Last month, I celebrated 40 years in Financial Planning. In honor of 4 decades, in my latest article, I am sharing what I’ve learned, what’s changed, what hasn’t changed, and what’s to come.
1980, the era of the 3-piece suit, a 3-martini lunch, and smoking was still allowed inside of offices, restaurants, and planes. The movie, “Wall Street” that would define this era as the decade of decadence was still 7 years from being produced. The decade started with 2 recessions back to back separated by only 12 months of recovery. By the beginning of 1980, the formerly dominant industrial states of Illinois, Michigan, Ohio and Pennsylvania became known as the “Rust Belt” as factories were abandoned, and urban decay set in. This deindustrialization which began around 1975 became part of a bigger transitional trend that was called the Great Disruption. Manufacturing jobs and whole companies transferred to other areas of the world, mostly to Asia. Increased automation replaced many remaining factory level jobs. Cities became mired in economic declines from which some have never recovered.
By the end of 1980, the Federal Reserve was charging banks 21.5% to borrow. Inflation was 13.5% and the Dow Jones closed the year at 963.99. It had previously reached 1,000 points on November 14, 1972. The economy went into recession in January 1980 lasting until July 1980. But the recovery lasted only 12 months before another deeper recession hit in July 1981. Over the next 14 months unemployment, which was already at 7%, shot up to 10.8% and the recession lasted until November 1982. Against this backdrop of economic devastation, I took my first steps into the world of financial advice.
From day one, I wanted to define myself as a “Financial Planner”. A term that was relatively new when I started in 1980. In 1980 the profession of Financial Planning was exactly 10 ½ years old having been created on December 12, 1969 when 13 professionals gathered in Chicago and outlined the first steps to further the idea that people could benefit from professional assistance from a profession that integrated knowledge and practices from the many often-fragmented areas of the financial services industry. Resolutions were made to create the International Association for Financial Planners (IAFP) and the College for Financial Planning (CFP). Prior to Financial Planning, there were only financial product salesmen.
Someone told me a long time ago that you will become the product of the things you read, and the people you meet.
Along the way I paid attention to the people who had high values and offered sage wisdom while reading lots of books. However, the single most influential person in my life who has been by my side since the beginning is my dear wife, Alisa. In fact, it was Alisa that pointed me to the help wanted flyer on the wall in the college career placement office when we were both seniors looking for our first jobs. Our relationship resulted in my longevity in both a marriage and a career. And we were blessed with two daughters: Jenna & Angela and four handsome grandsons. And now for over a decade, Jenna (10yrs) and Angela (11yrs) have worked by my side every day, contributing to our client experience and our business success.
Another very important relationship and contributing factor to longevity in my career are the business relationships I have with my staff on a daily basis, Cori Neith my client relationship manager and John Pellosie my associate advisor helping me deliver the most current and up-to-date advice possible. Legacy employs the very best people in the financial advice business. There is a high degree of professionalism throughout our organization.
If I could define all associates at Legacy in two words, it would be compassionate and collaborative.
Every business has a starting point, and Legacy Planning was launched in 1998 when I incorporated the name and set up a small office in downtown Allentown, PA We officially opened for business on the first business day of 1999 with one paid employee and one unpaid employee (my wife Alisa). Within a few years we grew by attracting other successful planners who shared my values and a dedication to comprehensive financial planning. We now have 5 owner/partners in 3 geographic areas, Allentown, Plymouth Meeting and West Chester, PA. In order of when they joined Legacy: Matt Kulp (2002), Robert Wermuth (2004), Kevin Donohue (2004) and Natalie Hodak, COO (2008). Each of them is a true leader who I am very proud to be associated with.
At the start of my career I had only one responsibility that was to find business owners who were paying a lot of income tax and were subject to a lot of estate tax. The law of numbers and persistence was my strength. Reaching people by phone who you didn’t know was known as “Cold Calling”. There was no computer database, just a phone book and a rolodex to write down names so you would not forget them. Getting around by car was made more difficult since I had just moved to the Lehigh Valley from my hometown 80 miles away in Lancaster. I had to drive to appointments with a physical map (No GPS in those days) or I would get lost.
In 1980 there were 16 Federal income tax brackets with the highest being 70% for those earning more than $215,400 and filing jointly. If you were filing as a single, any amount of income over $108,300 was taxed at 70%. The standard deduction was only $3,400. Federal Estate Tax exemptions were limited to only $161,000 in 1980. With a top rate of 70%. There was no unlimited marital deduction between spouses. So, anyone with substantial assets, like a business owner could see themselves taxed out of business if a partner or spouse died. This was called the, “Disturbing Call” whereby the reality of life was the key to getting an intro meeting scheduled.
My objective was to get 10 business owners to agree to an introductory meeting each week where I would discuss these potential tax problems that could devastate their family and their business. Pointing out that if they would do better tax planning, they would be able to keep more of their hard-earned money. A Financial Plan would provide the starting point and we would use both risk-based tools like insurance products and wealth building tools like investment products to protect and build a more secure financial future. Many of those clients, their children and their children’s children are still working with me 35-40 years later.
Simply put, multi-generational wealth planning results in the family protecting more of their assets as they pass through each generation. This type of relationship has provided me with the greatest level of satisfaction as a professional not to mention long-lasting relationships.
The act of setting around 10 meetings per week resulted in my meeting or talking to approximately 4,000 small business owners in the first 10 years of my career. For those few who agreed to work with me, the results are my greatest testimony.
Nothing in the world is worth having or worth doing unless it means effort, pain, difficulty… I have never in my life envied a human being who led an easy life. I have envied a great many people who led difficult lives and led them well.
— Theodore Roosevelt
The Financial Planner must seek to help people every day. This may sound easy, but it’s difficult when people do not place their financial well-being as a high priority. We seek to help every client financially prepare for what can go wrong and what can go right. In practice, everyone should want this help. But, a preponderance of the population are procrastinators or outright simply do not care. Most don’t want to face their mortality. According to “Care.com” in 2017 only 42% of Americans had a Will. And since 2017 this website states the number of people with a Will has gone down by 25%. That leaves only around a third of Americans with a Will. There is a sense of apathy around estate & financial planning. Indifference to financial health has been increasing and is the most important common thread I’ve seen that has remained the same over these 40 years. It is a fact that people will not take action until the pain of not doing something is sufficient enough to cause them to change or seek advice. At the end of the day, most people if asked will say they would like to have financial well-being, but they don’t know how to get it. It is our job as Financial Planners and Advisors to educate them on how to obtain good financial health that leads to financial well-being. It is attainable and it will lead to a more stress-free financial future.
There are many reasons to be optimistic about the future of our industry and our client-advisor relationships.
Today advisors rely heavily on Technology that was non-existent at the beginning of my career. Both advisor and client are now able to interact by multiple means of communication and exchange greater amounts of information in a shorter period. Most financial advisors 40 years ago were product focused due to the Industry’s historical salesman approach. Clients received scant attention (poor to little service) and long-term relationships were not cultivated. It is quite the opposite today. Today, financial planning provides for a deeper long-lasting relationship through the ongoing process of planning. The service experience becomes routine as the plan is maintained and renewed on a continual basis. Every year there are often multiple new financial decisions while people are in their working years.
With a financial world that grows increasingly complex there is an ever-greater need for “personal” financial advice. And I believe the public is more open to be approached about financial advice. But the advisor must still make the first move if they are to help as many people as possible. Technology is useful as a tool, but it does not replace the wisdom of advice from a caring and competent financial planner. The client no longer needs to be a millionaire to receive high quality advice. In fact we are working on methods to allow clients to purchase financial advice subscriptions like they would purchase a Netflix subscription. This would give them year-round access to a qualified financial advisor. The sooner one begins working with a financial planner the sooner they will begin to avoid making predictable mistakes. The avoidance of predictable financial mistakes is the quickest way to begin making better financial decisions.
The importance of having good people working with you to support the delivery of financial advice cannot be stressed enough. As stated earlier, Legacy Planning comprises 3 locations with 16 advisors and 17 staff members. All of them are very highly qualified with years of vetted experience. Getting a position at Legacy Planning, whether for staff or for providing client advice as a planner is no easy undertaking. We are highly selective of the people we choose to represent us.
Financial Services companies like ours are building brand name recognition. And we have developed reputational capital in 5 specific markets: 1. Retirement Plan Services, 2. Union Employees, 3. Family Office Services, 4 Business Exit Planning, & 5. Executive Compensation & Benefits.
Legacy Planning is being built around a model of helping advisors gain more time with their clients while delivering a high level of client experience. We seek to help advisors spend as much time advising clients and not doing administrative work. Our industry is still very young, and there are still many financial planners who choose to remain solo practitioners. These practitioners are generally very good at providing clients advice but have limited themselves in managing and growing a business. Economies of scale need to be addressed by these smaller planning firms as they will be challenged to increase the level of services they deliver. Being a one-dimensional money manager is no longer effectively able to serve all the financial needs of a client. The full-service firm requires a more robust infrastructure of management and administration. We are all given the same amount of time in a day. It comes down to how a planner wants to spend their time. The optimum use of highly successful advisor’s time is spent in face-to-face (or Zoom) meetings discussing the financial well-being of their current and future clients. Operational costs associated with technology, cyber security, compliance, and back office administration are rising faster each year. Many firms will seek to consolidate in the future as their owners either retire or seek another financial partner. Legacy Planning is well-positioned to meet the future needs of both clients and Financial Advisors. The best years are still ahead of us! And I am very grateful for the opportunities I’ve had to lead our organization to a new beginning.