Playing strong defense for client portfolios
Proactive Advisor Magazine: Larry, you have experience in several different positions within the financial-services industry. What are your main goals in working with clients as an independent financial advisor?
My goal is to meet each client’s unique needs while helping to educate them on the changing landscape of the financial world. I work with a team of professionals that have a wide range of financial resources and experience. This helps me to provide objective and reasoned solutions to my clients.
Many of my clients are at a life stage where they are starting to think seriously about retirement or are already in retirement. Preparing for that next step in life isn’t always easy. I believe the combination of experience, professionalism, and access to a variety of products and services can help them meet their financial goals, estate strategies, and insurance needs.
Talk about your planning process.
I focus on a four-step process:
- Helping clients identify appropriate financial goals, paying special attention to any top-of-mind concerns. My goal is to make those concerns far less of a worry point over time, ideally making them go away entirely.
- Show what is currently being done to move toward their goals. Then we present our detailed recommendations, which may include different options, for strategies that could offer a more favorable and higher-probability opportunity to meet the desired goals.
- Identify any gaps and offer solutions to fill them. We take a holistic view of financial planning. A client might work with our firm to develop a solid retirement income plan, but that means little if it is at risk due to inadequate protection planning now and in the future.
- Help clients prepare for milestone events in their lives. Whether this involves college planning, a major lifestyle change such as buying a new residence or second home, welcoming new additions to the family, charitable giving, or legacy planning, we can help clients identify the appropriate resources and think through strategies to help them achieve their goals.
This process requires our firm to focus on providing highly personalized service, applying modern insights for planning and investments, and having the capability to address multiple client needs. I am a great believer in continuing education to stay on top of new trends in the industry. I also believe in working closely with my associates and third-party resources to bring in additional expertise where needed.
“Clients need to be prepared for their portfolios to take defensive positions in down markets.”
Discuss your investment philosophy as it relates to client portfolios
My investment philosophy centers on the principles related to risk management for client portfolios. I was once responsible for training other advisors throughout Oregon on investment portfolio construction and other related issues. Having that kind of responsibility prompted me to further immerse myself in investment theory. There is a lot of truth to the old adage of the teacher being the student. When you train someone, you also learn a great deal or reinforce and refine what you already know.
I have always been a student of the markets and understand the boom-bust nature of market cycles. Market history tells us that these cycles will repeat over time, and it is important for an advisor to guide clients through full market cycles with confidence. We do not want emotion to take over, causing panic in down markets or overconfidence in euphoric markets.
When advising clients, especially those near or in retirement, it’s important to place the protection of their assets near the top of the priority list when considering investment plan alternatives. Clients need to be prepared for their portfolios to take defensive positions in down markets and, just as importantly, to be positioned to take advantage of markets that are trending higher. In general, I tell clients that our goal is not to get all of the upside of a bull market, but also not to see the worst of bear market returns. I believe that active investment management, with a focus on controlling risk, has an important role to play in most clients’ portfolios.
How do you educate clients regarding the benefits of active management?
I try to educate throughout the planning process, but a key element is the discussion of risk and determining the appropriate risk assessment for any individual client. Since a lot of my work involves married couples planning their retirement together, it is important to thoroughly involve both the husband and wife in the risk discussion. I ask them to fill out a basic questionnaire independently, and then we discuss the results together. I want to find common ground that meets their individual comfort levels. That works better than asking a couple to fill out a questionnaire together, which may not allow me to understand their individual feelings—they might think differently about money and investments.
Once we have ascertained a good risk assessment and what degree of market volatility a client or client couple can comfortably live with, I discuss the difference between passive and active management. The question comes up frequently given the publicity that indexing has received over the past several years. One of the core concepts I discuss is the sequence of returns. If you are approaching the distribution phase of your life, or are already in it, a large decline in your portfolio will have a bigger impact than if the decline happened when you were younger.
While an investor can theoretically recover from this in their early years, it has much more of an impact during the retirement phase. Just because the market goes down 30%, 40%, or even 50% in a given year does not mean your retirement income needs for the next 20 to 40 years go away—you still have to fund them. What happens if the first year you are not earning a salary turns out like 2008? The math is now not working in your favor.
Providing a client with a look at the type of portfolio they may have been using in the past versus a portfolio of managed strategies that I construct can be very effective. While it is impossible to guarantee any investment outcome, I feel comfortable stating to clients that we can create an investment approach that they can stick with over the long term. Yes, we may need to make adjustments along the way, and we constantly analyze performance. But this is a very attractive approach for most people—tempering the volatility of their portfolio without sacrificing returns over complete market cycles.
What message do you want new clients to take away regarding a managed portfolio approach?
I tell new clients that this is not the world of their grandparents or even their parents. What may have worked in the last century in terms of standard portfolio allocation is facing unique challenges in today’s investment environment. We have new technologies and increased global interconnectivity. What happens in a small country in Europe or an overseas bank, for example, can have a huge impact on global markets.
There is geopolitical risk, systemic market risk, interest rate risk, inflation risk, and several other factors that need to be prudently managed. My number one goal as an advisor is to help clients build the planning and investment solutions that will work to meet their specific and customized needs, while applying modern techniques for risk management. This message resonates with clients. I think it will continue to be an important element of building strong client relationships and help in the further growth of my practice.
Larry Mathis is a financial advisor and registered representative based in Lake Oswego, Oregon. He is affiliated with Pearson Financial Group and offers securities and advisory services through SII Investments, Inc. Mr. Mathis has more than a decade of experience in the financial industry and says his goal is to “provide professional financial services to my clients by first examining their big-picture financial situation—and determining how that will make a difference in their future as we look closer at each aspect.”
Born in California, Mr. Mathis was raised in “a beautiful, rural town” in southern Oregon before moving to the Portland area in the early 1990s. He is a graduate of Walla Walla University, where he says he studied “everything I could take related to business, finance, and management, with a little bit of psychology thrown in.” He began his financial career with Ameriprise Financial, and later worked with MetLife and MassMutual. Mr. Mathis received award recognition for his mentoring skills at Ameriprise and was an investment specialist at MassMutual, helping to teach investment principles and best practices to advisors throughout Oregon.
Mr. Mathis began his current advisory practice in 2014 and appreciates working in “an open-architecture environment.” He offers a wide variety of products and services, including retirement planning, individual life, disability income planning, long-term-care insurance protection, and asset-accumulation strategies. He also has significant experience addressing “the unique financial, insurance, and planning needs of high-net-worth families, businesses, and institutions.”
Mr. Mathis is active in his local community and with charitable causes, most notably with the Friends of Doernbecher Children’s Hospital organization. An avid basketball and baseball player for many years, he has also been a member of several nationally recognized amateur softball teams. He enjoys “staying fit, being involved with animal welfare, and helping out in several capacities with youth sports leagues.”
Disclosure: Larry Mathis is a registered representative of SII Investments, Inc. Securities and advisory services offered through SII Investments, Inc., member FINRA/SIPC, a registered investment advisor. Insurance services offered through Pearson Financial Group, which is not affiliated with SII Investments, Inc., or registered as a broker dealer or investment advisor.
Photography by Joni Kabana