Helping clients achieve a quality lifestyle in retirement
It has been a lot of hard work, but I have enjoyed every minute of the process. My father was a successful businessman, and I grew up in a family atmosphere where money was handled in a conservative and responsible fashion. I have been a saver my entire life and sought out my own financial advisor at a young age, in my early 20s. I feel I have a natural affinity for financial planning and have always been an avid reader in the field of finance and investments.
On the professional side, working in the finance field required understanding sophisticated financial concepts and all sides of the consumer and business finance equation. I have hands-on experience in areas such as risk management, cash-flow analysis and planning, analysis of balance sheets, and many other financial tools. So that was a strong fundamental background for becoming an advisor.
“Ideally, we would like to see clients meet or better their current lifestyle during retirement.”
Seeing that scenario develop is the truly satisfying part of our business. We provide financial solutions that are customized to suit our clients’ unique needs and their aspirational objectives. Ideally, we would like to see clients meet or better their current lifestyle during retirement. An important part of the process for achieving that is building a strong and open relationship with a client.
The other important aspect of how we operate is that our firm is independent. We do not have vested interests in shaping a plan or an investment recommendation. We like to conduct what I call “future casting”—looking at “what-if” big-picture scenarios and developing a comprehensive financial plan for an individual, couple, or family. For example, with my background in real estate, we will take a close look at the mortgage and housing planning for a family. That is something that is not always done by an advisor. We put plans together that can cover everything from college planning to mortgage planning to estate planning to wealth management. If we do not have the specific expertise that is required in-house, such as the specialized services of an estate attorney, we work with clients collaboratively to pull in that resource. While our firm offers long-term-care options, we also might occasionally consult with a specialist in that area.
I think my planning style is fairly unique. With my background, I believe in bringing a sophisticated yet easy-to-understand approach to clients. It starts with an in-depth discovery process—getting to know a client’s personal and financial objectives. I do not burden them with endless paperwork or ask them to go too far down into the weeds—a very comprehensive analysis can be conducted from understanding their topline assets, future income sources, real estate holdings, tax situation, family circumstances, and several other key factors.
I like to use a real estate calculator, spreadsheets, and discounted cash-flow analysis based off future inflation estimates. If we are talking about a client who is close to or already retired, this type of analysis will identify the gaps in their future income streams. Then we can go about building a sound recommendation for addressing those gaps.
At this point, understanding their outlook on risk and developing a risk profile is critical. How important is it to them to have a guaranteed paycheck in retirement versus assuming more risk? I have an extensive conversation with them about what their risk tolerances are. This conversation includes what they want their retirement to look like and if that includes guaranteed income or if they are comfortable going down the path of depending on market-based returns. From there, I simply show when and where different income streams and rates of return can come into the planning picture. Then we apply different investment or income-generating strategies to accomplish each of those particular objectives.
Clients have responded well to this type of approach. Essentially, I can capture all of their relevant financial data on one page. I do not charge for the initial planning required to create a financial strategy tailored to a client’s goals and needs, and I work with clients of all types and ages. My attitude is that I will work with anyone who is open to being educated and is willing to share their concerns and fears about retirement and investing. This allows me to present a financial strategy that best suits them.
That depends on the client’s overall objectives, attitude toward risk, and time horizons. Let’s assume we are talking about someone near retirement with a middle-of-the-road risk profile. I am very comfortable recommending active strategies in either equities or fixed income to offer conservative growth over time. These strategies will have a focus on risk management, have specific parameters around drawdowns, and tend to smooth out the ups and downs of market volatility. Portfolios centered on these strategies should grow over time based on their historical track records, and the client can expect to pull income from them, if that is necessary. These types of active strategies effectively act as an addition to guaranteed income products in an overall plan or a replacement, depending on a client’s specific needs.
It is very difficult to generalize, since we are living in an investment environment of extremely low interest rates, low inflation, uncertain growth, periodic volatility, and an equity bull market that will eventually end. I believe in making prudent assumptions about the future, especially inflation and the markets, and building an investment plan accordingly. I think it is somewhat dangerous to throw new money into passive buy-and-hold equity funds, unless a client has a very long time frame before they will need to touch that money. It is far more prudent at this time, especially for clients thinking about retirement, to use the services of outside money managers who are adept at managing the downside in the markets.
There are two basic lines of discussion. First, I place fees in their proper context. An investment plan may have many different elements, and managed money may be just one part of that. First, we look at fees over all of the assets that are part of the plan. In most cases, clients see the fees as being very reasonable, especially since I do not charge any additional fee for the planning process itself.
Second, we then examine the fees that are directly tied to the managed money portion. That percentage will naturally be somewhat higher than the total portfolio average. If the client is interested in having some part of their investment plan managed by outside professionals, there is a cost associated with that. The managers invest their time and staff in strategy development and a commitment to managing strategies on a continual basis.
But there are also the very real benefits from actively managed strategies. These strategies serve clients well both in performance over the long run and the concept of trying to reduce emotion around one’s investments. I use an example of how the NASDAQ Index had performed over the past 10 years. Though its average annual return has been over 7%, it has suffered a drawdown over 50% and many lesser but significant corrections. If an actively managed strategy can deliver roughly equal returns to an unmanaged index fund, but without the kind of volatility found in passive equity funds, is that type of smoother performance worth the additional fees being charged? Most of my clients see the benefit of that approach, and managed accounts represent a significant portion of the assets our firm has under management.
Janice Hammond, founder and CEO of Sunrise Financial Services, brings over 15 years of financial industry expertise to her clients. She provides comprehensive, broad-scope planning covering all aspects of strategic portfolio management. Ms. Hammond says she has “a deep respect for clients’ money matters” and believes that clients should always feel knowledgeable and comfortable with the financial decisions they are making.
Born and raised around Seattle, Washington, Ms. Hammond has traveled abroad extensively. She says this has provided “a worldly perspective and unique insights on finance and investing.” After working two jobs while attending a local college, Ms. Hammond decided to “jump right into the financial world after seeing a great opportunity.” She rapidly assumed positions of increasing responsibility in the banking and mortgage lending field, primarily in wholesaling to mortgage brokers.
Ms. Hammond later transitioned into financial and investment planning and opened her own firm in 2009. She says her experience in real estate and banking provided an excellent springboard for financial planning, as she has an appreciation for risk management and a deep understanding of the interrelationship of a client’s assets, income sources, and debt.
Ms. Hammond and her husband are the proud parents of two young daughters, one a very recent addition to their family. She is active in community service and organizes an annual “Pay it Forward” charity drive in her hometown. Ms. Hammond supports the Alzheimer’s Association and participates in American Cancer Society events and fundraisers. She enjoys speaking on financial education and makes guest appearances on a local radio talk show that focuses on personal finance.
Disclosure: Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC. Advisory Services offered through First Heartland Consultants, Inc. Sunrise Financial Services is not affiliated with First Heartland Capital, Inc.
Photography by Steve Mason