Investing & Economy

Shunning The Wealth Manager Moniker

Zeroing in on small business 401(k)s

The wealth management industry in the United States is estimated at about $29 trillion, according to the publication Business Insider, citing statistics from Aite Group. And assets under management (AUM) of North American wealth managers are expected to increase more than 26 percent by 2025, notes a recent Insider report titled Wealth Management Ecosystem 2021: Industry trends, stats, and firms undergoing digital transformation.

Still, not every investment advisor fits the wealth manager mold—nor cares to. Just ask Pat Harmon, CPA/PFS, CFP® and president of Jackson, Mississippi-based Harmon Financial Advisors, Inc.

Harmon head“I don’t have a firm minimum (investment) number one, and number two, I don’t call myself a wealth manager,” Harmon told Advisors Magazine in a recent interview. “You see that title in a lot of organizations, but I make myself available to just about anyone who has a need for financial planning.”

Originally a CPA with a tax practice dating back to 1987, many of Harmon’s tax clients sought out his investment advice. So, after just a couple of years he decided to shift focus to financial planning and joined a large financial institution to better learn the business.

The move was more suited to his personality because as a tax specialist, Harmon felt he was working in the past. “I was more interested in projections and working in the future on planning and helping clients prepare for upcoming events,” he explained.

Eventually, Harmon started thinking about opening his own firm. By the mid-late 1990s, he had received his designations as a Certified Financial Planner® and a Personal Finance Financial Specialist and has maintained an active financial planning service practice ever since. He noted that early on, he never really put a price tag on advice, and was more dedicated to educating people and helping them move forward.

Clint harmonCPA partner Clint Brown is an Investment Advisory Representative who has been associated with Harmon Financial since 2013. He has over 10 years of experience guiding clients toward a successful and fulfilling retirement. His background in tax planning and preparation provides him additional resources to provide clients a full spectrum of financial advice.

Most clients are referrals. “When prospective clients come to me, I tell them on the front-end if a fee is involved after I meet their needs; and if I end up managing their assets, the fee is generally a percentage of AUM,” Harmon said. “But I never exclude anyone,” he insisted, “And I maintain a proper, unique relationship with each client.”

Fact is, Harmon said there aren’t many like him in Mississippi wearing the dual hats of financial planner and CPA, and handling both tax work and investments. “It may be different in other areas, but I find that while there are a lot of CFPs out there, there aren’t many CPA-CFPs capable of also doing the tax work. I think it would be a good thing and I’d like to see more CPAs in the planning business,” he said.

New direction: 401(k)s for small business

A goal of Harmon’s for 2022 and beyond is an all-out commitment to providing 401(k) plans for small businesses. “I think it’s an absolute necessity that we move in that direction,” Harmon said. “I believe it’s the best way to educate a larger segment of people who normally wouldn’t have access to that kind of financial education.”

He feels by blending his own talents and skillset and one-on-one style with technology, he can provide the 401(k) plan advantage to more individuals. “That’s where the practice is headed, and I’m dedicating some resources toward that goal.” Harmon also thinks the federal government wants to enhance small businesses and is moving toward allowing more of them to offer 401(k) plans.

Specifically, Harmon is leveraging the perfect suitability of his own surname. He has trademarked The Harmonize™ Retirement Planning Program and partnered with Vanguard®, one of the world’s largest investment management companies. As such, Harmon Financial Advisors can now offer businesses and their employees retirement plans to fit the needs of each individual at every level of a company.

ErisaServices center around traditional 401(k), Roth 401(k), Safe Harbor 401(k) or 403(b) plans. Side-by-side comparisons with existing business retirement plans illustrate how Harmon can help reduce fees paid, while adding unbiased, comprehensive financial advice. At hand is completely neutral investment advice with thousands of investment options to choose from. Additionally, bundled recordkeeping and third-party administration help employers manage fiduciary risk.

What’s more, Harmon’s status as a CPA and tax expert can help small businesses navigate the complexities of the Employee Retirement Income Security Act (ERISA), assuring that any company’s 401(k) plan is ERISA compliant. Harmonize™ makes certain that every plan meets six requirements as part of its baseline service. Such service includes an investment policy statement, an organized plan compliance file, provider benchmarking every three years, distribution of quarterly investment reports, quarterly educational information, an annual review, and yearly employee educational sessions.

Education, absolutely

To Harmon and his clients, education is the key. He sees it as the absolute best way to get clients to commit to helping themselves and sets them up for success by effectively managing their finances.

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“We discuss their individual risk tolerances, get into the fundamentals of stocks and bonds and how investments relate to their asset allocations,” he explained. “It’s an ongoing process; I don’t do it all at one time,” Harmon added. “I spend a lot of time on the front-end with each client and prospect.”

He said he makes sure that every individual understands that while they don’t need to be investment experts, they must understand the vital importance of saving and what investments can do for them.

The education process, Harmon maintains, also builds mutual trust. The more clients understand and proactively respond to helping themselves, the more they come to trust Harmon to help them make good decisions going forward regarding their asset allocations.

“Clients learn that my goal is to minimize their risk,” he emphasized. “And that doesn’t always allow the maximum upside, but it’s preferable to being exposed to greater downside.”

In fact, Harmon said that the financial advisory industry still needs to make progress in two key areas: one is in providing adequate education to the public, and the other is that all advisors representing clients must function as fiduciaries. He noted that most clients do not have any idea what the term fiduciary means, especially as it pertains to the financial advisor relationship.

harmon meeting“I explain it to a client in very, very simple language; in our profession, it involves trust,” Harmon explained. “And from our professional standpoint, it means that the advisor always acts in the best interest of the client.”

Interestingly, Harmon quickly pointed out that it’s also important to behave as a fiduciary even before a person is an actual client. “I even act in a prospective client’s best interest when I am presenting to somebody,” he noted.

These days, it’s easy for almost anyone to call themselves a financial advisor in some form or fashion, according to Harmon. Separating him from the pack are his professional designations — not only as a CPA, but more specifically as a Certified Financial PlannerTM practioner and Personal Financial Specialist. And he is quick to point these out to prospective clients. “These require me to act as a fiduciary to my clients, and my firm is also a Registered Investment Advisor, which does the same,” Harmon said. Explaining in detail and sharing full transparency about fees and costs is just one example cited by him regarding his fiduciary approach.

And as the fiduciary-client relationship is rooted in trust, the advisor can better delve into all financial aspects of a client’s life. “Clients gradually realize there are steps in the process that lead me to know exactly who they are, what they want from life and what they have now,” Harmon said. “From a financial aspect, I get to know them as well as I can, and the decisions made are decisions we make together.”

Covid reinforced the value of communication

The majority of Harmon’s current clients have been with him a long time, and most have been referrals from other clients. This being the case, communication during the pandemic has not been an issue.

“It may sound odd, but I have not noticed any effect on my practice from the pandemic,” he said. “Mine is a smaller practice with long-term clients and we all communicate very well.”

Bottom-line, there is a comfort level between Harmon and his clients, and the pandemic hasn’t really changed the way he runs his practice. As a CPA, he does their income tax returns, so that requires them to get together at least once a year, and sometimes two or three times a year.

“Generally, we communicate electronically or by phone,” Harmon said. “And if we do meet in-person, we follow the pandemic guidelines for using masks and for social distancing. We do discuss vaccination status and procedures if clients want to,” he added. “Overall, I’m comfortable — and my clients are comfortable — with the way we’re dealing with the stages of the pandemic going forward.”

Harmon uses state-of-the-art planning software to get a baseline on a client’s retirement desires. All advisors face the same challenge today with people living longer, he says, but the methods for determining that a client will not outlive their money are all fairly simple.

harmon 2 qoute 
“I’ll also get into healthcare,” Harmon noted, “having them talk about their current health and family longevity or medical history — just as possible things to consider — because while we are living longer, we’re not necessarily living healthier.”

Harmon will also take some time to explain Medicare and Medicaid. Or, if there is an interest in long-term care, what the costs might be and how such costs could potentially affect one’s resources in retirement.

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