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

The challenges 
of longevity

by | Feb 6, 2014 | Advisor Interviews

The challenges 
of longevity

by | Feb 6, 2014 | Advisor Interviews |

Paul Saganey, CFP • Waltham, MA
Integrated Financial Partners

The concept of longevity is a core message Paul Saganey delivers within his firm, to clients, and among his peers.
This notion emanates both from a deep understanding of long-term demographic trends and his belief system surrounding a well-grounded and active financial-planning and advisory process.

Saganey is president and founder of Integrated Financial Partners, Inc. (IFP), an impressive and growing wealth-management firm based in the suburban Boston community of Waltham, Massachusetts. IFP holds approximately $6 billion in AUM, with over 120 advisors spread among 28 offices throughout the New England and New York area, with continued expansion expected in the years to come.

Saganey says, “For me, longevity is the big buzz which will affect our industry for years to come. I pay very close attention to the compelling statistics that are coming out right now about how long people are living, and how ill-prepared they are to face the financial challenges that longevity poses, in order to keep our advisors ahead of the curve. When I teach financial advisors, when I meet with clients, and when I give lectures, I probably spend 60% of my time digging into the theme about longevity and the challenges of longevity—that’s how important it is. Facing the latter stages of this extended lifetime, which obviously is a very good thing overall, people have to be concerned with the preservation and growth of capital and planning for their financial needs, especially with increasing health-care costs.”

“Longevity is the big buzz which will affect our industry for years to come.”

For Saganey’s team and his clients, one of the primary solutions to this issue may be an active management approach. He says, “When I work with a client’s portfolio, I offer them active money-management strategies designed to help improve their probabilities for success. After the 2008 market collapse—it was probably around 2010—I fully realized that there had to be a better way to handle clients’ assets … especially clients that are retired and can’t afford to, or choose not to, see their assets drop by 30%, 40%, or even 50%. That’s when I realized that there are some wonderful active management stories out there that are time- and performance-tested and can help my clients increase their odds of success.”

Because of this, Saganey’s firm has moved to a process they call the “Lifetime Income Model.” Saganey says, “This is a system where we help our clients actively manage their assets for certain periods of time. It is designed to analyze and implement a strategic retirement distribution plan with a goal to help increase your income and reduce risk while providing tax efficiency and preservation of assets. For instance, from zero to five years, five to 10, 10 to 15, and then 15 years plus. When I manage a client’s assets, I look to a certain point in the future, and I find that if I blend some classic strategies with active money-management strategies, I can significantly impact the potential for success for those different time periods.”

A key to IFP’s approach is a deep and rewarding partnership both with Lincoln Financial Advisors Corp., the firm’s broker-dealer and registered investment advisor, and third-party money managers offering the latest comprehensive actively managed strategies.

Saganey says, “I am very inquisitive, research-oriented, and try to stay ahead of the curve. I have come to be a big believer in actively managed strategies, especially for the intermediate term. There are two particular active strategies I am particularly impressed with. The first is what I will call the ‘stay-out-of-harm’s-way’ strategy. It has some very sophisticated algorithms helping to determine the market trend and providing an early warning on times when a portfolio should go to cash. Then there is a class of more aggressive trend-following strategies, which can both provide leveraged exposure to increase returns during an overtly bullish period in the markets or, conversely, adopt an inverse position where one can profit from a down market. But the key to any of these is in using them in a combination. Just like people diversify stocks and bonds, I’m very much a fan of diversifying various active money-management strategies, because each has a different algorithm or a different objective, or an alternative way of managing money. That’s why I like to put a pool of active strategies together, because I’m diversifying the big-picture, underlying strategy.”

Within this overall framework, Saganey has a very thorough approach to evaluating the appropriateness of strategies and managers, which focuses on six key principles: rolling period performance, risk or standard deviation, maximum drawdowns, strategic orientation, tax diversification, and fees and reporting structure. He says, “These are the ‘six discoveries’ I think through with my team and ultimately our clients to help form the basis for a comprehensive actively managed plan. While this can get very complex for clients, we try and break it down into simple illustrative terms and examples, which help them to understand the overall concept of our due diligence and what we are trying to achieve for them over time.”

A major growth focus for IFP is its ever-expanding partnering with accounting firms. Saganey’s team helps firms looking to add financial planning and wealth management to their offerings, as both an additional source of revenue and as a valuable service to clients. Saganey says, “We receive great support from CPAs for our business model, which is very comprehensive and can handle the most complex wealth-management and business-succession issues. We have over 100 accounting firms that are affiliated with our firm that give our 120 advisors access to their clients.

“If you were to take a poll of those 100 CPAs, they would tell you that this concept of time-based strategy ‘buckets’ is the most powerful piece of planning we have here in the firm. To vet out strategies and win the endorsement of talented CPAs is a welcome challenge, so we truly make sure our strategies are top-notch. And that’s where active management comes in … because for that five- to 20-year period for their clients, I just think that the active management stories are well-positioned for the time that we find ourselves in today.”

Disclosure: Paul Saganey is a Registered Representative of Lincoln Financial Advisors Corporation. Securities and 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.

Photography by Greg Anthony