Finance

What clients really want to know: “Am I going to be okay?”

Client-focused wealth management.

The past decade’s unprecedented economic expansion pushed the market to an all-time high, reduced unemployment to levels not seen since the 2008 financial crisis (I think it’s over 50 years but that’s up to you), and even saw wages tick up for blue collar workers. But nothing lasts forever, and investors have started asking how long the good times can keep rolling until the next downturn.

“The longer the expansion lasts without a recession, without a true prolonged bear market, the more nervous people get because they simply ask themselves, ‘How much longer can this last?’” said Scott Brown CFP®, the Managing Principal and PIM Portfolio Manager at Shore to Summit Wealth Management, LLC. “And the reality is that it can last another 10 years given the right policies are put in place, but yes people grow more concerned. They’re more concerned, not only about our debt in the U.S., but that even through this expansion we’re still running deficits. That doesn’t make people feel too comfortable. They’re concerned about how much longer this can last and whether or not there is a bubble that we haven’t prepared for?”

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Shore to Summit Wealth Management
, based in Bozeman, Montana, offers comprehensive wealth management services to clients large and small. The firm eschews industry buzzwords and unrealistic promises to “beat the market,” instead focusing on efficient resource allocation, clients’ specific financial goals and needs, and preparing to weather inevitable economic storms.

Brown works alongside firm members Benjamin Spiker CFP®, President, and Kelly Brown, Senior Vice President, to provide the tailored, responsive service that their clients have come to expect. The team at Shore to Summit Wealth Management, guides physicians, small business owners, corporate executives, families, and others through the complex process of achieving their financial goals. Since the late 1990s Brown has worked to grow investors’ success through good markets and bad, and together with the team he intends to keep his clients on the right track.

Brown, in a recent interview with Advisors Magazine, said that investor anxiety has risen in recent years even as the economy continued to beat expectations. Investors looking at other developed economies in Europe or Asia see negative interest rates and stagnant growth, knowing that the interconnected global economy will put pressure on the domestic market eventually, he said.

“The amount of attention that deficits are getting, that overall debt loads are getting, and the knowledge that overall growth is slowing in corners of the world – we are not an island, this is a global economy,” Brown said.

SB quote 500x400Shore to Summit Wealth Management works with clients to reach the financial future that works for them. The firm takes a tailored approach to client finances, with no cookie-cutter portfolios or generic asset allocations, but rather a measured look at the individual investor. The market, however, always gets a vote in how well a financial plan comes together, and so Brown’s team prepares for that by staying focused on the end goal.

“We don’t discount rates of return because return is very important, but that is not the most important aspect of a long-term sound, financial plan,” Brown said. “We’re not competing with a benchmark or an index, we are achieving goals. That target return is going to be all over the map for our clients. It’s something that we’re striving to achieve, the return is not the important thing, it’s ‘How do we get to this goal?’”

Client education plays an important role in reaching financial goals. Many investors lack the financial literacy required to really understand how their money works, and getting those clients to a place in which they can become self-sufficient decision-makers is key, Brown said.

“We really try to help people become self-sufficient by understanding the power of all of the resources available,” he said.

“Clients that are more financially savvy have a better understanding of things like balance sheets and cash-flow statements. They are typically better clients,” Brown added. “They are more patient with the process and they understand what it is we’re trying to accomplish together in our partnership and they have more trust because they have that good comprehension.”

Shore to Summit Wealth Management develops clients’ financial literacy one step at a time. Many advisors fall back on industry jargon and complex theory to explain concepts to investors, increasing confusion in the process and leaving clients frustrated. Shore to Summit Wealth Management breaks those complex concepts down to their simplest form and tries to explain them in a way that speaks to the client’s needs.

shoreto 700x500“You really have to understand your client, the most important rule is the ‘Know Your Client Rule.’ They may be fascinated by the modern portfolio theory statistical measurements, but that’s a very rare client,” Brown said. “I think clients really want to know the answer to a simple question more than any other: ‘Am I going to be okay?’ Getting too technical, too in-depth and trying to demonstrate how smart you are and how sophisticated you are can do a disservice to the client. They don’t really care what the most important statistical measure needs to be when I’m managing risk in a portfolio, they care about whether they’re going to be okay. I think you need to make sure you’re speaking to your clients and not above your clients.”

Brown understands what it means to receive bad financial advice. When he was young, his aunt and uncle were tragically killed in a fire leaving their six children behind. The family had an investment in IBM stock and at that time – the late 1970s and early 1980s – that company simply looked too big to fail. A financial advisor encouraged Brown’s six cousins to sit on that stock for the long-term and their portfolio never was diversified to any real extent. And then the stock collapsed.

IBM fared poorly during the personal computer revolution of the late 1980s and early 1990s, and by 1993 the company's annual net losses reached a record $8 billion. The technology giant even considered splitting its divisions into separate entities. At that point, with the stock at rock-bottom, Brown’s cousins were advised to sell and take what they could get.

“And that’s when my cousins were advised to sell because they were worried that the company was going to fail,” Brown said. “I saw the wealth devastation that my cousins experienced first-hand.”

Investors can avoid the “wealth devastation” that Brown witnessed by working with a trusted advisor. As a fiduciary advisor, Brown puts clients’ best interests before the bottom line, and investors can know that his advice does not have an ulterior motive. And just as investors need to understand how their money works, they also need to be prepared to take action in an environment where there are no right or wrong answers. Brown works with his clients to assess their financial needs and goals, and to make the decision that is right for them.

“Do you liquidate a portfolio to pay for your children’s college? Or do we have a dialog about why maybe it makes sense to cosign for a student loan?” Brown said, adding that the key is to make sure clients allocate their capital in the most efficient manner possible. “And that’s going to depend on the individual situation, that doesn’t mean that’s the ‘right’ solution for everyone.”

“It’s all about really managing the resources to be as efficient as possible for all of the different decisions they’re going to make throughout their financial life, because if they make those bad decisions, they’ve increased the risk of not being able to reach their financial goals,” Brown said. “It’s about thinking ‘What is the wisest way to pay for things, to invest in things,’ and sometimes that’s more valuable than anything else.”

For more information on Shore to Summit Wealth Management, LLC, visit: shoretosummitwm.com

 

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