That’s the view of T. Joseph Barger, financial planner and partner at Academy Financial, Inc., based in Lutherville, Maryland.
“It’s how I always approach working with clients,” he says, adding that getting clients to understand financial planning and how an investment portfolio is built and designed is a long process. “It’s not done in a meeting or two but takes five or six meetings. If you can get the client to understand it, it’s the best of all worlds. Clients and I have mutual trust because I’ve educated them and given them full disclosure. They know from the beginning how I am compensated, how the investment companies are compensated and what they are paying.”
With all this information, clients then understand the reasoning behind changing their portfolio or using different products, and it’s made servicing them much more efficient.
Getting to Know the Client
Barger wants to know as much as he can about his clients. Once he has that information, he can run retirement projections, a cash flow analysis and begin building an investment portfolio. Part of every review Barger undertakes with clients revolves around understanding what has changed in their world, so he can reassess the direction they need from that point forward and make investment changes as needed. Academy Financial does all its financial income and retirement planning in-house.
Stocks, Fixed Income and Alternative Investments
When designing a portfolio, Barger practices investment allocation, spreading money among various types of stocks, such as small cap, international and emerging markets, along with fixed securities and cash.
“I believe in further diversification in alternative investments, like REITS. The old model is 60 percent equities and 40 percent fixed securities, but we are more like 60 percent stocks, 20 percent fixed securities, and 20 percent alternatives,” he says. “There is no one investment tool or product that is going to solve all the needs of a client. Ultimately, we do what we need to do for a client, and that’s manage risk.”
The Greatest Financial Risk: Health
There are all sorts of risks that may afflict a client’s portfolio, from stock market volatility, interest rates, and the general economy, but the greatest risk concerns the client’s health.
“It’s my responsibility to make sure the client is aware of the financial risk of long-term care needs,” according to Barger. “If it’s a concern, how do we mitigate it and what products are out there that can potentially provide viable solutions?”
Among the products he recommends are variable annuities with benefit guarantees. These annuities are both vehicles for retirement income and a potential way of self-insuring for long-term care. While it’s an expensive product, with internal fees of 3 to 4 percent, such annuities can provide lifetime income.
“Longevity is the greatest challenge we face. Variable annuities aren’t as flexible or liquid as other assets, and we’d never use as them as sole solutions, but they are part of every retirement plan. The last thing you want is a client running out of assets,” he says. The risk with variable annuities is always the financial strength and stability of the company, so along with ratings, that’s what he investigates.
A Quarter Century and Counting
When asked by “Advisors Magazine” about his firm’s goals for this year, Barger says he intends to continue as he has for the past 26 years, bringing in six to 12 new clients. He’s also interested in establishing financial advisor benefits at companies, nonprofits and universities, so employees can learn early on about managing their money.
For more information on Academy Financial, Inc., visit: academyfinancialinc.com