Education-based wealth Management

The greatest transfer of wealth in history – from aging baby boomers to their children and grandchildren – will see $30 trillion in assets change hands. But are the Great Transfer’s beneficiaries ready to handle their newfound inheritances?

In short, probably not. One Houston firm, however, wants to change that and recently took action to develop financial literacy not only in clients but the community at large.


“We’ve built a very successful investment advisory business and we’re at the point where some of our clients are dying and their assets are being transferred to the next generation, and we’re trying to create a very strong connection with that generation,” said Jay W. Branson, president of Branson, Fowlkes & Company, Inc. “One of the ways that we’re doing that is by putting together an educational program which is a six-hour overview of all financial areas and it’s designed at the high school or college freshman level to teach people about the financial arena.”

Branson, Fowlkes & Company, Inc., based in Houston, is a Securities and Exchange Commission Registered Investment Advisor that provides comprehensive financial services including financial, estate, and retirement planning. The firm serves more than 150 clients holding over $240 million in assets. Branson founded the firm more than 30 years ago and intends to transition younger partners into leadership roles as retirement nears, Branson said.

The firm launched its new financial literacy initiative after seeing new inheritors struggle to process how their newfound wealth works. The data backs up what Branson and his associates saw.

The 2016 National Capability Study by the FINRA Foundation, which surveyed 27,564 Americans, from June through October of last year, found an uptick in incorrect answers to basic financial questions. For instance, 66 percent of respondents answered three or fewer questions correctly on the five-question quiz. That was an increase of 8 percent since the 2009 version of the study. Further, 56 percent of respondents admitted that they do not compare credit card offers before signing up for one. Results like that set off alarms for industry insiders.

“We’re putting kids through high school and graduating them and sometimes all the way through college and they come out and don’t even understand how to balance a checkbook or buy car insurance,” Branson said. “I’d like to see financial literacy become more of the core curriculum at least for the college level.”

Earlier this year, a federal report recommended that universities implement mandatory financial literacy courses for incoming students. The report, published by the U.S. Financial Literacy and Education Commission noted that student borrowers especially lag in financial understanding and often fail to grasp how their loans work, despite efforts by lenders to educate them. The result is that student loan debt is now the second highest consumer debt category, with only mortgages totaling a higher amount.

The country’s financial literacy needs go beyond just students, however. Families also lack financial literacy across generations. The same report found that families often struggle to compare different financial aid packages, for example.

“The financial literacy initiative that we’re launching now came to be over the last couple years when I observed that we had four key clients pass away, and the assets that these families had with us were substantial, maybe $5-10 million,” Branson said. “And in all four of those cases we were able to retain those assets and the reason why we were is because we have strong relationships with that generation below them.”

Strong relationships created the opportunity for Branson and his associates to educate the younger generation on how to plan for their post-inheritance future and on basic financial concepts. That one-on-one education might help clients’ children and grandchildren, but it does little for the community at large, where many others face the same challenges without a trusted advisor.

“It’s actually kind of a community service, it’s been very well received when we did a beta test,” Branson said, adding that the program is led by Troccon G. Reffell, CFP®, an associate at Branson, Fowlkes & Co. Reffell, in his 30s, is “generationally closer” to the intended audience, Branson added, and can work authentically with the younger crowd the firm wants to reach.

Branson, Fowlkes & Co. intends to launch the program on a monthly schedule. The program runs in the firm’s conference room on nights when it is open to clients and their families, and at a nearby location for the general public. Branson highlighted that the program does not include any “call to action” to do business with the firm, but is instead offered as a public service.

Branson’s attitude toward education is practical. He understands that knowledge needs application to be effective, and that the most educated person is not necessarily the one you want to trust most when it comes to money. Branson recalled applying for financial advisor jobs before he completed his bachelors, which he paused for a time for financial reasons, and how firms turned him away due to his lack of degree.

“I asked them to give me a test and let me show you what my intelligence level is,” Branson said. “And they said that wasn’t the purpose of [having] the education, the point was to hire people who wouldn’t go independent.”

Many of today’s 20-something inheritors or would-be new investors hesitate to enter the market. Many grew up watching their parents deal with the fallout from the 2008 financial crisis, and so the market, mortgages, and even home ownership can worry them. Branson said the goal is to explain that corrections can be severe, but that they are a normal part of the market system.

“There are some younger folks that may have heard about the recession 10 years ago and maybe weren’t participating in it but that may fall prey to the advertising about how risky the stock market can be and so on,” he said. “For me, it takes a little time to explain to them what causes these volatile things and about how certain sectors of the market like autos or real estate – that those are what trigger problems in the economy and we don’t see any bubble on the horizon or anything like that. But they still may be more antsy about that.”

To blunt the effect a market correction may have, Branson, Fowlkes & Co. developed a method called D3, The Power of Diversification. The system includes three types of diversification – asset class, investment style within individual asset classes, and through fund management styles within asset classes. By diversifying portfolios in three ways, the investor gains additional protection from downturns and also can benefit from strong returns in some areas even when the market remains sluggish.

“In simplest terms, multi-asset investing is the process of gaining exposure to a globally diverse mix of asset classes or styles,” the firm’s website explains. “This approach to investment management is intended to increase risk-adjusted returns.”

Risk management and protecting returns is critical to a stable retirement. The old-school ideas of only using stock-to-bond ratios and reducing risk in retirement might not hold true anymore, however, Branson said. As retirements become longer due to increasing lifespans, it may be necessary for retirees to maintain a more robust posture toward returns.

“There is a tendency that people have – they want to lower risk when they’re in retirement. There’s an old school of thought that you would simply have a balance of stocks and bonds,” Branson said. “That’s old school thinking like black and white TVs and fax machines, but it’s very hard to demonstrate that to them.”

A trusted and trustworthy advisor, however, will take charge in educating clients. And that is what Branson, Fowlkes and Co. aims to do.

“We have to educate them to show that we’re on top of things within the portfolio,” Branson said.

For more information about Branson, Fowlkes & Company, Inc., see bransonfowlkes.com