As the legislated mandates of Dodd-Frank and the voluntary requirements of the Basel III agreements take hold in the nation’s financial services sector, increased transparency is the intended result. Under the Title IX provisions of Dodd-Frank, a stricter series of investor protection requirements were created. While financial advisors welcome investor protection, some do question whether the tsunami of paperwork and electronic communication now required for compliance with these updated regulations is truly in the best interest of the investing consumer.

Doug Howes is one of those financial advisors considering the implications. He is the CEO of the independent financial services firm Sapphire Wealth Management, LLC, based in Andover, Massachusetts.

“In our experience the outcome of these regulations has created a new issue,”  Howes notes. He agrees that clients should be fully informed regarding their personal money choices. It's important – and  full disclosure is  something  the team at Sapphire Wealth has been doing since the inception of the firm in 2005.  However, he has a few concerns regarding the latest developments in this area from a regulatory standpoint.

“On the surface, you would think it is a positive. However, in order to adhere to the current regulations for transparencyit requires  considerably more disclosure. This has led to significantly more information being delivered to the clients’ mail and inboxes. Our clients have expressed to us how this can be overwhelming. I am not 100 percent convinced that transparency as it looks today – and I agree that transparency is necessary – but as it looks today, is not doing more harm  than good.”

He says this because his greatest concern is that the sheer volume of paperwork and email being sent to clients could cause already information-saturated clients to overlook the one vital document that truly does require their attention.

This is one of the reasons he remains in constant contact with the clients of the firm. Initially, his goal was to build a firm based on exceptional client relationships. It was something his grandfather – a man who spent his career in the service industry – had always advised him to do.

“He told me to be friends with my clients, and to always do and recommend what is in their best interest and not my own,” Howes recalls.

From the onset of SapphireWealth, Howes’ philosophy has been to synergize the high quality research skills he learned while working for Putnam Investments and Metlife with strict adherence to compliance, all the while remaining committed to fostering earnest relationships with their clients.  In the early years of the business, transactions were commission-based. As the relationships developed he came to realize clients were seeking more thana transaction. They wanted a partnership, they wanted their own personal CFO. After additional research regarding the workings of fee-based models, Howes quickly found out that his inklings regarding his clients’  wants were verifiable on a national, state and local level.

“It validated our own thinking, and so from there we began the process of transitioning our approach from a commission-based relationship to a fee-based relationship,” Howes said.
The business began to grow like a teenage boy in a summer stretch.

In 2013, Sapphire Wealth successfully increased its client base by 13.86 percent, with nearly 85 percent of those new clients being referrals from existing – and pleased – clients.
Howes attributes much of the firm’s success to the team’s upfront and earnest approach to people.  It starts with the initial interview process in which both he and the potential new client are given the opportunity to interview and evaluate one another. 

“It's our discovery process,” he explains. “It is rather  Simple. Do our services align with the goals they are trying to achieve? Can we meet their expectations? Do our personalities work well together?”

“The fit has to be right to weather storms like the modern day Great Recession,” Howes said, noting that the bulk of investors have not forgotten the trying times of 2008 and 2009. He explained that the residual effect was that investors revisited the true meaning of risk.   Many have moved to more risk-based strategies for the management of their portfolios.   After thorough review, Howes incorporated a more evidence based philosophy grounded in academic research into his analysis, and has been introcuding, when appropriate, many of his clients to the services of third party money managers like the San Jose, California based company Loring Ward.

With his emphasis on protecting his clients, Howes refers to the structure of his firm as a three legged stool.

The firm itself is the first leg – the leg that builds the relationship with the client, recommends and implements strategies. The second leg is the broker-dealer with whom the transactions occur. But more importantly, Howes explains, the second leg also serves as an independent compliance counsel.

“We could do it ourselves, but there is a bias there,” he said in regard to self-regulating the compliance procedures of his firm.  “We don’t think it makes much sense to have an internal compliance team when outside counsel is available and has proven to be effective.

The third leg is the custodian contracted by the firm. The custodian is independent of the firm and of the broker-dealer, adding yet another layer of protection for the client.
This concept of the three-legged stool helps Howes sleep well at night. He knows that even if the unthinkable should happen to him, his client’s will not be left without support.  Howes’ focus on protecting his clients best interests runs so deep that he has even established an agreement with another local wealth advising firm to step in to his roll,  in the event of his untimely death or disability.

Doing this also allows him to do what he does best –focus on his clients and to best serve them.

One advantage to Howes’s model is that it lends itself well to allowing him the necessary time to thoroughly research and analyze wealth management strategies.  Those retired clients who were with the firm during 2008 and 2009 learned first-hand the importance of his research.  Howes has long believed in the model of segmenting a client’s assets once they achieve retirement.  By doing so Howes is able to create lasting streams of retirement income while maintaining conservative level of risk.  He tells us that one of his greatest industry successes occurred when the market collapsed.  This event exposed the true benefit of the retirement income model he calls “asset segmentation” or “the buckets”.  During that period, none of his retired client had to adjust their monthly incomes. 

“Like most investors we experienced losses in the overall portfolios of these clients, but the great victory was that they felt no impact on their monthly incomes.

That is a success, indeed.

Securities and Investment Advisory Services offered through Woodbury Financial Services, Inc., Member FINRA, SIPC, and Registered Investment Adviser.  Sapphire Wealth Management, LLC and Woodbury Financial Services, Inc., are not affiliated entities.

Learn more about Sapphire Wealth Management, LLC, online at www.sapphirewealthllc.com