Ray Lucas • Worcester, MA
Integrated Financial Partners • Lincoln Financial Advisors Corp.

As senior vice president at Integrated Financial Partners, Inc., Ray Lucas wears two distinctly different hats. In addition to delivering solutions for his client base, Lucas also manages the firm’s processes for financial planning, training, and case design.

Proactive Advisor Magazine: Ray, how did you get into the advisory business?

I am a local guy, staying in Massachusetts for both college and my early career. I got my undergrad degree in accounting from Bentley University, one of the premier accounting schools in the country. I spent about 10 years in corporate accounting and finance, including jobs with Raytheon and Textron.

Quite simply, I realized that what I was doing on behalf of corporate clients on a monthly basis was meaningful, but it just wasn’t something I could see myself doing for the next 30 years. While I was still at Textron, I went through Boston University’s certified financial planner program and ultimately used that to springboard into advisory work. In fact, I taught courses in BU’s CFP program for several years until my wife and I started a family.

What is your investment philosophy?

The challenge is finding suitable products and investments that can give our clients a reasonable probability of success in achieving their financial goals. That’s where the active management aspect of portfolios comes into play.

The problem with using classic buy-and-hold strategies for all of your investment asset classes is that, for most people, the statistical probability is getting tougher and tougher to generate an adequate return coupled with a respectable distribution rate because of the volatility of all of the underlying investments.

The key to being a successful investor in a buy-and-hold strategy is making time your ally, because the only way to get market returns is to consistently be in the market for a very long time. The problem becomes not only market volatility but the investment behaviors that accompany it.

How do you handle risk and volatility then?

The beauty of our model is that it is a risk-management tool. We manage client assets on a “time-release” basis, meaning that the assets you need to consume in the next three to five years in retirement should be in low volatility, very conservative investments.

But then, in order to keep pace with inflation and to grow a client’s asset base, we will usually become more aggressive across the timeline. The art is in researching the investment environment and finding the appropriate vehicles that match up with the assumed rates of return to help give our clients a reasonable probability of success.

That comes back to why we are using active management more extensively now. The additional layering of risk management of actively managed funds, whether equities or bonds, allows us to mitigate a higher percentage of downside risk, while hopefully not exposing clients to the maximum drawdowns of a weak market cycle.

How do you describe active management to clients?

We sometimes use the analogy of a train coming down the track. If we’re at the high end of the equity market, or there’s a bond bubble, from an active management perspective we want to make sure that our clients’ portfolios can be positioned defensively. We’re very much a risk-management firm.

Clients seek adequate returns—they want to make money—but they also want to be assured that when the train starts bearing down the track on them or, more accurately, on their portfolios, we’re striving to do our best to help them get out of harm’s way.

And, if the markets are heading south and there is an opportunity to get the investor out of the way of that train, there may simultaneously be an opportunity to help them benefit financially from those same adverse investment circumstances.

In other words, if the markets are upward trending, we can stay long. If the markets are getting a little rough, we can go to cash. Equally as important, if the markets are looking to continue heading south, our third-party managers may take a negative or inverse position on the market.

Markets go up and markets go down, so why wouldn’t you want to have a piece of your portfolio that could benefit irrespective of the direction of the markets?

Tell me about the new generation of active managers. What kind of strategies can they provide to you?

We use managers who can offer leveraged positions, more often to the long side in a strong trending market.

Many strategies are available, depending on client needs and our portfolio modelling. Some examples are actively managed equity strategies, high-yield bonds, managed futures, sector-rotation strategies, or alternative investments.

As I continue to evolve my practice, I’m becoming much more of a fan of what I would call “active management of active management,” meaning that a client can be invested in a portfolio that delivers multiple strategies under one overall umbrella approach.

It might be long-short bond strategies combined with tactical equity movements or whatever is appropriate to the risk tolerance and objectives of a specific client. It’s a multi-strategy portfolio approach. The real strength is the overlay by third-party managers that allows them to change various tactical exposures if they see some momentum or a trend developing with regard to a macro development, or a specific asset class or sector.

You’ve been generous with your time. Anything you would like to add?

We are very excited about the prospects for our firm and for our clients. We believe in our proven model and are always evaluating and making incremental improvements.

It is part of my job to see what else is out there. We haven’t found a better mousetrap for how to manage clients’ expectations and to deliver on their lifestyle needs.