Conserve, protect, and grow
Proactive Advisor Magazine: Chris, you entered the financial services business at an early age — what changes have you seen?
The last 30 years have seen monumental shifts in the industry, at least three major trends to my way of looking at it. When I first entered the industry, the emphasis for most financial services providers was on life-insurance products and more traditional brokerage services that were built around individual stock holdings. Next came the tremendous boom in mutual funds and a buy-and-hold mentality for investors and advisors, which carried through to the dot-com crash. Now, I believe we have been seeing a rapidly growing trend toward more holistic financial planning, fee-based advisory services, and the use of outsourced investment management. I think this evolution, by and large, has been a very good thing for clients, with their total financial needs really coming to the forefront. I expect we will see further major changes over the next 20 years, and the key is being able to evolve one’s practice while always keeping the client as the central focus.
Talk about your client base and what is important to them.
Our practice has two locations—our main office in Shreveport and a practice we have acquired and are slowly transitioning in Marshall, Texas. Neither of these two areas has a very dense population. There are not many major corporations outside of the energy sector. Most of our clients are more or less hard-working middle-class and upper-middle-class people, with a relatively small number of higher-net-worth clients. Like most people in this part of the country, they tend to be conservative both with their money and their political views.
Our clients are mainly over 50 years of age and are either concerned about planning for retirement or in retirement already. We have a fair amount of clients who are widows, both those who first came into the practice as part of a couple or joined us after their husband’s death. The overriding concern for people is making sure their assets last them a lifetime. They are not terribly concerned with the nuts and bolts of understanding the latest investment theories. They really want to know the bottom line as reflected in their account statements: Is my account growing? When the market goes down, am I able to reduce my overall risk?
How does your investment philosophy align with those client needs?
First of all, I have a very specific way of thinking about how our practice best serves clients in this community. Because it is not an area where there are many specific target segments, we need to be generalists in the best sense of the word—able to work with all types of people with varying backgrounds, assets, education, and financial sophistication. But, within that framework, we want to build out customized solutions for each and every client. So, our investment approach can vary widely for any specific client or client couple.
I am focused on being the quarterback for as many of our clients’ financial needs as possible. I have a wide range of knowledge in many areas but do not consider myself the ultimate expert. We pull together those additional resources that our clients might need, whether it is in tax-related matters or legacy planning. This is especially true for their investments.
I help clients figure out the appropriate buckets for their money and create asset allocations, but I have neither the time nor the expertise to run investment money on a daily basis. I want to let really competent managers do what they do best and manage the investments, whether it’s with quality mutual fund or variable annuity companies, or on the fee-based side, with third-party RIAs.
“The rapidly growing trend toward holistic financial planning, fee-based advisory services, and the use of outsourced investment management has been a very good thing for clients.”
On the fee-based side, I favor active managers who can diversify risk extremely well—that is what my clients are looking for. I have had very few issues with performance-related questions over the years, primarily because we set the expectations up front. These managers attempt to outperform the market in down markets and underperform the market in up years. The objectives are to achieve more consistent returns over time, to manage the risk factors well, and to avoid the really disastrous outcomes of a severe bear-market period.
How do you explain the benefits of active money management to clients?
I primarily use active management with many of my higher-net-worth clients. They might be small-business owners or have sold a business, or have potential retirement revenue streams from other sources. This is usually money that is earmarked for conservative growth over time. I explain that highly professional active managers are closely watching their accounts, that there is a high degree of risk analysis and management, and the objective is to help their accounts hold up well in down markets.
Active managers are usually not constrained by asset classes, by sectors, or geography. Some do specialize in certain specific areas and others take a much broader, more holistic portfolio approach. Their job, to greatly simplify, is to use their methodologies and analysis to ascertain what asset classes or sectors should be overweighted and which ones should be underweighted. They also will determine what sort of exposure there should be to the market in the absolute. From a client perspective, we will talk about the range of returns for certain asset classes and the amount of risk associated with that. There are no guarantees, of course, but it is a matter of enhancing the probabilities, using quantitative analysis, and in applying strong risk-control measures.
I also explain that this is a fairly liquid investment approach, and there are no strings attached in terms of high up-front costs or any meaningful redemption fees. Of course, there is a management fee, which is fully disclosed. But it is in the best interests of these managers to see higher client account balances. They do not have a financial incentive to trade an account, except when conditions warrant. Their incentive comes with seeing growth in the money they are managing.
My clients fully understand and like this type of portfolio management. I think third-party active management will become an increasingly significant portion of my practice in the future. The financial world has been volatile for the last two decades and, in my opinion, will remain volatile for the foreseeable future. For the right clients, a managed investment approach is a valuable tool for their overall financial and investment planning picture.
Chris Harbuck is an independent financial advisor with Royal Alliance Associates Inc. and partner at Generational Financial Advisors (GFA). Based out of Louisiana and Texas, Mr. Harbuck and his associates offer a wide range of planning services to a diverse client base.
Establishing client trust is an important part of Mr. Harbuck’s approach. “Trust is our biggest asset. At client meetings, I explain that before they ever invest a penny, they will know what investment options are an appropriate fit for their needs and how we are compensated. Nothing happens until they are fully comfortable with how we will work together,” says Mr. Harbuck.
Mr. Harbuck attained a Bachelor of Arts in economics from Tulane University, where he was captain of the varsity tennis team and played in several national USTA and NCAA tournaments. After graduating, Mr. Harbuck worked in sales for a prominent consumer goods company before joining his father’s insurance business.
During this time, Mr. Harbuck earned Chartered Life Underwriter and Chartered Financial Consultant designations. After several years as a partner on the insurance and employee benefits side of the business, Mr. Harbuck “decided to make a change” and joined an independent financial services firm “committed to helping people pursue their total financial goals.”
Mr. Harbuck lives in Shreveport, Louisiana, and has two adult children. He cares deeply about preserving marine resources and coastal environments for future generations, and was former state president of the Louisiana chapter of the Coastal Conservation Association. He is also an avid saltwater fisherman and bird hunter.
Disclosure: Securities and investment advisory services offered through Royal Alliance Associates Inc. Member FINRA/SIPC. Insurance, accounting and tax services offered through Generational Financial Advisors, not affiliated with Royal Alliance Associates Inc.
Photography by Neil Johnson