Spreading the message of risk management
My father was a physician and my mother was a nurse. Both were involved with missionary and church work in the U.S. and in other countries. I grew up in this environment and embraced it, ultimately going on to earn my divinity degree and becoming a pastor. It was very gratifying being a youth pastor and then a senior pastor, and I did that enthusiastically for close to six years. But some aspects of these positions were just not great fits with my personality and life goals.
I took a personal inventory of what I liked most about being a pastor. I knew that helping people solve problems was a very satisfying part of the job. I also enjoyed the challenge of the administrative work and financial management of our church. I was an active speaker on a number of topics within the church and for outside groups. I could see that cultivating those organizational, financial, and communication skills were all positives in my personal development.
I have always been interested in the financial markets, how they worked, and the theory of investing. I spent a good amount of time speaking to professors about these topics in college. During seminary school, I actually scraped together some money for a course based on the famous “Turtle Trading System.” Their principles were centered on identifying trends and an investment philosophy that was systematic, tried to control risk, and was disciplined—all very sound ideas.
“We are not afraid of challenging conventional wisdom in our views on investing and preserving wealth.”
I decided to leave the ministry as a profession and continued to pursue church-related activities—just not for a paycheck. I explored several sides of the financial-services industry and decided that I wanted a position that combined financial planning, investment management, and working one-on-one with people. I am convinced that becoming a financial advisor was the right decision. I have been in the industry for over 11 years and love what I do.
Talk about your main goals in working with clients.
As a financial advisor, I am fully invested in my clients. My practice consists of growing, working toward protecting, and transferring a retiree’s or business owner’s wealth. I understand that my clients have worked hard for their money and expect their money to do the same. For someone facing their retirement years, this means a sound financial plan that allows them to develop a dependable and comfortable income stream that will see them through the rest of their life. Business owners may have to deal with the additional complex issues of succession planning or selling a business. For both types of clients, I frequently get involved with legacy planning and, if the need arises, can consult with their other trusted advisors.
I will never have proprietary products that cannot transfer to another firm. I have a fee-based advisory practice and have no vested interest in the types of products, services, or investments that I recommend to clients. As a client succeeds in growing their wealth, my practice should do well also. I also have no asset minimum, because people are more than just their net worth. This philosophy has helped me guide my clients through difficult financial markets and uncertain times.
Currently, I am taking on many clients looking to roll money out of their 401(k) into an IRA so that they can do more advanced retirement planning and investing. I also specialize in creating 401(k)s for small businesses that keep the business owner within the guidelines of 404(c). Clients who need help managing newly acquired assets from an inheritance, adjudication, or divorce find my services helpful as well.
I believe I have the heart of a teacher. I frequently tell clients, “My job is to help you know what your options are, and also to let you know that there’s no such thing as a perfect investment. There are always pros and cons, and there are always risks and rewards. If you can understand the distinctions, then you can make knowledgeable decisions. I will work hard to help you evaluate those options. My job is to educate you first, and allow you to have confidence in the decision-making process.”
How has your investment philosophy taken shape?
When I first entered the industry, I was trained in classic asset-allocation theory and a passive approach to portfolio management. This served clients with long time frames appropriately for several decades. But you have to remember that the pre-2000 era was a very bullish time for stocks. My thinking has evolved significantly since then.
First, I place a great deal of emphasis on understanding the qualitative side of a client’s wants, needs, and objectives. I do not think there should be a “one-size-fits-all” approach to a financial plan or an investment portfolio. A client’s experience with investing is important in an absolute sense and in a behavioral sense. What is the best way to speak to them about investment options? How can I best communicate to this specific client the trade-offs of risk and return for various investment approaches?
Second, I use a sophisticated software program to analyze their risk profile. I think our industry has taken great strides toward attaining a more quantitative evaluation of how much risk each client is truly comfortable with. As an industry, we were not well-prepared for the credit crisis on many levels. We did not have appropriate risk management in place for the needs of many clients. This went beyond the pure numbers and drawdowns. We were not well-equipped to handle the emotional hardship many clients faced when everyone thought the financial world was crashing down around them. So, educating clients about risk management has become one of my most important priorities.
Third, I do not think a 100% passive investing approach is appropriate for the majority of my clients. I still follow many of the fundamental allocation principles of modern portfolio theory, but I want to make sure that a large portion of a client’s investable assets are in risk-managed strategies. That does not mean ruling out any asset classes or sectors or geographies. It means that mechanical rules are in place in portfolio strategies to help limit downside risk and attempt to maximize the upside capture.
The first benefit for clients is that I take an impartial and consultative view of what recommendations might work best for their specific situation, risk profile, and objectives.
Secondly, my practice often uses the services of third-party investment managers who provide a variety of portfolio strategies for clients. The majority of these strategies emphasize risk management. I believe clients benefit greatly from having these sophisticated strategies available to them and a professional money-management team working on their behalf every day. This is a far cry from the buy-and-hold unmanaged strategies of the past. We have seen how important that can be in mitigating portfolio loss during steep market declines.
Lastly, we aim to make our fee structure simple and easy to understand. We are very transparent about how we work with clients. Our goal is to develop a financial plan for virtually every client, as that is really the only way to appropriately develop an investment or income strategy. If we manage assets for a client, we do not charge for the financial-planning process. I have a straightforward fee schedule for assets under management. Clients appreciate that, and it allows us to manage our practice more efficiently.
The bottom line is that the fee-based advisory model works well for clients and for our team. It is very important to me that clients thoroughly understand our working philosophy, both in how we charge fees and how we approach financial and investment planning. We are not afraid of challenging conventional wisdom in our views on investing and preserving wealth, and our clients come to see the benefits of that over the long term.
Rey Descalso is the principal owner of Privada Wealth Management, located in the central Florida town of Maitland. Mr. Descalso has been a registered representative and an investment advisor representative since 2005, joining J.W. Cole Financial in 2010. Before this association, Mr. Descalso spent several years working for Wells Fargo Advisors Inc., Wachovia Securities, and A.G. Edwards. He says his practice specializes in helping clients answer the question, “How much do I need to put away for retirement, and where do I put it to generate income streams in retirement?”
Born in Philadelphia, Mr. Descalso spent his early life abroad with his parents before relocating to Orlando, Florida. He attended high school at Forest Lake Academy in Apopka, where he says he was “always involved in different student activities and leadership positions.” He earned a bachelor’s degree in theology at Southern Adventist University and a master of divinity degree from the SDA Theological Seminary at Andrews University.
Following his education, Mr. Descalso became a pastor at Markham Woods Church in Longwood, Florida. Beyond his daily duties as a pastor, he led the office staff and volunteers of the 850-member church, was chairman of the board for two years, and was a member of the finance committee. He says this was a very meaningful time in his life, affording “the opportunity to help people in a variety of ways.”
Mr. Descalso and his wife have a young daughter. He enjoys staying fit and “goes to the gym often, cycles, and practices martial arts.” Mr. Descalso has been involved in numerous civic and charitable organizations, and is especially passionate about children’s causes, health and fitness, and animal welfare. He is a member of the Florida Hospital Diabetes Institute and Translational Research Institute Foundation Board and volunteers for a local organization that supports animal charities throughout central Florida.
Disclosure: Securities offered through J.W. Cole Financial, Inc. (JWC). Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisors, Inc. (JWCA). Privada Wealth Management and JWC/JWCA are unaffiliated entities.
Photography by Cy Cyr