Investing & Economy

White Glove Wealth Management

The proliferation of new investing technologies – the so-called “robo-advisors” – continues to attract venture capital funding and investors hoping to set and forget their finances.

But these technologies lack the crucial emotional intelligence required to guide lay investors through financial crises, and it remains unclear how the robo-advisors will handle their first major market correction when it comes.

“I think they provide solutions to, maybe, the right investor, but really, where they fall short is that they are not centered around behavioral finance,” said Scott L. Brown, CFP®, CIMA®, CRPC®, Managing Principal of Shore to Summit Wealth Management, LLC. “A robo-advisor can’t get into the psyche of a client on a day-to-day basis, and it’s sometimes very, very hard for a client to remain focused around a long-term investment strategy and those longer-term goals when you’re dealing with 2000 to 2002 dot-com volatility or Great Recession 2009 volatility. Those downturns really test an investor’s mettle.”

Shore to Summit Wealth Management – with offices in Bozeman, Montana and Annapolis, Maryland. – provides comprehensive, “white-glove” wealth management services primarily to small business owners, corporate executives, and higher net-worth individuals. The firm maintains a $250,000 minimum to sign on, with Brown and his partner, Ben Spiker CFP®, CRPC®, President of Shore to Summit Wealth Management, requiring a $1 million minimum from clients they serve personally.

The white-glove touch is part of what helps set Shore to Summit Wealth Management apart from its competitors, human or otherwise. Robo-advisor startups recently began unveiling products aimed at higher-end investors. Betterment, LLC, the largest automated financial advisory startup in March rolled out new features for clients with more than $100,000 invested through the platform.

Wealth front, another major automated platform, listed 1,100 high net-worth investors in its latest Securities and Exchange Commission filing, Bloomberg reported. High net-worth investors, however, need customized solutions and considerable guidance when markets become unpredictable.

“Robos or other applications cannot provide that consultative rationale for your finances,” Brown told “Advisors Magazine” during a recent interview, adding that robo-advisors also cannot talk investors down from rash decisions and, instead, expect clients to rationally stick to their investment plans in the face of panicked headlines and the daily drumbeat of market news. “I don’t think that we’ve seen enough of the robos in terms of long-term performance, and investor trends and behavior, to determine whether people are going to stick with their strategy when times really get tough.”

Automated investing tools also can be “too strategic,” Brown said. A human advisor, meanwhile, can take a “tactical approach” amidst a tumultuous market environment to seize the opportunity to improve performance in ways the robo-advisor would miss.

slider img2Shore to Summit Wealth Management takes an active, holistic view of prospective clients’ finances and works to develop a customized solution based on their unique risk-profile, needs, and financial goals. The firm is a fiduciary, meaning clients’ best interests come before commissions or bottom-line concerns.

“We really take that role as a planner and a fiduciary seriously. We try to emphasize the planning and fiduciary aspect to the client-advisor relationship,” Brown said.

Client education takes centerstage during initial meetings, and the firm utilizes a thorough planning process to ensure investors’ questions get answered.

“Better educated clients are simply better stewards of their money and their personal finances,” Brown said. “They’re typically more fiscally responsible, they’re also more comfortable with proven and sound investment strategies.”

Prudent Financial Advice
Proven investment strategies can be in short supply in some corners of the financial industry. Brown became a financial advisor after watching relatives struggle with the consequences of poor financial advice following a family tragedy. A house fire claimed the lives of Brown’s aunt and uncle in the 1980s; their sizeable, $12 million estate was passed on to their children. The financial advisor enlisted to manage the estate – primarily IBM stock – failed to see that the technology giant was being hammered by upstart competitors. Brown’s cousins finally sold their stock toward the end of that decade, but only after its price had taken a beating.

“My young cousins who all had inherited a pretty nice estate ended up with about half of their original inheritance by the end of the decade,” Brown said.

After watching the ordeal, Brown decided to pursue finance, hoping to one day offer clients “prudent financial advice,” he said. Post-university, Brown, a graduate of the Reserve Officers Training Corps program, spent time in the U.S. Army and ended his military career with the rank of Captain. Later he worked for an RIA and several Wall Street firms.

More than Alpha
Shore to Summit Wealth Management does more than mechanically chase alpha. The firm provides solutions to clients based on their unique financial needs. Planning is the cornerstone of the firm’s practice, Brown said. Prospective clients can expect questions about credit, family situations, business holdings, and personal financial decisions, he added.

“We focus on a goals-based approach to their plan and risk-adjusted approach to their returns,” Brown said.

The firm operates within an investment paradigm that puts returns in line with risk, need, and financial goals. Brown pushes clients to benchmark performance to goals, not others; although investors can, and should, pursue aspirational investments provided the resources are available.

“Your friend might be up 20 percent. That’s all well and good, but if you don’t need that then why are you taking unnecessary risk?” Brown said. “That doesn’t mean that we don’t have an aspirational basket in our portfolio. Certainly, some of our clients, even if they don’t need to take additional risk, may have an aspirational bucket. But we really emphasize a goals-based planning solution.”

CaptureApples to apples benchmark comparisons for clients are a must as well. Moderate investors cannot compare themselves to the S&P 500 when their risk tolerance does not align to the index’s. Choosing the correct indices, asset allocations, and benchmarks to measure those investments is part of the process for developing a unique solution for each investor.

“A one-size-fits-all herd mentality to things like indexing and block trading is problematic,” Brown said. “Using an apples-to-apples benchmark is an example of that. Yes, the S&P 500 had a great year in 2017, but do people remember that it lost 56 percent from October 2007 to March 2009? Because that’s a huge drawdown on people’s assets.”

Clients often underestimate the risks involved with particular investments, making it more important to ensure they are properly educated. A 50 percent loss, investors should remember, requires a 100 percent return to make up.

“Is the S&P 500 a great performing asset class long-term? Yes, it is, but do people understand what it takes, mathematically, to recover from a 60 percent pullback?” Brown said.

Family Ties
Brown talks to many clients in the emerging “sandwich generation,” families groaning under the weight of caring for elderly relatives and children, often teens or 20-somethings. Conversations with these clients often revolve around getting them back to saving enough money and prioritizing expenses. It also requires difficult conversations about what can and cannot be done.

“You should not mortgage your own retirement to pay for higher education for your children,” Brown said, adding that student loans, scholarships, and other funding sources leave higher education in reach for most even if their families cannot foot the bill. “You can’t borrow for retirement. I think people should focus on their retirement first and helping their children in any way possible second.”

Shore to Summit Wealth Management works with clients to determine which retirement plans fit best. Hybrid plans, 401(k) Safe Harbor, back-door ROTH IRAs, and other options are examined on a case-by-case basis.

Long-term care planning also figures prominently in these discussions. Many families struggle to aid ailing parents, and long-term care costs can quickly accumulate beyond what many can reasonably pay.

“Because so many people are now feeling that pinch of the sandwich generation, they recognize they don’t want to be a burden on their children so we recommend to all of our clients that have the means that they should strongly consider a long-term care policy,” Brown said. “That sandwich generation has a greater appreciation than any previous generation of not being a burden on their children.”

White-glove Service
Shore and Summit Wealth Management communicates with clients often and works to build lasting relationships. The firm prides itself on understanding clients’ unique situations and providing advice tailored to each investor.

“We also want them to know that we’re trying to deepen our understanding of their values,” Brown said. “And in those interactions, we also really want to deliver a white glove service.”

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Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Shore to Summit Wealth Management is a separate entity from WFAFN. Insurance products are offered through nonbank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies. The indices are presented to provide you with an understanding of their historic long-term performance and are not presented to illustrate the performance of any security. Investors cannot directly purchase any index. The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock's weight in the Index proportionate to its market value.


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