CONFERENCE CALL: PLANNERS HEAR TOUGH TALK IN BIG EASY

You have to give credit to an organization that invites one of its most vocal critics to speak at its annual advanced planners conference.

The conference in New Orleans, sponsored by the National Association of Personal Financial Advisors, drew a small, but successful, crowd – 50 planners with at least five years’ experience. Indeed, many of the sessions were about coping with growth and better time management – a sore point to some attendees who wanted more nuts and bolts about financial planning.

Still, Harold W. Gourgues Jr., a non-practicing CFP who also happens to be an ordained deacon in the Catholic church, seemed to cover all the bases in his presentation Saturday morning at the ungodly hour of 8 o’clock. First off, he said financial planners should focus solely on advising clients to avoid conflicts of interest.

“Many fee-only planners are involved in manufacturing: constructing stock and bond and real estate portfolios,” said Mr. Gourgues, who publishes an Atlanta-based newsletter for advisers. Instead they should be advising: using ready-made mutual funds as well as real estate, commodities futures and oil and gas partnerships.

“Selecting mutual funds and giving investment advice is a purposeful and justified role for a financial planner.”

His beef about picking stocks and bonds is that once the infrastructure is in place, it’s hard to shift gears. “What will happen when a consensus develops that it’s time to underweight financial assets and overweight hard assets? Interest in real estate by financial planners is long overdue. How can a CFP easily and honestly give that up when it’s time to underweight it and go into hard assets?”

He reminded the group that when he was a stockbroker the Dow moved in the narrow band of 600 to 1000 over a period of 16 years. “This is a period where our clients are underserved by being overweighted in financial assets,” he said. “I see disaster ahead.”

Moving on to his next point – that NAPFA should
join forces with other planning organizations rather than continue its fee-only crusade – he sounded more and more like a preacher. “My friends, do we want to be a profession or a trade? Do we want to cooperate or compete? Our professional organizations have to combine to speak with one voice.”

avoid undue risk

Already, the International Association for Financial Planning and Institute of Certified Financial Planners are in merger talks. “There’s one AMA, one ABA, one AICPA. There’s no way around it. You’re dealing with a public that’s quite confused.”

Mr. Gourgues’ final point was about risk: Planners should be like medical doctors, who recommend the least risky course of treatment. “First, do no harm,” he cautioned.

“How often do we suggest more be invested at a lower return,” rather than the opposite? “It’s more important to avoid major disasters in wealth accumulation than to get every inch of every bull market. It takes a 100% gain to wipe out a 50% loss.”

On the practice management front, new NAPFA member Richard Chiozzi of Successful Financial Solutions Inc. in Deerfield, Ill., spoke about his “spotlight theory,” of getting the client to talk about himself, “not you.” He also cautioned advisers to screen potential clients, asking if their other advisers had “met their expectations.” That’s a good way to find out if they’ve sued their last few brokers, he said.

think big

He mentioned the threat of lawsuits again when he discussed burnishing one’s image in the minds of clients. “What’s important when you’re taken to court is the perception that they have of you,” said Mr. Chiozzi, who sends clients Season’s Greetings cards inside a fortune cookie – his firm’s logo.

He’d better be a good marketer given his goal. His firm, which runs $20 million for about 65 clients and has been managing investments only since May, hopes to boost assets to $50 million by yearend by taking on one client per week.

Lawrenc
e E. Howes, a CFP with Sharkey Howes Wagner and Javer in Denver, has equally grand aspirations. During his presentation on managing growth, he boasted that his firm, which runs $135 million and has 520 “active” clients, “brings in $1 million per month.”

He said “every new client should be profitable in a year and extraordinarily profitable in year two and beyond.” As for his firm: “We’ll peak at 1,000 clients and $350 million.”

Perhaps. But Mr. Gourgues would rather see firms take it slow. Noting it’s not easy being a contrarian these days, he said: “It’s like getting elephants to mate. If you get it right, it takes two years to see the result. If you get it wrong, you get trampled.”