Small-town practice. World-class strategies

Paul Decelles, CFP • Newport, VT
Paul Decelles Financial Strategies • LPL Financial
Read full biography below

Proactive Advisor Magazine: Paul, 
how do you find working as an advisor in a sparsely populated area?

I would not want to live or work anywhere else. I grew up in this county, went to the University of Vermont, and have known many people in the area my entire life. My parents owned a small Vermont country store, and I grew up working a cash register in a town of fewer than 1,000 people.

So, I am a small-town person at heart and have enjoyed building what are now becoming long client relationships. I think something that has driven that is my operating philosophy as a financial advisor. I take a holistic view of my clients’ financial situations, starting with a comprehensive financial plan. I want to help them pursue their lifelong financial objectives, address their education and legacy-planning needs, and help them manage risk in all areas of their lives. In addition to their investment plans, we make sure we take care of risk management from a traditional standpoint with life, disability, and long-term-care insurance programs.

How do you handle risk management for investments?

When I first started in the business, the approach to portfolio management was very different from today. We primarily used fairly standard asset-allocation models appropriate to each client profile. But please remember that asset allocation does not ensure a profit or protect against a loss. Over the last several years, I have been utilizing third-party investment managers to a much greater degree. Their approach and strategies are a good fit with the suitability and risk profiles of our clients, and they are far more concerned with risk management than the traditional model of investing.

“In addition to our rigorous financial-planning focus, we are also casting a line toward managing market risk.”

There are some excellent manager models out there, some with a highly tactical focus. Our clients are very receptive to the philosophical approach of these managers, in terms of more closely managing potential drawdowns and being prepared for worst-case market scenarios. I think it is a great reassurance to clients that in addition to the financial-planning focus, we are also casting a line toward managing market risk.

Who is your target market, and what is your investment approach with them?

Our target is similar to that of most advisors: retirees and pre-retirees. But the big difference is that, due to our location, we really do not have the typical mix of corporations, large retailers, research facilities, tech companies, etc. We do have our fair share of legal and medical professionals, but primarily we are driven by agriculture and some tourism-related businesses. I joke that we have more Holstein cows than people in our county, but it is close to the truth.

Most of my clients are current or former small-business owners, with many in the agriculture industry. They have worked hard their entire lives and been successful, sort of the millionaire-next-door profile. Capital preservation, legacy planning, and creating a solid stream of retirement income are all very important to them.

Most of what we do, because of the demographics and the nature of our business, is income planning. And since we’re working almost exclusively with pre-retirees and retirees, investment risk management is always at the forefront. Depending on client need, we use an array of products and managers to address specific needs, like capital preservation for certain “buckets” of money, or an income focus to maintain their desired lifestyle, or alpha-generating for legacy assets. It allows us to match investment vehicles to a client’s stated objectives while addressing risk tolerance.

How do you explain active management to clients? Is that a term you use?

I am fortunate to work with some great, smart people. Most, though, are not terribly sophisticated in the area of investments. When I introduce actively managed portfolios, I will generally say something like, “My job, Mr. and Mrs. Client, is to sit with you and first consider all of your household’s financial-planning needs. Investment planning is the very last thing we will consider, after taking care of all of these other items that precede it. I would prefer to spend my time working through your financial plan, taking your questions, and meeting with you several times a year to review progress toward your goals.”

On the investment side, I have professional money managers at my disposal who devote all of their time to analyzing markets, staying on top of economic trends, and following key financial developments domestically and globally. I work with them to create portfolios for clients in such a way that as market and economic conditions change, they can make appropriate portfolio changes to help manage the risk in investment exposure.

This is the basic story I put forward regarding money management. I certainly don’t talk about Monte Carlo simulations, alpha and beta, and other complicated concepts unless a client is really interested in digging down into the details of portfolio management theory. But I do review historical performance and a backtested history of a particular model or strategy that I think may be appropriate for a specific client.

How do clients respond to this?

This makes perfect sense to my clients. They appreciate that I am able to spend my time making sure their financial plan is on track and monitoring our money managers. They like the fact that we are employing talented managers on their behalf who will apply risk-management measures to their portfolios. This way of doing business fits well within the concerns and objectives of my client base. It has been successful in helping to further build our practice and in contributing to client satisfaction.