The intersection of structure and strategy
I think most of our clients’ issues can and should be solved by utilizing financial-planning techniques that are not directly tied to the purchase of insurance or an investment. This philosophy places us firmly in the category of advisor, instead of salesperson. I believe this differentiates us from many advisors who do not conduct their practice from that perspective.
Second, my years in the business have coincided with periods of great volatility and major swings in market performance. When I got my first real exposure to the financial world working on planned giving at the University of Virginia, we were close to the end of a tremendous and lengthy bull market. People were confident about the future and accumulating wealth. Frankly, that made our fundraising a lot easier. But it also allowed me to see firsthand early in my career how a relatively unconcerned attitude about risk can develop when times are good. We all know what happened in the first years of the 2000s. Risk management is a major priority in everything I do for clients.
While diversification is extremely important, I have come to appreciate combining that with some level of active management for client portfolios.
But once we are at that stage, I have two critical advisory roles. The first is to make sound recommendations on how a client’s allocation should be structured, by asset classes and then sectors within those asset classes. We use our own proprietary planning parameters and usually will consider various capital-markets data and assumptions developed by Lincoln Financial.
Next, my role is to assess and validate whether it makes sense to utilize third-party managers. In general, I personally believe we cannot overlook the lessons of the past fifteen years—the global investment world remains full of risk. That risk is not something to be ignored nor to be scared by—it needs to be managed carefully. Active investment management that has a strong risk-management component can be a valuable addition to most client portfolios and strategies.
That is why we view the planning process as integral to making investment decisions and consider time horizons to be a critical element of the plan. It takes a different kind of investing style to assist clients in retirement income planning than it does in allocating assets during the accumulation phase. Classic modern portfolio theory may be more appropriate during accumulation, but risk management should be emphasized during distribution.
Unfortunately, investor “A” runs out of money during the first 20 years of retirement, while investor “B” ends up continually building wealth, accumulating additional principal beyond the original starting amount. The only difference between the two situations is investor “A” faced two years of negative returns in the early years of retirement. This graphically illustrates the huge impact of the sequence-of-returns issue for retirees and why we follow a time-based planning process for our clients, especially those in or near retirement.
We have a rigorous and disciplined planning process in place. To simplify, there are seven critical assumptions we have to address. They are the investment time horizon, the appropriate risk tolerance, cash-flow considerations, liquidity, the current inflation environment, the outlook on interest rates, and the burden of taxes.
Third, our structure is built around the principle of unbiased and client-specific investment strategies. We have no predetermined approach and base our recommendations on a client’s needs.
However, I think a clear case can be made for why risk-managed, active strategies make sense for those entering retirement. Most of our clients hire us to be a steward of their capital, which includes an emphasis on avoiding catastrophic loss. Active management typically shines during bear markets. So, we firmly believe that our clients will win in the long run by not losing.
Lastly, everything we do is guided by a “serve first” mentality. Our rewards as a firm come when our clients are successful in meeting their goals—this has led to deep and long-lasting relationships. We take great pride in our skills and our knowledge in helping clients to make better financial decisions.
Jonathan Muhlendorf, CFP, is the president of Envision Wealth Management, serving clients in the Tidewater area of Northern Virginia. Mr. Muhlendorf says he “discovered his passion for helping clients reach their financial goals” while attending the University of Virginia (UVA) and assisting on UVA’s first capital campaign. During his final year at UVA, his planned giving team raised over $50 million.
Upon graduation from UVA, Mr. Muhlendorf acquired his investment and insurance licenses and started the Certified Financial Planner (CFP) coursework at Old Dominion University, becoming one of the youngest CFP practitioners in the country.
He began his career with a national financial services firm and then moved to a well-known accounting firm in the Washington, D.C., area. Mr. Muhlendorf prepared individual tax work and assisted in handling the investments and financial planning on behalf of high-net-worth families. These included an NFL team owner, a former IRS commissioner, a sitting Supreme Court Justice, the governor of Virginia, and the chairman of the Federal Reserve Board.
In 2002, Mr. Muhlendorf joined Lincoln Financial Advisors and moved his practice “back home to the Tidewater area” in 2005. He and his team have prepared and implemented many financial plans for physicians, business owners, retirees, and high-net-worth families. Medical Economics recognized him in 2012, 2013, and 2014 among its “Best Financial Advisors for Doctors.” In 2014, Mr. Muhlendorf became a Premier Partner and member of The Resource Group of Lincoln Financial Advisors.
Mr. Muhlendorf and his family live in the Virginia Beach area and are “passionate about environmental issues” related to the Chesapeake Bay. He is involved with many fundraising activities for Jewish charities, both local and national. He also continues his charitable planning roots by assisting local charities with funding their endowments through creative designs. His family can often be found combing a beach for shells and tidal pools, or on a sailboat.
Disclosure: Jonathan Muhlendorf is a Registered Representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker-dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Envision Wealth Management is a marketing name for registered representatives of Lincoln Financial Advisors Corp. CRN-1256206-072215
Photography by Christopher Winton-Stahle