Marlow Felton, Chris Felton, CPA • Denver, CO
Transamerica Financial Advisors Inc.
Read full biography below

Understanding a client’s relationship with money is a critical first step in building a portfolio.

Proactive Advisor Magazine: Chris, what motivated you to become an advisory?

Chris Felton: I worked for several years for Arthur Andersen as a CPA, was doing well, and had a specialty in audit work for mining companies here in the western region. But I always had a dream of being an entrepreneur and owning a business in the financial area.

When I was introduced to TFG’s predecessor company, I was immediately taken with their mission statement. To paraphrase, “We want to create financially independent families and bring products, service, advice, and money management usually reserved for wealthy people to everybody.” That totally blew me away, and I just loved the purpose behind it, as I think the average American family has not had the resources to figure out how money can work to their advantage. The rest is history, as I started my practice and never looked back.

“The active management story is a powerful message. It can help transform financial lives.”

How about you, Marlow?

Marlow Felton: I went to school for communications at Loyola University in New Orleans and began my career in the media and advertising business. I was climbing the corporate ladder but, like Chris, felt there had to be some terrific entrepreneurial opportunities out there. I originally was not a financial expert, but I have the ability to absorb information quickly and communicate complex ideas to clients in a way that they can clearly understand. Our business model is built around mentoring. I feel I was a beneficiary of that and now have used the opportunity to pass on my knowledge to the advisors we manage and train.

What process do you use in working with clients?

Chris: I think the upfront part of our process is very similar to the discovery phase any good advisor will do with new clients. We want to thoroughly understand an individual’s or couple’s financial history, their current situation and assets, their budgeting and cash flow, and what their objectives are for the future.

But in the next phase we get at some critical issues that may not be so typical. We have really honed in on a process to understand a client’s or couple’s relationship with money. What was their family history like regarding finances? How are money issues dealt with in their marriage? What are the psychological roadblocks they have encountered with money in their lives, and how can we help them transform their attitudes into seeing opportunities?

Marlow: Getting to know your clients on a pretty intimate level is so important. Men typically have different attitudes than women on finances and investments. The financial needs, both practical and emotional, of a divorced or widowed woman can be very different than those of a woman currently married. Where are they in their career? What are their hopes and aspirations for their children? Do they or will they have elder-care responsibilities?

Getting at these types of issues and their attitudes around them is critical. You can show a client the most financially logical plan, but there are sometimes emotional barriers that get in the way.

How does active money management fit into the process?

Chris: It goes back to the mission statement I was talking about: bringing to everyone the tools and methods available to high-net-worth individuals. We learned a difficult lesson as advisors and investors in the early 2000s. Even with my extensive financial training, it was tough to realize how challenging it is, mathematically, for a portfolio to recover from the impact of deep losses in passive portfolios—until you have lived through it.

I was determined that was not going to happen again and was extremely pleased to see our company offering a much wider spectrum of third-party money-management alternatives following the dot-com bust. The key point is that we can now provide a way to approach portfolio construction, and strategies within portfolios, that offers a high degree of risk management. It varies by client and their specific risk profile, but we have been able to mitigate a lot of the fear that used to exist in clients’ investment equation.

Marlow: We currently have access to nearly 20 third-party active managers, and tend to use about seven or eight for core and satellite portfolio approaches. Managers, we have found, have different strengths or specialties, and often we will mix and match an appropriate blend for a specific client. We work in a very collaborative fashion within our group and with other advisors at TFA, collectively examining the strengths and capabilities of a variety of money managers.

We might have a manager who is really proficient at fixed income, another with a specific equity approach that is long-only, another who might be equity-oriented but far more tactical to both sides of the market, or a manager who more actively employs sector rotation. There is no one right answer and no one magic formula. It all depends on a client’s needs, objectives, and outlook on risk.

Are clients responsive to active investment management?

Chris: Absolutely. Once we explain the purpose of incorporating heavier risk management into their portfolio, they are very engaged, especially since everyone still has 2008 pretty fresh in their minds. There is not a client out there who is afraid of making money—they are afraid of losing money. That is why the active management story is so compelling: Providing solutions and defensive strategies that can work in just about any market environment.

Marlow: It really comes down to knowing your client and how much information they can absorb. We keep it pretty basic and conceptual. We start with what most people experienced in 2001-2002 and then in 2008. Generally, their portfolios went down in excess of 30% both times using a buy-and-hold approach. We then explain the active investment approach that we use, something that used to be reserved for the very wealthy but is now available to most clients.

We use the active management story in combination with our approach to truly understand a client’s relationship with money. It is a powerful message, and we have seen how it can help transform financial lives when put into practice and executed well.