Financial Literacy

The road from chinese history to financial planning

Well-educated clients, even those with advanced degrees, might admit they really don’t understand financial planning and they may feel embarrassed asking for help. Christopher L. Cox, managing partner of The Monitor Group, L.L.C., realizes an educator’s approach is needed. Clients stay with Cox’s firm because over time they have learned how to pursue financial security through planning and have built long-lasting relationships with their team.

Working in a Laboratory
Cox was planning to become a Chinese historian; he was enrolled in a Ph.D. program and had a fellowship. “I started looking around and saw being a Chinese history professor was not going to give me financial security,” he recalls. He got a job at Morgan Stanley instead of going into academia.

While he was educated, Cox didn’t know enough to speak intelligently to people who had business concerns, especially financial concerns. He decided to go for his MBA at night. “It was like working in a laboratory. During the day, I got to test out what I learned from my evening classes and speak intelligently to our clients on a business level,” he says.

From Morgan Stanley, Cox was recruited to go to Citigroup in the greater Washington area because of the high concentration of Asian clientele. “This is where a Chinese history education really kicked in. I was a financial advisor to a mostly Asian clientele, although I am not Asian. I felt like giving advice suitable for the client was sometimes in conflict with my employer, both at Morgan Stanley and Citigroup. I did it for four years and felt there had to be a better way,” he said. It was then that Cox and his business partner, Amy Cox, decided to become independent.

cox600x400They started the Maryland-based firm The Monitor Group in 2005 in response to the needs of their clients. Upon meeting other like-minded advisors along the way, they launched an even larger endeavor called the Financial Advocacy Network (FAN). FAN helps financial advisors run their business like a business and redefines their focus toward long-term growth and less on the daily tasks of running these businesses. FAN aids advisors in brand establishment and in offering personalized service and value to their clients.

Customization and Education
Cox’s firm doesn’t have a financial minimum. “We define what role we are playing to clients,” he says. “We still have some clients who say they only want investment management help, versus others who say they need help with all of it. For example, in financial planning, they need to know how insurances work as well as investment management advice.” While his clients’ needs run the gamut, the firm is very clear on what they are doing for whom and have an engagement process defining that.

“We educate along the way so if anything happened to us, clients could still work towards their goals. We make them aware of how financial planning works. We explain what we are doing and why,” Cox says. As an example, the recent increase in interest rates meant he had to educate clients about the fixed income class and how it could be negatively impacted by rising interest rates.

The Monitor Group is very much about customization. Cox says the company goes beyond the actuarial age for long-term planning and plans to at least age 97 for clients. “We plan so you will not run out of money. Financial planning gives us the rate of return number needed to not outlive the funds and that’s how we construct portfolios for the individual client,” he says. Whether or not assets can support a client’s lifestyle and potentially support them should they need to enter a long-term care facility are all factors for striving towards the long-term goal. “All are constructs of financial planning and updating the plan regularly. That’s how we prepare, by looking at costs in today’s dollars and inflating them out over time to ensure your portfolio is in a good place to absorb those costs,” he explains.

The Only True Communication Is In Person
“We’re in a more selfish, cynical age right now. It makes it tempting to be detached,” according to Cox. He adds that while technology gives us many ways to communicate, the only truly human way is in person. “It creates and reinforces genuine connection,” he says. “Tech can generate fear in a large majority of people, like their finances. They may like the connection of human interaction, even if only to reassure themselves that their asset allocation is correct, and they are on the right path.” He points out that investors using robo advisor methods aren’t advised on whether they are doing the right thing.

Is technology advantageous? Because of tech, “You don’t have to give your clients up because your location moved,” he says. “If you are in Hoboken, you probably want to deal with a financial advisor in Hoboken, so you can look them in the eye and have that human connection,” he says. However, if the advisor moves, he or she might retain some of his existing clientele all because of technology.

Dealing with the Sandwich Generation
Middle-aged members of the sandwich generation are taking care of aging parents while having children of their own still living at home. “In some ways, it’s a return to the phenomenon that’s always been there,” says Cox. “Aging parents depend on their children to help them in retirement and there’s an opportunity to teach the next generation of younger kids who are returning home how to help and what to expect in their future. It becomes more of a family and economic unit at that point. It can be tricky to navigate,” he says, adding that it takes a bit of education from the advisor to help the sandwich generation understand its simultaneous roles of child and parent.

The DOL Rule
In March, a federal appeals court tossed out an Obama-era rule requiring financial advisors to act in their client’s best interest. Known as the Department of Labor (DOL) fiduciary rule, Cox says it was a well-intended but poorly executed policy. “Everyone can agree it’s the right thing to put your client first and make sure you are giving prudent advice,” he says. “It’s even prudent to say you shouldn’t make these kinds of investments because they aren’t consistent with your risk profile. Doing what is in the best interest of the client isn’t a novel idea, it just hasn’t been mandated.” With the end of the DOL rule, the industry is now left with a question: Are we not going to have a best interest standard? “For those advisors who already practice in that way, it will be a non-event. For those who haven’t had their practice aligned with the best interest standard for their client, it will create the biggest amount of change, as we’ve already seen in our industry,” he says. Cox thinks the industry should adopt a best interest fiduciary standard and not make it optional. This includes employer sponsored retirement plans. He adds that 401(k) fee disclosures need much more transparency, so participants understand the total underlying costs of the plan. They are sometimes paying between 1.5 and 2.5 percent in annual fees for their 401(k) yet receive no advice.

The Prospectus – From a Different Time
When asked if people read and understand the prospectus, Cox replies that the prospectus is from a different time and is meant to be opaque. “It could be a lot easier to read. It is in the best interest of the client for the financial advisor to be on the hook and say, ‘Having read the prospectus, I’ve shared my opinions, and this is the best way to go forward.’” That doesn’t mean investors bear no responsibility - there is accountability on their part - including choosing the right advisor for them. When it comes to questions a prospective client should ask a financial advisor, Cox had a one-sentence reply: “What exactly are you doing for me and how are you compensated?”

In Search of Like-Minded Clients and Advisors
The Monitor Group’s goals for this year include continuing to smartly grow its client base. Cox is also trying to find more like-minded advisors to finish building out the FAN. Referrals are the number one source of new clients and advisors. “We leverage intellectual capital to find the best strategies for clients,” says Cox. “Whether or not the SEC standard comes out, or the DOL rule makes a comeback, we won’t do much differently than we have in maintaining best interest standards for the client.”

For more information on The Monitor Group, LLC, visit: tmg-llc.net

Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Maryland Financial Group, a registered investment advisor. Maryland Financial Group, The Monitor Group and Financial Advocacy Network are separate entities from LPL Financial.

 

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