Early adoption of investment knowledge and a defined purpose are key to successful long-term plans
Most people understand that it is never too early to start planning for retirement, yet only 30 percent of Americans have created a comprehensive financial plan. The longer one waits, the longer it takes to catch up – emphasizing the need for young people to start preparing sooner rather than later.
“Older adults are more likely to have retirement savings and to view their savings as on track than younger adults,” the most recent “Report on the Economic Well-Being of U.S. Households” from the Federal Reserve Bank stated. The Fed study found 42 percent of those ages 18-29 had no retirement savings, as did 26 percent of those ages 30-44 and 13 percent between the ages of 45 and 59. Schwab’s latest Modern Wealth Index also indicated only 34 percent of millennials have a written financial plan.
Many people wait too late in life to begin planning their financial future, according to Charles Carrick, CFP®, ChFC, investment advisor’s representative and partner at DMJ Wealth Advisors, LLC.
“Maybe they'll save in a 401(k) plan somewhere. However, they have no idea whether that is going to support their long-term objectives. They may not have even thought about some of those things.”
He said many people make choices primarily based on whether their cash flow will support those decisions. However, they should also evaluate spending within the context of a financial plan addressing their ultimate goals. For example, people may not evaluate how buying another home or another car could impact their finances over a 20-year period. What are the tradeoffs? If you considered them, would you still take this action?
“I think earlier education would be a strong fundamental way to improve the lifestyles and support the goals families have,” Carrick said. “I’m not sure if more workplace involvement would help. But I do believe that if there were a way for financial planners to construct programs to engage people earlier, we could help them make better decisions and allow them to better support their long term priorities.”
Carrick said DMJ Wealth Advisors – with five advisors and seven support staff in Greensboro & Durham, North Carolina – is part of a consultative comprehensive planning practice that coordinates with their sister firm, DMJ & Co., PLLC. They are separate entities but work closely together. The CPA firm has many traditional clients but also serves a large medical and dental consulting client base. About 90 percent of DMJ Wealth Advisors clients are also clients of the CPA firm.
“This has worked well because the CPA firm can identify those clients who might have a need that fits into the strength of our service offering,” explains Sheryl Austin, CFP®, ChFC, CLU, also Partner in DMJ Wealth Advisors. Austin has more than two decades of experience working with through this partnership model. “We've been able to identify opportunities and provide results for those clients through comprehensive planning for the past 20 years. Our Wealth Management firm has grown from essentially a scratch organization, to a Registered Investment Advisor with just under $500 million in assets under management. That was all through organic growth, and the vast majority came through word-of-mouth from clients and DMJ CPAs.”
The DMJ Wealth Advisors team also includes Jeff Hwang, CFP®, CRPC, Partner and Lead Advisor and Greg Carrick, CFP®, CIMA®, Investment Advisor Representative. Brad Mann, JD, QPFC is the firm’s Qualified Plan Specialist. Collectively, DMJ advisors are more than money managers: they view themselves as comprehensive planners. Each client starts out by bringing in their own budget, cash flow expectations, and anticipated capital needs for future needs such as retirement. Then they work together to build a 30-year plan.
The plan includes variables for possible capital needs, such as new car purchases, family weddings, education, or second careers. This plan drives the investment process and helps clients understand how DMJ can provide real value in planning and investment of assets.
“Essentially we're building a model, and then we're giving the client the controls so they can work through their priorities and trade-offs” explains Jeff Hwang, CFP®, CRPC and firm Partner. “It's almost like game-playing where we set up the scenarios for them. Then they're building in what they want to do at different times: What's the impact of buying a second house now, versus maybe selling a house in 10 years and maintaining a downsized residence? What is the impact of retiring two years early? What’s the impact of doing Roth conversions now?” 
Those conversations and what-if scenarios create individualized plans tailored to client’s goals while shifting the focus away from the technical aspects of investing. Advisors typically meet with clients three times a year where they mainly focus on financial planning. In a typical 60- to 90-minute meeting, Carrick said, only about 15-20 minutes are spent talking about investment portfolios.
“We typically have clients that are nearing retirement or experiencing some form of a life transition,” Carrick said. “They are serious about the planning and are more proactive in trying to develop a financial plan. They like that value we can provide by laying things out for them in an organized thoughtful long-term scenario.”
Over the past 10 years, while the economy and the stock markets were going well, “what-if” scenario planning was on the back burner for many clients – despite DMJ’s efforts to raise their interest and illustrate its importance.
“Typically, it was not as big of a priority for many new clients,” Carrick noted. “But when you start seeing some of the challenges we now face in the economy, it raises scenario planning to a higher level with new and existing clients. Now they are very interested in pursuing it to understand whether they're protected properly for various events that could occur.”
When times are good, clients frequently go online to check their account balances to see how much their assets are growing. But during downturns, Carrick continued, they tend to not open their mailed statements or log on. He said online client views decline when things turn down in the economy, such as during market declines over the first quarter of 2020. He added those were the times DMJ advisors proactively engaged clients to talk about how those declines were impacting their plans and reassured them about their portfolios.
“During volatile times, a client may review their investment statement and be motivated to take actions based upon the normal emotional fears of the market. However, in our update sessions, a client comes to understand that they should not measure their success by a single quarterly statement but rather on the ability of the investment to support their financial plan or prioritized lifetime goals. We often see the stress dissipate and the client appreciate the rewards of a sound financial plan.
“Yes, there are times we may need to make some adjustments to their plans,” he continued, “but they are reassured by seeing their goals are still achievable.” DMJ helps clients shift their perspective from a quarterly report to rewards generated from a 30 year forward looking plan.
“We also understand there were ways to navigate this, and there are things you can control,” he said. “So, if the client has a 4.5 percent draw rate from their account, for example, maybe we’ll take out 4 percent for a period of time to catch up. We're not planning on selling anything when the market has a short-term impairment. We typically have money in reserve so they can weather storms and recover, and allow assets to return to where they were over the long run. They leave that meeting feeling much more confident about where they are with their plan.”
“There's a lot clients can control when it comes to financial planning opportunities,” he added, “we believe the value obtained from controlling what can be controlled can bring as much confidence if not more to a financial plan than trying to predict or outmaneuver the market -- which is something that nobody can do on a consistent basis.”
For more information on DMJ Wealth Advisors, visit dmjwa.com
