Managed solutions: key to disciplined strategy and efficient implementation

Leave it to a former engineer and geophysicist to be hyper-organized in how he delivers information. We asked Steve Flodder to relate the impact of managed solutions on his business and clients, and he gave us the narrative equivalent of a flowchart. Why he did so soon became clear, as our comprehension time for complex concepts was easily halved.

Steve began his career in the mid-1970s with Amoco Oil Company, eventually rising to the position of president of Amoco Mediterranean. During the turmoil of the late 1990s, he retired from the oil industry, joined AXA Advisors and founded Flodder Financial Group “so we could help people the way we had helped business units.” He has since been joined by his two sons (both Harvard MBAs), so “clients know we have a strong team, one that will still be there long after I am retired.” The firm focuses on (what else?) retirement planning for oil industry professionals and executives.

Asked if he regrets the career move given the boom in domestic energy production, he didn’t hesitate.

“Not at all,” he said. “The energy business wanted me to hire too many people when times were good, and fire them when times were bad. In this business, the opposite is true. When it’s bad, that’s potentially a good time to invest. When it’s good, that may be a time to slowly sell or reassess. We either help clients out of a tough situation or help them figure out how to take advantage of a good one.”

Noting the help the firm is afforded by using AXA’s Strategic Asset Management (SAM), which is a Rep as Portfolio Manager platform, he explained his investment process and philosophy.

“The advantage of our managed account solution is that we can agree on a plan with the client that involves decisions and strategy selections based on either time or events in the market. We can then implement it efficiently with no trading costs to the client.”

“The managed account solution plays a key role in the collaboration between the client and our firm. With this solution, it is clear we are on the same side of the table, working toward the same goal. When we make a strategic move, we do so because we think it is the right thing to do for the client. The solution produces increased transparency, which helps support the relationship.”

Steve mentioned a particular client – an oil executive who was nearing retirement and had significant holdings in company stock. The position was the result of accumulated grants, options and 401(k) holdings accumulated over a long and successful career.

Steve noted, “It’s not unusual for busy executives who are focused on their careers and family matters to somewhat inadvertently develop a heavy concentration in their company stock. Our job is to help them understand the attendant risk and develop a strategy to reduce the concentrated position over time.”

“Our managed account solution gives us the flexibility we need to unwind such positions in a way that takes account of each client’s unique risk profile and stage in life. If the market is flat, we focus on routine rebalancing. If the market is ‘extremely good,’ we’re busy generating the income our retired clients will need by slowly selling certain holdings. If the market is ‘bad,’ we begin buying slowly for clients who are increasing their market exposure. The managed solutions trading platform means that numerous trades can be placed simultaneously, which affords us significant scalability and efficiency in our operations.”

The key, he argued, is in taking their time. They could move in and out of positions all at once, Steve said, but the odds of beating the market and, as a result, the outcome being the best for the client are low. On the other hand, if they make moves gradually over a six- or seven-month time frame, the odds of the client coming out ahead of the market increase.

“Every day, we focus on their accounts and implement the agreed-upon strategy so that they can relax and focus on being retired. The process of moving from a heavy concentration in a single stock or cash into a diversified portfolio over many steps really benefits from a platform that trades efficiently at no trading cost to the client.”

Flodder Financial Group continues to take their time and employ a measured approach, but when it comes time to move, managed solutions help give them the tools to act.
This profile appeared in the March 31, 2014 special supplement to InvestmentNews “Managed Solutions: Meeting today’s challenges.” This supplement was written by InvestmentNews Custom Media with support from the MMI and partner firms. To download the full supplement, click here.”