David Shimana, CPA, CWS, AIF • Honolulu, HI
First Allied • First Allied Securities Inc.
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Proactive Advisor Magazine: David, please talk about your path to founding your advisory firm.

After graduating from the University of Hawaii with a degree in accounting, I worked for a large international CPA firm. I met many great people and learned a lot, but it wasn’t a good fit for me. As an auditor, although we were helping the client, it didn’t always feel that way. We were a necessary “evil.” I wanted to do something more positively aligned with the client’s goals. I also wanted a career I was passionate about.

While earning my MBA, I was a student teacher. I enjoyed helping others learn but knew I did not want to pursue a career as a professor. I had been investing in mutual funds since my early 20s, so the MBA course I found most interesting was taught by a retired investment manager. I did well in the course, which focused on investment management and portfolio construction. I think this planted the seed that I might consider working in financial services.

However, after earning my MBA, I decided to continue serving as a CPA, working at two prominent Hawaiian banks. After a few years, an old friend who had transitioned from CPA work to financial advising recruited me to the firm he worked for, which did consulting for participants in tax-qualified retirement plans. I will always be grateful for his mentorship in helping me get my start in the industry.

Today, I have over 23 years of experience as a financial advisor. I started my career at a large national company and have also worked with a smaller ensemble practice focused on comprehensive financial planning and wealth management. I have run my own advisory business for 16 years. In addition to my CPA background, I have earned the Certified Wealth Strategist and Accredited Investment Fiduciary designations.

Describe your client base and how you see your firm’s mission.

Our clients are primarily retirees, pre-retirees, and small-business owners. We also work with some of the children of our clients. Our firm specializes in retirement planning, risk management, investment strategy, and portfolio management.

Through our affiliation with First Allied, we can offer the objectivity of working with an independent advisor as well as the resources of a full-service independent brokerage firm. Our objective, long-term decision-making approach helps our clients make informed decisions. By crafting a proactive, adaptive plan that addresses a client’s entire financial picture, we can guide them through changing economic and market scenarios.

On my office wall, I have three Japanese calligraphy characters that represent the concepts of preserving, protecting, and enhancing or growing. These symbols, in that order, represent the philosophy of our firm and what we’re trying to achieve for our clients. My practice philosophy and process have evolved over the years. I believe in the value of ongoing professional education, sharing knowledge with peers and professionals in other disciplines, and having a mentor. I also learn from our firm’s work with clients, including successes and occasional instances where hindsight shows we might have done better.

“Our goal is to make a positive difference in clients’ lives.”

Discuss your financial-planning process for different types of clients.

We believe every client is unique. They have different ages, careers, family lives, financial experiences, risk appetites, and backgrounds. We break down our service offerings by client types, which include targeted-solution clients, investor clients, and comprehensive-planning clients—or what I call situational-planning clients. Targeted-solution clients want a product solution for a specific concern or issue that is a major priority. They tend to work with us on a limited basis for guidance on the most appropriate solution for their current circumstances, such as life insurance, long-term-care insurance, or a fixed annuity.

Investor clients want professional support to help design, implement, and manage an effective investment strategy that reflects their risk profile and investment objectives. This includes research, analysis, portfolio construction, strategy selection, and implementation and monitoring.

Comprehensive- or situational-planning clients may want our help with a targeted solution and investments. They also usually want assistance with investing toward achieving long-term goals, preparing for retirement across different decision areas, retirement-income planning and projections, needs analysis for life insurance or long-term-care insurance, and estate planning. We also can help with budgeting and cash-flow management, break-even analysis of spending on projects or real estate, paying off mortgages, managing debt, and planning for college funding. We also may discuss and strategize on ideas to enhance their quality of life. Where appropriate, we recommend the services of trusted third-party professionals in other disciplines.

What is your broad investment approach?

First, our firm uses what we call a core and explore approach. The investment products we use for the core part of our clients’ portfolios are meant to preserve and protect wealth or manage risk, as well as grow a client’s wealth over a full market cycle and in different economic cycles. The core element, which employs essentially what is known as an all-weather approach, uses traditional assets such as stocks and fixed income and supplements them with several different asset classes such as commodities, currencies, precious metals, and alternative strategies. We believe this provides more diversification and risk management than the traditional 60/40 portfolio of stocks and bonds.

The explore part of the portfolio varies based on client investment goals. For many clients, we are using a heavier allocation to gold than what is in their core, as our analysis shows this asset class is currently undervalued. Explore strategies fall into many different areas and usually represent specific strategic opportunities offered by our third-party investment managers. We regularly evaluate non-correlated strategies that can help better manage risk while offering the potential for attractive returns.

Secondly, we account for both market and economic cycles, or regimes, and how they affect asset-class performance. The four stages are inflationary growth, inflationary recession, deflation/disinflationary growth, and deflationary/disinflationary recession. Different asset classes perform better than others during each stage. Because no one can predict the future, the all-weather approach uses different third-party systematic investment managers and a range of strategies—for example, buy-and-hold, trend following, hedging, and momentum—to hedge risk and identify which asset classes appear to be in favor over different time horizons.

Lastly, our philosophy considers positive expectancy, which assesses how quickly a strategy can yield positive returns even if you invested at the worst possible time. We look for strategies with a positive expectancy of three to four years or less. This makes it easier for clients to stick with a strategy. A poor example of positive expectancy would be buying and holding an S&P 500 Index product at the market peak in March 2000. It would not have been profitable until the fall of 2014. Most problems with retirement planning come from this type of unmanaged market risk. Combining several dynamic and adaptive strategies to provide multiple levels of diversification is at the heart of our approach to investment risk management.

What qualities do you want clients to associate with the experience of working with your firm?

I hope they believe we will always work in their best interests, providing knowledgeable and experienced-based guidance. We speak about what I call our firm’s five core values when it comes to client relationships: care, character, chemistry, competence, and consultation. Our goal is to make a positive difference in clients’ lives. I believe clients will see that we do so in a manner consistent with those values.