Active investment management’s weekly magazine for fee-based advisors

Philip Saponaro • Wilmington, DE
Lighthouse Financial Consultants • NEXT Financial Group Inc.

Almost all of our new client prospects are introduced through an existing client or a personal relationship that I have developed. Several of our older clients introduced their children to us years ago, and, while it is hard for me to believe, some of those individuals and their spouses are now approaching retirement themselves.

I believe that our ability to successfully build long-term relationships and client satisfaction is in large part driven by our firm’s approach to investment planning.

I think there are three guiding principles that help differentiate our approach to investment planning and implementation:

  1. We take a highly customized, goals-based approach to developing investment plans with clients. We consider their overall financial objectives, attitude about risk, time horizon, and how their investment objectives mesh with their retirement-planning goals. We help clients determine short- and long-term strategies that are best suited for achieving their objectives, monitor the progress they are making, and periodically review and revise—if appropriate—our recommendations.
  2. I do not believe in some of the investment conventions of the past. I think history supports the need for most investors to more closely manage risk. We do not recommend a cookie-cutter 60/40 investment allocation or investment allocation models primarily based on age. The idea, I believe, is to find ways appropriate to each client to manage the risk-return balance based on their individual risk tolerance, liquidity needs, and specific goals.
    I look for ways to provide additional layers of risk management and alternative investment products that are less correlated to equity and bond markets. We have a wide universe of investment, guaranteed-income, and insurance vehicles to consider and are always looking to develop an investment plan with a risk-reward balance that suits a specific client.
  1. I do not consider myself to be a stock picker, nor do I have the time and capacity to monitor sophisticated investment strategies daily for our client base. In many cases, we use the resources of third-party investment managers, especially those that offer risk-managed tactical strategies. Our overall objective for clients is both reasonable growth and capital preservation. We do not have an objective of achieving market-beating returns, primarily because the assumption of risk would be too high. Our third-party managers, in general, provide rules-based strategies that can adjust exposure and allocations according to current market conditions. In this way, they can be more aggressive when market conditions are favorable and mitigate risk when conditions are not favorable.

I use third-party managers because they have access to highly professional research and portfolio-management tools and the ability to make changes to portfolios efficiently based on their proprietary models and indicators. I primarily use managers that have demonstrated an ability to show consistent results over time, place an emphasis on risk management, and whose strategies will generally perform as they were designed to do. I constantly review the performance of our existing money managers and periodically evaluate new managers who might have an appropriate investment capability for our clients.

Critical elements for an advisory practice website:

  • Determine short- and long-term strategies that help clients progress toward their financial goals.
  • Find ways to manage the risk-return balance based on your clients’ risk tolerance, liquidity needs, and specific goals.
  • Use third-party investment managers who have access to professional research and portfolio-management tools.

Disclosure: Securities and investment advisory services offered through NEXT Financial Group Inc., member FINRA/SIPC. Lighthouse Financial Consultants LLC is not an affiliate of NEXT Financial Group Inc. 306 Lighthouse Road, Wilmington, DE 19809. 302-351-4318. Guarantees referred to in this article are subject to the claims-paying ability of the issuing insurance company.

Photography by Dick Dubroff/Final Focus

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