Rick said. “I don’t know if Celeste told you I work as a marketing VP, and I’ve got to say I don’t hear enough of that kind of commitment to service and helping customers find what actually suits their needs.”

“She did mention it,” Jim said, “and that’s why I’m

— 47 —

Menu of Services

really glad we have this opportunity to sit down and talk. Something my team and I are continually discussing is how we can provide excellent service to each individual client.”

Patrick took out an embossed folder and put it on the table so both Rick and Celeste could see its contents. “I was really excited to join Jim’s team,” Patrick said, “because he’s doing something that—to be honest—I just hadn’t seen before at any other financial management firm. When I first met Jim, he talked with me about tailoring services to each and every individual client, rather than offering some kind of pre-planned scheme that every client has to fit themselves into.”

Together, Rick and Celeste looked down at the first page in the packet Patrick was showing them. The words “Menu of Services” were printed across the top.

“I like the sound of that,” Rick said. “The thing I keep running into in my field is that every business, no matter what industry, talks about providing excellent ser-vice—but it’s rare that people get specific about what that means. It’s sort of left up to the individual employee to decide if that just means smiling a lot or throwing in some extra perks or what. I think you’ve got to come up with

— 48 —


a company-wide system for actually putting the sort of vague idea of ‘service’ into action. Looks like you’ve done exactly that.”

“That’s what our Menu of Services is really about,” Jim agreed. “I think part of the reason a lot of organiza-tions fall short on service is that every client has their own unique idea of what ‘service’ means. We all have our own preferences. So we approach each client on a case-by-case basis. We want our clients to feel like they are more to us than just a number, just a portfolio.”

“If you like,” Patrick joined in, “we can go through this menu point by point, so you get an idea of what we mean when we say we can approach working with you based on what you want.”

Rick gave Celeste a pleased look. “Sounds good,” he said.

“So, the first question,” Patrick said, “is what type of relationship you would ideally have with us. What we’re best at—and what, to be frank, we prefer to offer—is full financial planning. We do have some clients who work with more than one advising firm; they feel more com-fortable ‘diversifying advisors,’ so to speak, and keeping a little of their money with one firm and a little with us. So

— 49 —

Menu of Services

before we even get into the nitty-gritty, we want you and Celeste to know that it’s possible to have different levels in your relationship with us. You can talk together later on and ask yourselves: Are you looking for us to manage a certain amount of money, or are you interested in a full financial planning relationship?”

Rick looked thoughtful. “I hadn’t even thought of that as a possibility. I suppose, once we’ve merged our assets, we’d be more comfortable keeping everything in the same place.”

“It’s nice to know, though, that there is that possibil-ity,” Celeste said. “Let’s set it on the backburner, but talk about what it would be like if we went with the full finan-cial planning.”

“Sure,” Jim said. “If we were to set up an ongoing relationship, the most important thing for you to know is that we’re here for you. We want you to be as involved in what’s happening with your portfolio as you want to be. For some clients, that means being very hands off and just knowing that we’re taking care of things for them, and for other clients, that might mean checking in more frequently. You probably know from your work with Diana that a ‘review’ is the term for a meeting where we

— 50 —


check in with clients to talk about how their portfolio is doing.”

“Sure,” Rick agreed.“We quite often conduct study groups to determine

if there’s an optimal frequency of reviews, but basically it comes down to what you’re comfortable with. We can meet quarterly, or twice a year, or just once a year—which is more typical. For the overwhelming majority of our cli-ents, one review a year is adequate, just as a ‘touch base’ kind of thing. But it can also evolve over time. In the beginning of an advising relationship, it might be best to meet two or three times in the first year, so that we know we’re getting off the ground comfortably.”

“I think that’s something I’d like,” Rick said, glancing at Celeste, who nodded her agreement. “Especially given how much our financial situation will be changing this year.”

“Exactly,” Patrick said. “It’s a good idea to check in periodically to make sure we’re all on the same page. But that doesn’t necessarily mean that we have to take up a lot of your time having you come into the office in person—I know both of you have demanding jobs.”

Both Celeste and Rick nodded. It was hard to imagine

— 51 —

Menu of Services

taking a morning or afternoon off every quarter to drive over to Jim’s office.

“So that’s the next thing on the menu,” Patrick explained. “The bulk of our clients like to meet in per-son. But we also offer phone or Internet-based reviews. We can’t text you, but these conversations are usually too involved for texting anyway. But we’re seeing more and more people doing phone reviews. That’s usually a quick and convenient method, especially if there’s nothing in particular that needs to change.

“The other thing we’ll do from time to time is check in with you—or welcome you to check in with us. So you don’t necessarily have to wait for a full review to get in touch. And we’ll make sure that we do that kind of ongo-ing communication in the way that’s most convenient for you. Again, we want you to be comfortable and to know everything is taken care of, but we also don’t want to over-whelm you with messages. So we’ll ask you to let us know if you prefer email, calls to your home or office or cell phone, or web-conferencing calls. It boils down to what’s best for you.”

“For example,” Celeste jumped in, “Jim already knows I prefer email—that’s the thing I think is quickest and

— 52 —


easiest. But Rick always has a thousand messages in his inbox, so he usually prefers to get a quick voicemail if it’s important.”

“Yup,” Rick said. “I’d much rather have a chat on my cell phone. Just seems like there’s less back and forth—I’ll know right away that we’ve understood each other. And I don’t have to stare at my computer screen longer than I have to!”

Jim and Patrick both laughed. “Got it,” Patrick said.“Here’s the last and maybe most important thing I

want to draw your attention to,” Jim said, pointing to the bottom of the Menu of Services page. “For a lot of clients, they hire us because they just don’t want to have to worry about this stuff. But others feel much more comfortable if they can understand the decisions we’re making on their behalf. So we hold educational events frequently, based on the interests that our clients have communicated to us, so that if you want to, you can learn about different areas of financial planning and really become a participant.”

“Give me a ‘for instance,’” Rick said, intrigued.Patrick showed Rick and Celeste a checklist in their

packet of materials. It listed items that different clients might find important in their financial planning:

— 53 —

Menu of Services

• Investment income• College savings• Retirement savings• Estate planning

“Right at the beginning of our working relationship,” Patrick said, “you’ll let us know the things that are most important to you, and we’ll keep a record of that. So if we’re going to have a seminar about retirement planning, for example, and we know that’s of particular interest to you, you can be sure you’ll get an invitation.”

“What happens if I can’t make it that day, but I still want to get a sense of what you talked about?”

“Glad you asked,” Patrick said. He opened his laptop so that Rick and Celeste could see the screen. “Here’s our website. See this link here that says, ‘Events’?”

Rick and Celeste nodded, and Patrick clicked on the link. A page appeared with photos of the wine and cheese event that Rick and Celeste had recently attended.

“The way we interact with people and do business is getting increasingly global,” Jim said, “and our firm reflects that. We actually have clients across the country, and with the Internet, we’re able to stay in touch as if they

— 54 —


lived right down the street. But we still want them to feel like they’re a part of the community we’re creating here. So, after an event, I’ll send out an email to the folks on the invite list letting them know we’re sorry they couldn’t make it, but they can still see photos of the event or catch up on some of the main points that were covered if it was a class or seminar.”

“These events aren’t always just educational,” Patrick continued. “As Jim said, we’re really interested in creating a sense of community. Financial planning is a people-ori-ented business; it has to be based on a solid and trusting relationship. So we try to hold social events just like that wine and cheese party where you and Jim first met. It’s a way for us to meet new prospective clients, sure, but more importantly, it’s also a way for you to build the relation-ship—and get some enjoyment out of what people don’t typically think of as a fun-filled activity. We’ve had a pro golfer come in and do a swing clinic. Sometimes we’ll just have clients in for lunch. You can bring a friend who isn’t a client, or you can just come for the networking and get to know other current clients.”

“Just like you met Hank last Saturday,” Jim said to Rick, “who happened to be an alum of your college. We’re

— 55 —

Menu of Services

excited when we can make connections like that and help people network or just meet people they have something in common with.”

“And then we transfer part of that experience online,” Patrick said, “so that we can maintain a community that isn’t limited to folks who are local. It’s all about keeping this on an interpersonal level, so that clients don’t feel like they’re getting lost behind numbers and graphs.”

“I’ve got to say,” Rick said, “I’m getting excited about this firm. There really is a difference between what you’re offering and what Diana offers. I think it could make a great deal of difference in terms of our experience, Celeste.”

Celeste smiled. “I think so, too,” she said.“Hey, one more question,” Rick said, turning back to

Jim. “I’ve got a niece who owns a small business with her husband Kevin. I want to be frank that they’re not quite as far along financially as Celeste and I are. They are… ahem… a bit younger than us. But I really want them to meet you. I’m not sure that they’re getting everything they could out of their current advising relationship, especially right now when they’re starting out and early decisions can make such a crucial difference. Are you open to meet-ing folks who might have a smaller portfolio?”

— 56 —


“Absolutely!” Jim said. “I’m really glad you brought it up. Here’s how I think of it. You and Celeste are the kind of clients I call ‘oaks.’ You’ve already built a substantial portfolio. You’re successful in your careers, and you’ve got some real achievement behind you. Of course, as oaks you can and should continue to grow, but a lot of the initial push to get somewhere has already happened.”

Rick nodded. “I think I’d agree with that.”“But oaks have to grow out of something, right?”“Acorns!” Celeste said, grinning. “That’s a great way of

putting it. I’d say that’s exactly who Kevin and Angie are.”“You beat me to the punch,” Jim laughed. “I’m always

open to clients who might have a smaller portfolio, but who are motivated. If your niece and nephew own a busi-ness, it sounds like they’re going to continue to grow, and a few years down the line, they might be in your shoes. I’d love it if you’d give them my name. I think we might have something to talk about.”

Rick smiled. “I’ll do that,” he said. “But I also think you and I and Celeste might have more to talk about. What’s the next step?”

“Well, take your time. I know you’ve got a wedding to plan and a lot of other decisions on your mind. For

— 57 —

Menu of Services

a lot of clients, we’d move right into creating a proposal from here, but your situation is slightly more complicated and you have more options. I would suggest that we have another meeting before we move into the proposal phase, because I want you to have a full understanding of what’s possible and what’s available to you.

“If you guys talk it over and decide you’d like to keep moving forward, we’ll set up a second meeting to talk about your goals and how you and Celeste envision your finances coming together. That would give us a rough idea of how to prepare a proposal for you. Eventually I’ll ask you to send one of our support team people copies of your statements from your current accounts. But that won’t be necessary just yet. Again: No pressure. It’s for you to decide whether you want to move ahead or not.”

“This sounds wonderful.” Rick stood up and extended his hand. “My assistant Adam will be in touch to set up a second meeting. I’d love to take the next step.”

— 59 —

C h a p t e r 6

A Strong Support Teamfor a Limited Clientele

“i hope we’re not wasting Jim’s time,” Angie told Kevin qui-etly when they found themselves alone. Jim’s receptionist had just brought them into the same conference room where Rick and Celeste had met with Jim and Patrick a few weeks before. The receptionist had brought a cup of coffee for Kevin and a glass of water for Angie, and now the two of them were waiting for Jim to arrive.

“I mean, I know Rick felt really enthusiastic about his meeting, but… I’m just not sure how all this applies to us,” Angie continued. “First of all, Dean is a fine advisor. What could Jim do that’s so different? And second, I don’t think Rick quite understands where we are financially. We aren’t high rollers like Celeste and him!”

— 60 —


“It’s just a conversation,” Kevin reassured Angie. “I’m sure Jim meets with people this way all the time, and it’s no bother to him if it doesn’t lead to an advising agreement. And you’re right, I’m not really sure why Rick thinks Jim could be all that different from Dean, but it can’t hurt to find out. And if it turns out we just don’t have the assets to interest Jim, then we’ll just keep doing what we’ve been doing. No sweat for anyone.”

“You’re right,” Angie said. “It can’t hurt to just have the conversation. Rick obviously thought there would be some value in it, or else he wouldn’t have made the referral. And he usually doesn’t steer us wrong with his judgment.”

Just at that moment, the door opened, and Jim came in with a different associate this time, a woman named Kimberly. Angie and Kevin stood up and offered them both a handshake.

“You must be Jim!” Kevin said. “We really appreciate you taking the time. Angie’s uncle Rick was thrilled about your firm and the services you offer.”

“I’m glad to hear that,” Jim said. “It was great meeting him. He and Celeste are going to make a great pair.”

Kevin and Angie both smiled broadly. They had to

— 61 —

A Strong Support Team for a Limited Clientele

agree. They couldn’t be happier that Rick had found Celeste.

Once Jim had introduced Kimberly to Kevin and Angie, they all sat down and got down to business. Jim and Kimberly talked through the same Menu of Services that Rick and Celeste had seen, and as they went, Angie couldn’t help shooting Kevin a few sidelong, astonished glances.

As they were finishing up, Angie said, “I’m really amazed by how specific and tailored these options are for each individual client’s preferences. To be honest, it never occurred to me to ask our current advisor for these kinds of options. He has a way of working that seemed all right to us, so we just went ahead with it. But now that you’re showing me this menu, I’m realizing for the first time that I probably would like to have options about how we do reviews and when.”

“And I definitely wouldn’t mind doing a pro golf clinic from time to time!” Kevin joked.

They all laughed, and then Angie steered the conversa-tion back to the matter at hand. “I hope you don’t mind my asking, but—how are you able to be so individualized with your services? How do you find the time?”

— 62 —


Jim smiled. “That’s a great question. We made the time.” He said. “A few years ago, I would have said that there wasn’t an enormous difference between how I oper-ate and how most other financial advisors operate. With the help of the people on my team, I took a step back and started asking myself, ‘Why are we doing things this way? Sure, it’s the way most financial advisors do things, but is it actually the optimal way?’ And the answer, loud and clear, was no.

“Let me give you an example of what wasn’t working,” Jim continued. “I know you’re currently with an advisor. Do you happen to know how many clients he serves?”

Angie and Kevin looked at each other, and finally Kevin shrugged, “I never thought to ask. He’s in indepen-dent practice, with one administrative assistant. So I can’t imagine he’s got a ton of clients.”

“But then again,” Angie said, “he also doesn’t seem to have a ton of time. So he probably is serving his absolute maximum number of people.”

“That would be my guess, too,” Jim agreed, “if he’s anything like the overwhelming majority of advisors. And if we go by what’s typical in the industry, it’s safe to esti-mate he has anywhere from seven hundred all the way on up to eleven or twelve hundred clients.”

— 63 —


Kevin’s eyebrows shot up. “No kidding?” He said, astounded. “Poor guy! No wonder it takes him a while to answer a voicemail.”

“I don’t mean to criticize him in the slightest,” Jim said. “It’s a very standard way of doing things, and most advisors manage to do a great job and have a fairly large roster of clients. But the thing is, since he’s working on his own, he’s got a lot going on. First and foremost, he’s watching the market and doing research. Then he’s dealing with individual portfolios and making decisions tailored to each client’s investment needs. All of that is what you’d expect. But then he’s got a huge load of work beyond all the things that make up the actual work of advising.”

“I can jump in here,” Kimberly said, “because I used to work on my own before I joined Jim’s staff. So beyond managing the money, there are a bunch of things cli-ents might need from time to time. Say they decide to change their beneficiary or add a beneficiary? They call you. Say they just need to change their address because they moved? They call you. And then beyond that, if you have a support staff—even if it’s just one person—you’ve got payroll. You’ve got quarterly taxes. You’ve got all the overhead of running a business, from renting office space to coordinating cleaning services to keeping up-to-date

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on filing so that you don’t lose track of clients’ important documents.”

Jim nodded. “Even with an administrative assistant, these tasks pile up. They start to encroach on an advisor’s time. I’d be willing to bet that if you did a breakdown of most advisors’ time, you would be astonished to find how little of it they’re actually able to commit to monitoring what’s going on in their clients’ portfolios.”

Kevin and Angie exchanged a look. They didn’t want to bring it up here, but they both knew what the other was thinking: No wonder Dean missed that opportunity with the Gable and Dynamic Systems merger.

“So what did you do to get around this issue?” Kevin wanted to know.

“Two things,” Jim answered. “First and foremost, I have a phenomenal team of advisors. Every client has two financial advisors who know the details of their specific situation. You’ll be in touch primarily with one of those advisors on a regular basis—for reviews and the like. If you decide to move forward with us, that will be Kim-berly, and we’ll also introduce you to a second advisor on the team. Whenever we take on a new client, all the advi-sors meet to discuss their profile, and we decide who is the best fit or who is interested in the specifics of their

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particular situation. Even though you won’t be working with me directly, you’ll still be getting the exact same qual-ity of service. And by having two advisors work with you, you’ll always have someone to be in touch with, and you can rest assured that your portfolio is getting the time and attention it needs.

“And in addition to the experienced advisors we have on the team,” Jim continued, “we have a support staff to deal with all of those things Kim talked about that are secondary to the actual advising. So if, for example, you decide you do want to transfer your accounts to us, you’ll have a specific staff member who will help you through the nuts and bolts of that process, by helping you fill out the proper forms. But on the other hand if there’s some-thing more substantive going on—say you open a third store, for example, and your financial situation is really going to change—”

Kevin jokingly held up his hand and crossed his fingers.“—well, that’s not a clerical matter. That’s an advising

matter, and then you’d be sure to meet with your advisor about what you want to change.”

“Got it,” Kevin said. “That really frees up a lot of time for you guys to focus on the research and planning end.”

“Right,” Jim agreed.

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“You mentioned there were two steps you took to make sure you had the time and resources to provide indi-vidualized services,” Angie said. “What was the second?”

“This is what’s really different from most other firms,” Kimberly explained. “We have a limited clientele. So, Jim talked about how there are advisors out there with as many as twelve hundred clients. That’s not gonna happen here. We limit the number of clients we take on so that we can be sure that we can give the proper attention to the clients we do have.”

Angie gave Kevin a meaningful look. “We should be upfront here,” Angie said, “because we’re just not in the same boat as my uncle Rick. I imagine if you want to keep your client list short, you’re looking for a very specific profile.”

“We are,” Jim conceded, “but it might not be the pro-file you’re expecting. We don’t have a minimum portfolio size, for example.”

“Jim and I already know a bit about your financial situation from the phone call you had with Erica, one of our support team members,” Kimberly continued. “That’s the usual process we go through when we get a referral. Erica calls folks up and introduces our firm, and then she

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goes through a list of questions that help us get a sense of who the prospective client is and what their goals are for the advising relationship. So we know what kind of work you do, if you’re married with kids and whether or not you’re thinking about college savings for those kids, whether or not you have investments and/or a 401(k). All the questions you answered for Erica help us get to know you better.”

“From there, we’re able to think about whether we can really add value for you,” Jim said. “And in your situa-tion, I think we can. Something I talked about with your uncle Rick is that I have all kinds of clients at all kinds of different stages of life—but all of them are growing in some way. Some of them I call ‘oaks’: They’ve already got substantial portfolios, so they’ve laid their roots in life, they’ve built up some wealth, and although they want to keep growing, they’ve already covered a lot of territory. But those oaks used to be acorns. And I have a lot of cli-ents on my roster who fit into the ‘acorn’ category: While they might not have a million dollars today, they’re headed somewhere. An acorn has all the potential of an oak, and I think of it as my job to help them start laying down roots and realizing their potential.”

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“Hmm,” Angie said thoughtfully. “I think that’s exactly how Kevin and I see ourselves and our business—although we’ve never put it exactly in those terms. We’ve got two store locations now, but it really is our goal to continue to expand and to see how far the business can take us.”

“We’ve put a lot into the stores already,” Kevin agreed, “and we’re fully committed to them. We’ve got a lot of passion for the business, and we want it to keep growing. One of the reasons we were both so happy that Rick met a woman like Celeste is that we admire her profession-ally. She founded her own business, and now it’s operating nationally. Both Angie and I feel like it’s possible for us to get that far. The sky’s the limit.”

“That’s how an oak thinks,” Jim said smiling.“The thing that’s great about the approach at this

firm,” Kimberly said, “is that there’s no rigid criteria for clients. People who are ‘acorns’ can be of any age. They can also be in any line of work. We take a lot of factors into consideration. I just met a couple the other day, for example, who doesn’t have huge savings right now, but they have a fairly substantial amount of money in their 401(k)s. And they’re in their late 30s and good savers. So

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if we were the kind of firm that just said, ‘Well, what have you got to invest with us right now?’, we wouldn’t have taken them on. But because we looked at the whole pic-ture, we could see that this was a couple that will definitely have a substantial portfolio twenty years from now. And we can help them get there.”

“Often people hear that we have a limited clientele,” Jim continued, “and they get nervous. They think, ‘Oh, that’s an exclusive firm; it won’t be for me.’ But limiting our clients is not about excluding people, it’s about hon-estly asking, ‘Can we add value? Is this the best relationship for everyone?’ And if it’s not, we want people to find the advising relationship that will be the best fit for them. But we also don’t want to turn people away offhand. We have different levels of service we can provide, and from time to time, even if we aren’t able to enter into a full financial planning agreement with someone, we might be able to offer them consulting services at an hourly rate, to help them make a decision about one specific issue they’re deal-ing with.”

Jim shook his head as he continued, “But that’s a bit of a tangent because that’s not what I would suggest for the two of you. You two actually fit into the profile of a lot of

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my clients. You own a small business that’s growing. Your cash flow is growing. Now you’re at a point where you’re committed to saving for retirement. I’d say there’s a lot we can do for you.”

Kevin and Angie both smiled.“This has been a very illuminating conversation,”

Angie said. “I admit I was a little doubtful, but I’m start-ing to see that there’s a lot more to an advising relationship than meets the eye.”

Kevin nodded his agreement. “At first we were think-ing there just wasn’t much reason to rock the boat. Why look for a new advisor if we already have one? But after today’s conversation, well…” He looked at Angie. “I think Angie and I have a lot of exciting things to think about.”

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C h a p t e r 7

Fair and Transparent Pricing

“no two Clients are alike,” Jim said. He and Patrick were once again sitting at the conference table with Rick and Celeste, a few weeks after their first meeting, and Jim was responding to a question Rick had just raised: “Have you ever dealt with an asset-merging situation similar to mine and Celeste’s?”

“Sure, there are certain goals that most people tend to share when they come to a financial advisor,” Jim con-tinued. “Like preparing for retirement, for example. But everyone places different emphasis on different goals, and everyone’s wealth is distributed differently over different kinds of savings and investment accounts. So I just don’t have a one-size-fits-all strategy for every individual or

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every family. Instead, when we’re talking about going with full financial planning services rather than simply manag-ing a portfolio, I offer very specific ‘à la carte’ options so that we can tailor an approach according to your needs.”

“Well, that sounds good,” Rick said. “I’m sure you remember that Celeste and I do have a fairly unique situation.”

Celeste joined in. “We’ve both got substantial portfolios that we built up before we met each other. We’re look-ing forward to what we can achieve if we bring our assets together—both of us love to travel, for example, and we want to have a lot of flexibility to spend time abroad during our retirement. But we’ve also got separate families. I have my kids from my first marriage—they’re grown up now, and their education is already taken care of, but if anything were to happen to me, I want to be sure I have a plan in place that’s fair to both Rick and them. And even though Rick doesn’t have kids of his own, Kevin and Angie are a major part of his life, and he wants to include their sons in his estate planning. So there are a lot of moving parts.”

“These are all excellent points to start with,” Jim said, “and this is exactly why I don’t use a formulaic approach. I want to know each client’s individual values to determine

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how I can best serve them. So, let’s look at different possi-bilities and think about the pros and cons. How you move forward in one area will determine your options in other areas.

“There is the option of literally merging your assets,” Jim continued. “If that happens, it will require a process. All along, you’ve had two different advisors looking after your portfolios with two different management systems. And since I know your current advisor Diana, Rick, it’s safe to say that she’s set up a system that works well for your portfolio. It’s also safe to say that Celeste’s portfolio is moving along well under my system.”

Here Celeste gave Rick a playful little poke.“So if we looked at your portfolios independently,

they might be just fine, but that doesn’t necessarily mean that we could combine them exactly as they are and leave everything as is. If we bring things together, we would want to go through an entirely new diversification pro-cess, so that we can make sure we’re making the optimal decisions for your merged portfolio, which will be a whole different animal from your separate portfolios. We’d think of it as starting with a blank slate, as if this were a brand new portfolio.”

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Celeste nodded. “I see your reasoning. So, if we went in that direction, you’d be able to discuss the specifics of that diversification process with us at our proposal meeting?” “Exactly.” Jim nodded. “But now here’s another option. It could be possible to merge your assets and then do estate planning from there. But another way to go about it—which I would say is more typical in situations like yours—would be to not truly merge your portfolios.”

Rick and Celeste exchanged a look. “We’ve talked a lit-tle about that as a possibility,” Rick said, “but we just don’t want things to get too complicated. And we also want to be sure that if something happens to one of us, the other is taken care of.”

“Of course,” Jim said. “So, if this is the direction you decide to go, we’d be sure to place a heavy emphasis on the estate planning side of things to make sure that you have a plan in place for whatever circumstances life might pres-ent you with.”

“How about a for instance?” Celeste asked.“What we often do very successfully,” Jim answered,

“would be to create a series of accounts so that you and Rick can jointly manage your assets and so that both of you can have access to ‘the whole package,’ so to speak,

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during your retirement. But we’d flag a certain portion of your individual assets, Celeste, to go to your kids, and a certain portion of yours, Rick, to go to Kevin and Angie.”

Here, Patrick, who had been listening quietly, joined in. “This is the type of situation that really lends itself to creating trusts,” he offered, “so that, in terms of your estate, one survivor could still receive a portion of the assets and your kids or your niece and nephew could also be beneficiaries.”

“Sounds like a job for our attorneys,” Rick said. “We want to make sure we do this right and carefully, but I’m just now realizing how daunting a task it’s going to be.”

“We definitely would need to work with other profes-sionals in your lives,” Patrick agreed, “but it doesn’t have to be daunting. I like to think of Jim as the quarterback for a whole team of professionals.”

Jim laughed. “I like the sound of that!” He said.Patrick laughed, too. “Here’s what I mean. We don’t

draft wills or trusts, for example. There are certain ele-ments of getting your financial plan in place that other professionals will be in charge of. This will be a joint effort involving an attorney, a CPA, and bankers at whatever institutions you have accounts with—and since there are

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two of you, it’s probably safe to say we can multiply all those professionals by two.”

“True,” said Celeste.“This is quite typical for people in your position, who

have accumulated substantial assets,” Patrick said. “As your wealth grows, you need to have different people in specific roles to support the management of that wealth and to offer their various expertise. So there are a lot of players on your team. We consider it part of our job to reassure you that everyone on your team is working in coordination, to your benefit.”

“Right,” Jim agreed. “You have enough on your plates already, so we are certainly not going to turn you loose to do the job of collecting paperwork from all these different people and making sure that the lawyer understands what we’re doing and the CPA understands what the lawyer is doing. Instead—and I like Patrick’s word for it, ‘quarter-backing’—I’ll be quarterbacking a professional provider team. My staff will take care of communicating between individuals and making sure that everyone has copies of the necessary paperwork to take the steps we agree upon together. All you’ll have to do is sign a form allowing us to handle that coordination on your behalf.”

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“Wow, that sounds fantastic,” Rick said. “It sounds like, once we make the major decisions, it doesn’t have to be daunting—you’ll take care of setting the wheels in motion.”

“A major part of my job, honestly, is reducing worry for my clients,” Jim said. “So, that involves what most people think of first: I help you plan a financial future so that you don’t have to worry that you’ll lose security. But I’ve also put a support team in place so that you don’t have to worry on a logistical level either. You have a lot going on in your life—that’s part of what has made you as suc-cessful as you are. So my role is to let you do the work that makes you successful, not bog you down with concerns about details.”

“That’s a relief,” Rick admitted. “But how do we pay you for that kind of service, especially if it’s that involved for your whole team?”

“We’ll come up with a proposal for you, based on how you think you’re going to want to proceed—whether we’re dealing with merging your assets or keeping them some-what separate. We’ll be able to choose, as I mentioned, ‘à la carte’ services that apply to your situation. In your case, it will definitely involve estate planning and retirement

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planning. Each financial planning package is quite tailored to the individual client, so as we’re writing your proposal, we’ll estimate the number of hours involved for us, and come up with a fee that we can discuss at our next meet-ing. But I’m glad that you brought up pricing, because even before we get to the proposal phase, there’s more I can tell you about how we can possibly save you money.”

Celeste smiled. “I already showed him your fee calcu-lator online—and we were both very impressed.”

Rick nodded his agreement. “But how exactly are you able to offer a capped fee? From everything you’re describ-ing, you’re not a discount firm. You’re not cutting back on services—in fact, you’re adding value for clients right and left.”

“Let me be honest with you,” Jim said. “Pricing is something that we think about a great deal—and an area that really differentiates us from most other firms. A few years ago, I had a client whose portfolio was growing ask me, ‘Why exactly am I writing a bigger and bigger check every year?’ I gave him the standard answer—that as his portfolio grows, the work we put into it grows. And also that if our compensation grows as his wealth grows, it’s an incentive for us.

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“But then I went away and started to give it some thought, and I realized that even though I was following the industry standard for pricing, it wasn’t particularly fair to clients like you. I’ve talked with you about how some of my clients are acorns—they’ve got a great deal of poten-tial, but their major growth is still ahead of them—and some are oaks, right?”

Both Rick and Celeste nodded, remembering how Jim had described Kevin and Angie as acorns and them as oaks.

“Well, the trouble is,” Jim continued, “even if I follow the industry standard and reduce the percentage I charge my oaks as their wealth increases, they’re still paying sub-stantially more than the acorns are. Not in percentage, but in dollar amount. And it occurred to me that that’s simply not fair. To put it frankly: I have far more acorns in my clientele, but the oaks were responsible for most of my income. So we began to look for ways that we could make things more equitable by creating savings for the oaks.

“When you’re investing through a financial advi-sor, there are generally three expenses to be prepared for. The first is my fee, which as you know is 1.25 percent until you reach a yearly cap. The second is the investment

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cost, and the third is what’s called a ‘custodial’ fee, a small fee for actually holding your account and processing transactions.”

“Sounds standard,” Rick said, nodding. “Diana has explained these fees to me as well.”

“Right—you’ll run into them no matter who man-ages your portfolio. Now, I don’t have any control over the investment and custodial fees, those are set by the institu-tions we work with.

“What I can help you save on is the fee that I do have control over: My management fee. If you’ve used the online fee calculator, you already have a sense of just how much money that can mean. For many of my clients, it’s a difference of thousands or even tens of thousands of dollars a year, as compared to advisors who don’t offer a capped fee.”

“Like my current advisor,” Rick agreed ruefully.“Well, to be honest, like all of my colleagues,” Jim

said. “I really don’t know of another firm that has done the research we have to find out how to continue to be prof-itable while offering a capped fee. Ours is a very unique approach to pricing. Before I really started to question the fairness of the standard pricing system, it wouldn’t have

— 81 —


occurred to me that there was anything wrong with ‘the way things have always been done.’ But now that we’ve discovered a different way of doing things, I can’t imagine ever going back to the old system. This system is simply more fair; there’s no other way to put it.”

“It’s certainly different from what I’m used to,” Rick said. “But it’s different in a good way. To be honest, it just didn’t occur to me to do a systematic comparison of different financial advisors. I figured everyone was doing roughly the same thing, and the most important differ-entiator was, ‘Do I get along with this person and trust them?’ And that’s a worthwhile question to ask, of course. But do I get along with Diana to the tune of an extra ten thousand dollars a year? Well…that’s a different question altogether.”

“That’s a good way of putting it,” Jim said. “I believe very strongly that a relationship between a financial advi-sor and a client has to be built on trust. But at the end of the day, helping you manage your money is really about helping you accomplish your life goals. You and Celeste want to remain financially secure; you want to retire com-fortably and do some traveling; and you want to be able to pass on some of the fruits of your lives’ work to your kids

— 82 —


and family members. The way I see it, adding a price cap isn’t just an arbitrary way to differentiate my firm from other firms. It’s a very real way of contributing to your goals. The money you save on my fee each year will go right back into your continued growth—and over time, that could make a huge difference.”

Rick reached over and took Celeste’s hand, giving it an affectionate squeeze. “I have to say, I was skeptical about the prospect of changing financial advisors. But you have me pretty well convinced. It sounds like, with your team helping us through the process, the logistics of the transition won’t bog us down or interfere with our busy schedules. And, ultimately, this is going to make a signifi-cant difference in our lives. It’s really not just a question of flipping a coin between you and Diana. There are real, measurable reasons to make the switch.”

Rick smiled at Celeste. “I’m glad you gave me the nudge to find out more,” he told her.

With Jim and Patrick’s help, Rick and Celeste spent the rest of the meeting making some decisions about how to bring their separate portfolios together and what steps they wanted to take in terms of estate planning. Once these decisions had been made, Jim and Patrick were ready to

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begin work on preparing a proposal for Rick and Celeste.“Of course, I have all of Celeste’s financial informa-

tion already,” Jim said, as they wrapped things up. “The last step will be for us to collect your account statements, Rick, and then we’ll be able to go away and crunch some numbers. In our next meeting, I’ll have a detailed proposal of how we’ll proceed with your financial plan and exactly what the fee will be for our services.”

Rick smiled broadly. “Fantastic,” he said. “I’ll have my assistant get the ball rolling on sending over the state-ments right away. I’m really looking forward to working with you, Jim.”

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C h a p t e r 8

Professional Management Strategies,Clearly Communicated

kevin and angie were almost sure they wanted to transfer their assets to Jim’s management. Their first meeting with him had been surprising for them in so many ways. First, they were astonished that he was willing to take on a port-folio like theirs at all. Second, they were pleased to hear that he didn’t think of their assets as small but as growing, and that he saw the same potential in their livelihood as they did.

Beyond that, it had been eye opening to them to see just how different one financial planner could be from the next. They still liked Dean, and no matter what deci-sion they ultimately came to, they would be grateful for the help he had given them when they were first building

— 86 —


their portfolio. But Jim had shown them how much more empowered they could be in creating an advising relation-ship that fit their needs and that supported their goals. So, they had decided to take the next step of sending him their statements so that his team could put together a proposal.

Jim met them in his conference room with Kimberly, the advisor they had met during their first meeting, and another advisor named Ben.

“Kevin and Angie, I’d like you to meet Ben,” Jim said, as Ben extended a friendly handshake. “Our advising team took a look at the documents you sent over, and we agreed that Ben and Kimberly would make the right advising team for your needs. I’m going to let them sit down with you and explain what we have to offer.”

“That sounds great,” Kevin said, again feeling impressed that not just one advisor but two would be available to make sure his and Angie’s finances were on track.

As Jim left the conference room, Kimberly began to lay out some paperwork on the table.

“The first thing we like to explain about the way we work,” she said with a wry smile, “is that…we actually have a way of working.”

Angie laughed. “What do you mean?”

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Professional Management Strategies, Clearly Communicated

“We have a very specific, reviewed, and tested way of selecting investments. Now, most advisors will say they do—but to be quite frank, they really don’t. They might have a process of getting things off the ground, but then after that, it’s mostly hands-off and the occasionally mad scramble to catch up.”

“We’ve found,” added Ben, “that it’s a lot saner for us—and a lot more effective for our clients—if we have a step-by-step system that is ongoing. We’re not just here to build portfolios; we’re here to manage them in an ongoing and proactive way.”

“Our process involves a number of different steps that investments are filtered through, so to speak,” Kimberly explained. “That way, before we make any purchases, we’re able to determine whether or not they meet our cri-teria. Another item that would be important for you to know is that all of our advisors are on our firm’s Invest-ment Committee, which meets quarterly. We sit down together and review the investments, to determine if they’re still suitable—if they’re still meeting our standards of performance.”

“Now of course, it’s also possible that changes could happen during a quarter,” Ben continued. “So we have

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technology that allows us to monitor the investments on a continual basis. We build certain flags around different issues that could arise with an investment, and if one of those flags pops up, we can step in and address that par-ticular item at that point.”

“So, what kind of issues could arise?” Angie asked.“Keeping in mind,” Kevin added, “that neither of us

are experts in this—which is why we’re here.”“Of course,” Kimberly said, smiling. “Well, I’ll go a lit-

tle more in-depth into how we evaluate investments, using certain criteria. If those criteria start to slip, that’s what we mean by ‘issues arising.’” Kimberly pulled out a short handout with a brightly colored heading and a few charts and graphs. “We don’t need to go too much into the jar-gon here, but as you can see,”—she pointed to a column on one side of the page—“there is a list of criteria that are used to evaluate investments.

“Let’s look at just one of those criteria as an example.” She indicated a bullet point in the list. “Companies should have a minimum track record. They should be at least three years old—and sometimes quite a lot more—so that we can look at the history of their performance.”

Kimberly continued to move down the list of criteria,

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explaining in brief what each meant and why it was impor-tant in terms of evaluating an investment. “Now, some of these points get fairly technical,” she explained, “especially when it comes to evaluating an investment’s level of risk and its performance relative to other investments. Not only do we look at an investment’s performance by com-parison, but also over a period of time. So the equations can get fairly involved.”

“I see,” Kevin said, glancing over the charts on the handout. “We don’t really need you to turn us into experts on this. The important thing to us is that you’re the experts.”

Ben laughed good-naturedly. “Well, the way I see it,” he said, “you’re the experts in running your business; that’s where your passion lies. And our passion happens to lie here,” he said, tapping the handout. “So the important take-away from these criteria Kimberly was showing you, is that ultimately each investment gets a score. The score is an independent, third-party evaluation of an investment. And it helps us make decisions not only about whether we should select that investment initially, but also about whether it should continue to be in our clients’ portfolios going forward.”

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“Got it,” Angie said.“Now, as Ben was saying before,” Kimberly continued,

“sometimes issues arise and we do decide that we want to make a change in an investment. This is where Jim’s firm is a stand-out. It used to be that any advisor was required to call each and every one of his clients and get permis-sion to make a change. If he had a hundred or a hundred and fifty clients with a certain investment, he’d have to spend days—maybe weeks—getting a hold of each one if a problem arose. Now, from a client’s perspective, that’s worrisome.”

“No kidding!” Kevin agreed.“Regulations have now changed to allow certain advi-

sors, who have met certain standards set out by a governing body, to make limited, discretionary changes, without nec-essarily needing to get a client’s consent first. A lot of advisors out there are still doing it the old fashioned way and so they are susceptible to missing opportunities or falling into traps.”

“That makes a lot of sense,” Kevin said. Both he and Angie were thinking the same thing. They hadn’t even known about this extra level of discretion allowed to

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advisors, and so they hadn’t thought to ask Dean whether he was able to do it or not.

“This does introduce the question…” Angie started hesitantly. “If you have the authority to make changes in our portfolio without running it by us first, can we always feel confident that you’re making changes in our best interest?”

“Exactly!” Kimberly said. “I’m glad you asked. That’s an absolutely appropriate question.”

Angie looked slightly relieved.“While some of the advisors in Jim’s firm are desig-

nated as Accredited Investment Fiduciary Analysts, we all believe in and follow fiduciary standards of care. The main word to pay attention to there is fiduciary. A fiduciary is someone who is required by law to act solely in the inter-ests of and with undivided loyalty to his or her clients—to put the client’s best interests ahead of his or her own.”

“That means,” Ben explained, “that we’re obligated to make sure that we understand your specific financial goals, including how much risk you’re willing, or unwill-ing, to take to achieve those goals. Together, we arrive at an agreed-upon plan for moving forward. Our job is to

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help you understand the ramifications of the decisions we’ll be making together.”

“As Ben just alluded to,” Kimberly continued, “we’ll make sure we appropriately diversify your portfolio to help mitigate as much risk as possible. All of our deci-sions will be made in a thorough and objective manner. Your assets will be held in a secure account with a quali-fied custodian. We’ll communicate with you clearly—this means sending you periodic statements that show updated values, any transactions that have occurred, a summary of fees, and any interest or dividend payments made. And finally, as we’ve stressed before, we’ll be monitoring your portfolio on an ongoing basis.”

“That all sounds very reassuring,” Angie said.Kimberly continued, “We have a thorough process for

developing a tailored investment strategy that is unique to you. Our only consideration will be your specific invest-ment needs.”

“And, as we’ve mentioned, we follow objective stan-dards for evaluating and recommending investments that suit your portfolio,” Ben added, “which is not always a practice you’ll see at other firms. Once it’s in place, both Kimberly and I will be committed to monitoring the

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performance of your portfolio. And you can rest assured that our standards won’t slip. Jim conducts ongoing reviews of the firm’s business practices, so that we keep up with the accreditation standards.”

“What all this boils down to,” Kimberly said, “is that we will be here to help you accomplish your goals. For most of our clients, the details of which investment is performing in what way at what time aren’t important. Far more important are the big picture questions: What should we be setting aside to help our kids get through college? When can we retire?”

“Or,” Ben said, pointing to some of the paperwork on the table, “when can we reward our hard work with that vacation home? From our firm’s initial conversations get-ting to know you, we know that’s a goal you’ve set for yourselves, in addition to ensuring your sons’ tuition is paid and retiring comfortably. We see ourselves as custo-dians of your goals—all of the minutiae that we handle on a day-to-day basis is about contributing to those larger life steps for our clients.”

“That’s exactly why we’re here,” Kevin said. “We don’t want to be worrying about exactly which investments are made when, we just want to know that those decisions are

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in good hands with you. Then it’s up to us to keep up our end of the bargain by continuing to grow our business.”

“And continuing to make sensible decisions with our money,” Angie added.

“That’s a great point,” Kimberly said. “Investments are a wonderful tool—but we have to think of them as just that. A tool, rather than a magic wand. They won’t take anyone from Point A to Point Z overnight. We’re here to make sure your investments continue to gather momen-tum, but an important part of the process is your own approach to saving and spending. So the proposal we’ve put together for you outlines exactly how you can reach certain reasonable benchmarks in the foreseeable future.”

“But this is something that we’ll obviously always be adjusting,” Ben said, “which is why we want to meet with you at least annually, but probably more often in this first year or two. For example, opening up the second loca-tion of your store was a major financial change for you. So when things like that arise, we’ll want to sit down and think about whether we should change our approach. If you decide to open a third location…”

Kevin and Angie exchanged a meaningful glance. It was a possibility that was never far from their minds.

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“…we’d be able to have a conversation first about what assets we can move around in what way to give you the upfront capital,” Ben continued. “And from there, down the road, we’d talk about exactly how to reinvest your increased profits!”

Kevin grinned. “Because when Angie and I do any-thing, we always make sure we can make it a success.”

“And we hope we can contribute to those successes,” Kimberly said. “And even if things aren’t always a success, we’ll be able to partner with the other professionals in your life, like your attorney or your CPA, to make sure you’re taking prudent risks. Part of what we do is not just determining what steps to take, but also determining the right time to take them. If we think there’s just not enough cushion in your portfolio for that vacation home yet, based on how you’ve outlined your goals for us, we’ll be upfront with you. But we’ll also work together to find a way to get there.”

Angie nodded, a satisfied smile growing across her face. “All of this sounds very promising,” she said. “It feels much more like we’ll be working toward something, rather than just dropping off our money and letting it sink or swim.”

— 96 —


Kimberly laughed. “That’s one way of putting it.”For the rest of the meeting, Ben and Kimberly showed

Kevin and Angie the specifics of their proposal, detailing the investment strategy that they recommended and offer-ing some guidelines for how much of their income should be set aside on a monthly basis.

By the time they had gone over everything, Kevin and Angie were feeling very confident.

“I think we’re ready,” Angie said. “Where do we sign?”

— 97 —

C h a p t e r 9

Acorns Become Oaks…and Oaks Keep Growing

“oh My goodness, what a surprise!” Celeste exclaimed.She and Rick were just coming through the door of

Jim’s reception area—when they ran into Angie and Kevin on their way out. It was April, almost a full year after both couples had met with Jim for the first time.

Rick and Kevin exchanged a warm handshake as Angie hugged Celeste. It had been a few weeks since they’d had a chance to get together, and while they were planning another picnic lunch for Angie’s upcoming birthday, they were all very happy to have this unexpected chance to see each other.

— 98 —


“We’re just finishing up a review of our first year with Kimberly and Ben as our advisors,” Angie explained. “And I guess you guys are going in for the same thing?”

“Exactly,” Rick laughed. “What a coincidence. It’s been just under a year since we first started working with Jim and his colleague Patrick.”

“Can you believe it’s been a year?” Celeste asked. “It feels like the time has just flown by. We thought every-thing would slow down for a while after the wedding and the honeymoon…”

“But then—less than a month after we got home from the honeymoon—Celeste had that opportunity to buy out one of her smaller competitors,” Rick jumped in. Kevin and Angie nodded, remembering.

Rick and Celeste had held a beautiful, intimate cer-emony and reception for their closest family and friends. They had had just the right kind of help with the planning and set-up so that the wedding had gone ahead without a hitch. It had been a joyful, easy occasion, and the next morning, they headed off on a three-week cruise on the Mediterranean.

Celeste had been surprised to come back from the honeymoon to learn that one of her competitors was

— 99 —


facing financial difficulties. A few weeks later, the com-petitor decided to sell—and Celeste made the decision to take advantage of the opportunity and grow her business.

“I’m still so relieved, looking back on it,” Celeste said, “that we had everything in place with Jim. I mean, this was the kind of opportunity that comes and goes in a flash, but Jim got everything set up for us so efficiently after we made the final decision to move forward with him that all of our accounts were in order. We’d decided to have some cash accessible for exactly this kind of unexpected situa-tion, so I was able to move forward like that.” She snapped her fingers.

“Exactly,” Rick said. “Jim had everything so clearly organized that Celeste and I were able to sit down and have a very manageable view of how this would affect us as a couple and our personal finances, apart from her com-pany. He helped us get a good handle on what it would mean for us, and then Celeste was able to take that infor-mation into her further planning with her board… and it just made sense. I’m so glad we had everything in order so that she could think quickly—but still make a sound deci-sion. Which, so far, it has been!”

Celeste smiled broadly. “It sure has. It wasn’t in the

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business plan at all—this just wasn’t something we could ever have anticipated. But it has certainly allowed us to expand into some places that we’d been hoping to reach for a long time. Of course, you know it’s been a busy few months, but also very exciting.”

“I’ll say,” Kevin agreed. “Just seeing how quickly you were able to act on the opportunity and start reorganizing your business has been really inspiring for me and Angie. Frankly, it’s given us some good ideas for what we want to do.”

“I’m glad,” Celeste said, “because you both really deserve to keep growing.”

“And now we feel like we have better tools than ever to do just that,” Angie said. “Kimberly and Ben were so efficient and organized in getting us through the set-up period that it seemed like right away we were able to start thinking about the future rather than getting bogged down in just keeping our finances maintained and stable.”

Kevin nodded his agreement. “I think we mentioned to you how, early on, they set us up with a plan for how we could save for that lake cabin we’ve had an eye on—and also how to stay organized so that if we get an opportunity

— 101 —


to buy a third retail space, we’ll be able to jump on it the way you did.”

Rick and Celeste smiled, both of them very much rooting for their niece and nephew to be able to continue to expand their store.

“And the good news is…” Angie said, pausing dra-matically, “…we’re going to hit our target this summer! Kimberly and Ben just gave us the go-ahead to start look-ing at houses if we want to.”

“Fantastic!” Rick said, giving Kevin a slap on the back. “I’m so proud of you two. You created your business out of barely any start-up, and look where you are now. It really seems like you’ve designed exactly the life you wanted for you and the boys, and you’re just going to keep on making progress.”

“Well, the incredible thing is,” Kevin said, “we didn’t even realize how much less of a headache all this could be. Back when we had Dean as an advisor, we thought it was just our job to sort of do guess work and never feel very confident about whether it was the right time to take a financial step or not.”

“We really thought uncertainty was just part of the

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bargain,” Angie said. “But now we have advisors who are so much more involved. It’s not that Dean didn’t care or wasn’t invested in our success…”

“He just truly didn’t have the time,” Kevin explained. “Honestly, when we told him we were moving on to a dif-ferent firm, he didn’t seem at all disappointed. He’s got so many clients, he just couldn’t be involved in our planning process the way that Kimberly and Ben are.”

“And thank goodness they are!” Angie exclaimed. “We might have borrowed money for the cabin last year. It wouldn’t have been a disaster, but now we have everything set up so that we’ll be making the purchase from avail-able cash. We’re not getting ourselves saddled down with responsibilities that might limit us. We can stay responsive to opportunities that might come up in terms of our busi-ness—exactly the way you were.”

“Exactly!” Celeste said. “That’s really the whole key, right? That’s why I was so eager to introduce Rick to Jim. Because it’s not just about plunking your money down in an account with a manager whom you feel comfortable with and then standing back and riding things out. It’s about creating a working relationship, a continual conver-sation, so that you know you’re working toward a goal.”

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“And so that, as your life and your goals evolve, you know you’ve got a team behind you that can help you evolve financially as well,” Rick said, looking at Celeste with a little twinkle in his eye. “I should have known from the beginning that Celeste was on to something with Jim’s firm! She never picks anything average—I should have known she would pick the advisor who knows how to optimize. And for a great price, too!” “That’s just how I got you through the door,” Celeste laughed. “But it’s true that both as individuals and as a couple, we’ve saved quite a bit of money this year with Jim’s price cap. And it won’t be too long before the two of you are able to take advantage of it, too.”

“That’s exactly what we’re aiming for!” Kevin agreed.Angie nodded. “And it actually feels within our reach.

We have a clear, realistic plan in place—and we’ve got the resources we need to work toward it. We could never have guessed how much this new advising relationship would free us up in terms of time and unnecessary worry. It never even occurred to us that there was a difference.”

“Me neither, frankly!” Rick agreed, remembering how convinced he had been that there was no need to stir things up by transferring his money out of Diana’s

— 104 —


care—and how easy and smooth the transition had been once he had decided to take the step.

Just at that moment, Jim came around the corner into the reception area. “Looks like the whole family’s here!” He said, exchanging handshakes all around.

“I’m glad you’re all here together for a moment,” Jim continued once he’d greeted them all individually. “It’s a great chance for me to tell you how glad I am that you all came onboard. You’re truly a pleasure to work with, and I’m glad my firm can be a small part of your success.”

“The feeling is entirely mutual, Jim,” Rick said.With that, the small group parted ways. Angie and

Kevin walked out to their car, talking excitedly about the real estate search ahead of them. And Rick and Celeste fol-lowed Jim toward his conference room, where they would continue making plans for a comfortable, secure, and suc-cessful future.

— 105 —

C h a p t e r 10

Shall We Continue the Conversation?

if you’ve read this far, you know that there is a lot more to a financial advising relationship than meets the eye. Of course, it is true that your relationship with your financial advisor will be somewhat subjective. Do you trust him or her? Do the two of you just “click”? These gut feelings are an absolutely valid place to start.

While our gut feelings are useful in making decisions about any working relationship, it can sometimes feel like there just isn’t a lot of hard data to go on. In an industry as complex as wealth management, is it even possible to compare different professionals in a clear-cut way? Sure, instincts are valid, but how do you really know which advisor is best for you when you have so many to choose

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from and your instincts are telling you that they’re all “nice guys”?

Perhaps reassuringly, your gut feelings don’t have to be the only barometer. The reality is that most financial advisors are good people who have the best intentions for their clients. If deciding whether or not you like a particu-lar advisor is the only basis for comparison, making the final decision can feel somewhat arbitrary. It shouldn’t be. We’re talking about your security and your family’s future. You don’t have to feel like it’s a toss up between one advi-sor and the next.

The reality of the industry is that there are objective, measurable differences between advisors, and you can compare the services you’ll receive from different advisors.

Over the course of this book, you’ve met two very dif-ferent families. Kevin and Angie are ambitious and they’ve been successful so far in building their dream. But they’re still in the building stages. They haven’t yet accrued a great deal of wealth because they’re young and still reinvesting in their business.

Rick and Celeste, on the other hand, are established in their careers. They’ve climbed long ladders to get where they are, and they now have a solid foundation for their

— 107 —


lives and livelihoods. They’re still energetic and ambi-tious, but they’re starting to think about slowing down and enjoying the fruits of their careers.

As it turns out, despite these two couples’ different life stages, both stand to gain a lot from an advising relation-ship—but only from the right kind of relationship. Kevin and Angie think that they don’t yet have enough wealth to interest a certain level of financial advisor. They think their best option is to stick with the standard advising relation-ship, which does offer them some value but also means that they are one among hundreds of clients and that they don’t get much individualized attention to their goals.

Over the course of the story, they learn that the right kind of advisor won’t just glance at their net worth as the lone factor. Instead, the right advisor for them sees the complete picture of their lives, which includes their net worth as it is today, and also their net worth as it could be tomorrow. The future depends on Kevin and Angie’s willingness to work hard and save right, according to a plan that takes into account their specific goals. The right advisor for them knows that they are acorns. They’re still putting down roots, but they have the potential to grow far beyond what meets the eye.

— 108 —


Rick and Celeste, on the other hand, have already grown into oaks. They do have the kind of wealth that interests any level of advising firm, but even for them, the optimal decision is not necessarily a simple matter of find-ing the biggest name firm with the most exclusive client roster. It’s likely that any advisor Rick and Celeste turn to will devote the right amount of time and attention to their portfolio—but does this automatically mean they’re get-ting the best value for their money?

As it turns out, Rick and Celeste discover that value is a two-way street. They don’t necessarily have to pay the highest fees to get the highest and best service. And at their income level, a savings in fees could make a signifi-cant difference in terms of the wealth they continue to accrue and reinvest.

Whether you’re an acorn or an oak, you need a finan-cial advisor who suits your needs specifically. An advisor with a tailored plan to help you move forward—and a tailored pricing schedule that’s fair to you. As you meet with various advisors and begin to think about how they could make a measurable difference in your life today and your life tomorrow, think about the questions that arose for Kevin and Angie, and for Rick and Celeste.

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1. How many clients does this advisor currently have?

2. How much time will this advisor devote to me and my portfolio?

3. Does this advisor have a system in place for communicating with me?

4. How often will we communicate?

5. How will we communicate? By phone, email, or in person? Can this advisor adapt his or her communication style according to my preferences or to accommodate the demands of my schedule?

6. What fees will be involved?

7. Is this advisor able to clearly explain his or her fees and show me that they are fair and in keeping with the kind of service I will receive?

It comes as a surprise to the characters in this story that different advisors will answer the above questions differently. And the characters are also surprised to learn that they have a choice. Kevin and Angie believed that they simply had to accept being a relatively low priority on the

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to-do list of an advisor with a larger roster of clients. And Rick believed he was stuck paying high fees for premium service. As it turns out, though, clients have a right to ask for more personalized service and more personal attention.

It’s not about “clicking” with a particular financial advisor and then squeezing yourself into his or her sched-ule and style of working. Instead, an advisor’s job is to work with you to find a strategy that fits the amount of time and energy you are willing to give and that fits the mode of working that you find most comfortable. And this kind of personalized service doesn’t have to put a big dent in your returns each year!

Over the course of this book, Jim’s way of working rep-resents my way of working. The solutions and strategies he offers Kevin, Angie, Rick, and Celeste are the ones that I have discovered and developed over decades of working with a wide range of clients. For years now, I have been continually asking myself and the members of my team, “Why do we do it this way? Is there a better way? Is there a way that provides more value to our clients?” And this careful attention to detail has paid off in terms of what I can offer back to every client, from the acorn to the oak.

Although Kevin, Angie, Rick, and Celeste are not real

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people, their stories represent many of my clients’ life situ-ations, questions, challenges, and dreams. By telling this fictional story, it’s my hope that I’ve offered you a new window into your own life. This is only the beginning.

It’s my hope that some aspect of this story resonated with you. It’s my hope that reading this book offered you some insight into your plans for the future. Perhaps it has helped you identify yourself as either an acorn or an oak—and given you some idea of how your financial advisor can participate in the growth or the maintenance of your wealth. If you did find yourself reflected in these pages, I’d like to continue the conversation with you.

If you’d like to take your financial planning to the next level, and you’re ready for an advising relationship that not only meets your individual needs but exceeds your expectations for service, quality, and value… contact us today. We’re eager to meet you—and show you exactly how much of a difference the right advising relationship can make.

About the Author

For nearly three decades, Phil Wood has been a trusted and respected voice in the financial services industry. His innovative approach to money man-agement, retirement income planning, and estate planning has helped his clients discover what financial secu-rity means to them. Phil lives in Nebraska with his wife, Michelle, and two children, Madeline and Ethan.

Copyright © 2014 by Phillip Scott Wood...Securities and advisory services offered through SII...

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Transcript of Copyright © 2014 by Phillip Scott Wood...Securities and advisory services offered through SII...