Comprehensive planning at the core

Alex Zourides, CFP, ChFC, CLU, CASL, EA, AAMS • Melville, NY
Alex Zourides, CFP, Inc. • Ameritas Investment Corp.
Read full biography below

Proactive Advisor Magazine: Alex, you have a great deal of experience in various aspects of financial services. Talk about how your career has evolved.

My interest in finance and business started when I was in high school. I graduated from Florida International University with a degree in finance and was recruited by Prudential right after school. That was an excellent training ground, in addition to being a great organization, and I worked initially for Prudential Financial and later for Prudential Securities.

I was able to immerse myself in both the insurance side of the business and the investment and financial-planning side over about a four-year period. They provided younger advisors with an educational program called Financial Advisors in Training. Over the years, I have built on that initial framework with course work leading to several professional designations.

After I left Prudential, I had several interesting positions. These included working for both JPMorgan Chase and HSBC as an advisor in bank branches. While I was at JPMorgan Chase, I also worked in its telephone advisory unit, which was a very enlightening hands-on experience. When you are working with a high volume of clients and attempting to provide quality guidance, it forces you to become experienced at asking the right questions in a succinct and efficient manner. It also was a very collaborative experience, as we had a very knowledgeable unit and other resources within the organization to call upon.

“I am a firm believer that the measurement and management of risk is critical to successful investment planning and implementation.”

I later worked as a vice president at a boutique wealth-management firm that focused on ultra-high-net-worth clients in areas such as sports and entertainment. This was a unique experience and provided the opportunity to work on very sophisticated planning cases with estate planning and tax-related issues you do not see every day. My last position before opening my own firm was for TIAA-CREF, where I worked as a wealth-management advisor with individual clients who generally had assets above $500,000. We offered a full range of planning and investment products, which could include advisory services, managed accounts, and trust services for clients with more complex needs. I decided to open my own firm in 2009 and am very glad I made that decision. I think all of my career experiences have added up to a very well-rounded background that serves my clients well.

How have these experiences helped shape your planning and investment philosophy?

I think there are several aspects to my background that have influenced my philosophy, but two in particular. I feel privileged to have worked with several first-class organizations and have learned and assimilated what I consider the most suitable thinking and practices from each of them. Second, I have worked with clients all along the wealth spectrum, from people with under $25,000 in assets to some with over $100 million. That exposure to many different types of individuals and many different needs and objectives has helped me grow as an advisor.

 

But, in the final analysis, the most important lesson is that it all comes back to a comprehensive, disciplined, and customized planning process for each client. These are the core of creating financial stability and security. To start this process, I ask all of my clients some fundamental discovery questions:

• What is their total financial picture, both the blemishes that might be painful to discuss and the assets and future benefits that will come into play?
• How do their personal outlook, family situation, special needs, and hopes and dreams influence the direction they might want to go?
• What is their true tolerance for risk? There are significant differences between what risk someone can afford to take, what risk one needs to take, and what risk an individual is comfortable taking.

Their answers to those types of questions will help guide us through a comprehensive planning process and ultimately help reach the point of developing recommendations for implementation across all of their financial-planning needs. I believe in comprehensive financial planning, which includes just about anything that has to do with money. Whether it be investments or insurance, debt management or estate planning, taxes or retirement planning, college funding or risk management—you name it—I want to be the person clients can rely on for unbiased and knowledgeable guidance.

What is your investment approach?

I am a firm believer that the measurement and management of risk is critical to successful investment planning and implementation. I use a sophisticated software tool that I think helps analyze a client’s risk profile. This part of the process is not only important in informing the proper allocations and strategies for their portfolio, but also as a reality check for our shared expectations moving forward.

For example, let’s say the S&P 500 is up 25% in a given year, and a client’s portfolio has gained 12%. If I have done my educational job properly, we can jointly review their portfolio against their objectives and their risk profile with the same understanding of the going-in parameters. Those results will probably represent potential progress toward their goals within the tolerances of their risk profile. Clients appreciate this type of disciplined approach and can see how over the long term it is better to manage risk—and attempt to avoid the extremes of the market if at all possible. They especially appreciate it when that same popular benchmark, the S&P 500, is down 30% or 40% in an extreme downturn, and their portfolios have typically not suffered those types of losses.

How do you specifically manage risk in client portfolios? What is the role of money management?

I work on behalf of my clients with a select group of third-party money managers, all of whom offer portfolio strategies that provide a strong element of risk management. The process starts by developing the risk profile for clients and then selecting portfolio options provided by these managers that align with the goals and risk tolerance of each individual client.

It is difficult to generalize since client needs can be so diverse. For some of my younger clients, I might use target date funds since it is money they will not have to touch for quite some time and pure active management is somewhat less important. For another older client who has a very conservative risk profile and a need for guaranteed income, I may recommend a stronger allocation to annuities to ensure that the income stream is there in combination with their other resources.

But for the vast majority of my clients, I use some aspect of active money management. I believe there are several benefits to this. First, client portfolios are being managed by professionals who have this as their sole responsibility. They have the brainpower, the staff, and the systems in place to do this task. Second, there is the inherent flexibility with managed accounts to make portfolio adjustments as the market environment changes. A manager may have the ability to take a portfolio to 100% cash, for example, if their models, algorithms, and indicators are pointing to a severe down market.

Third, while risk management is an important consideration, these managers are also very good at identifying opportunities in specific asset classes or sectors. I believe that their risk-adjusted returns may be very competitive. Fourth, for clients with non-retirement money, there can be tax advantages, as some managers are very adept at tax-advantaged strategies and tax harvesting. Finally, there is the psychological benefit for many clients of knowing they should likely face much less of an emotional roller coaster with investments that are being managed on a constant basis by professionals. I also specifically tell clients that while these managers are very competent at what they do, I am effectively managing the managers. If a strategy is not performing as I expect, or there are significant changes in a client’s risk profile or life circumstances, we can fairly easily make changes to either strategies or managers on a client-by-client basis.

Does active money management help in building your practice?

The entire concept of being able to offer access to professionally managed accounts is not unique to my practice, but it is something that many prospects and clients are not aware of. These are the types of sophisticated actively managed accounts that a decade or so ago were really thought to be only for high-net-worth individuals. It is a strong business development tool for our firm across many different segments of potential clients, including the many public sector clients we serve.

For example, we can offer access to managed accounts as a 457 plan investment alternative to firefighters who are under the umbrella of the Florida Retirement System. This has been a powerful message, as we can help align their investment portfolios with their overall financial objectives, while also offering more of a risk-management component. I am very excited about growing this part of our business.