Theodore Feight characterizes his 38 years in the financial planning business as “four different phases and maybe entering a fifth.”
Mr. Feight is the owner of Creative Financial Design in Lansing, Mich.
Beginning, as a lot of practitioners did in the early 1970s, as part of the financial planning arm of an insurance company, he said that it didn't take him long to realize that he needed more education and training if he was going to help his clients and become more profitable.
“You operated as an independent businessman, and they were teaching you to do it, but all they had was insurance and annuities for us to sell, so most of us started waking up to the fact we weren't really doing financial planning,” Mr. Feight said. “That was in 1973, and two years later, I got licensed to sell securities.”
LEAN AND MEAN
A competitive powerlifter and avid sportsman, Mr. Feight deliberately has kept his practice small and nimble enough to adapt to an evolving industry.
He has three employees, $25 million under advisement and he refuses to grow beyond 100 clients.
“I know that if I can increase my clients' assets by 10%, I can make more money than I would make by just bringing in a few more clients.”
As part of his migration away from product-centric insurance companies, Mr. Feight earned his certified financial planner designation in the late 1980s and also transitioned away from commissions and toward fee-based pricing.
“The more classes I took, the more I found out what I was doing was not as good as it could be,” he said. “I realized I couldn't sell a commission product and do what I wanted to do for my clients, because it would have been churning.”
The move to fee-based advice resulted in a “big pay cut at first, but it was much better for my clients, and that's when I started seeing the accounts grow,” Mr. Feight said.
The other major up-side of fee-based ac-counts is “Jan. 1 of every year, I didn't have to worry about what I was making,” he said.
By using no-load mutual funds, Mr. Feight was able to charge between 1% and 2%, depending on the size of the account.
While with Mutual Service Insurance Cos., which later became Pacific Life Insurance Co., he gave up 10% of his earnings to the insurance parent.
By 1994, Mr. Feight moved to Vestax Securities Corp., which was later acquired by ING Groep NV, where he paid back only 5% of his earnings.
He went completely independent in 1996 when he began clearing through Charles Schwab & Co. Inc.
Mr. Feight recalled the financial crisis of 2008 when a lot of advisers started talking about shifting to retainer fees from fee-based pricing in an effort to create a more predictable income stream.
He stuck with his fee-based model and never regretted it, even after 2007 when his son, Richard, left the firm to start his own planning business.
“I let him take whatever he wanted to take, and he took 15 or 20 clients, 30% of the assets and probably 40% of the fees we were earning,” the elder Mr. Feight said.
“It was hard the first year because of the reduction in fees, but we're doing OK now.”