Risk management: A family affair

Cassandra 
Brashier • Bloomington, MN
ClearStep Financial • Harbour Investments Inc.
Read full biography below

Proactive Advisor Magazine: Cassandra, what first attracted you to the 
financial-services business?

I studied psychology and philosophy in college and was pretty set on entering a career where I could interact with people and have a positive impact on their lives. One of the avenues I considered was family and marriage counseling. It was during the last year of college that I had a serious discussion with my mother, who has been in the financial industry for many years and is the president of ClearStep Financial.

She made the point that money and finances are one of the root causes of conflict for families and couples, and maybe I could successfully help bring solutions from the perspective of being a financial advisor. That made a lot of sense to me and was important input for how I decided on this career. She and I share a passion for helping people build a better financial future, and I am certain I made the right career decision.

“With global economic cycles and connectivity, risk management is increasingly critical.”

How does that attitude relate to your planning and investment work?

While we have comprehensive planning software and tools, it all starts with our philosophy of getting to know clients on a very personal basis. We want to know what is important to them, what is troubling them, and what their dreams are for the future. This fits very well with my educational background and my desire to help people on matters that count.

I truly enjoy working with people that want that help, want to be more educated about their finances, and are open to digging in and working with an advisor. There is also a great deal of satisfaction in working with clients at all stages of their life, from new couples just starting out and getting serious about their finances, to people already in retirement who absolutely need to enhance their ability to fund an adequate income stream.

After coming to an understanding of a client’s needs, I believe we have a sound approach to planning and investment management. We take what I think is a modern view of investment strategies and closely examine suitable strategic alternatives. I have built my practice almost from the beginning using active investment management.

When did that process evolve?

Let me start with a little bit of history as to how we saw the progression to active management from an advisory perspective. Several of my mentors in the business, including my mother, started in the 1980s and 1990s when modern portfolio theory was in vogue and advisors were trained in classic asset allocation. Yes, there were some difficult market periods, but by and large that method of investment management worked out pretty nicely over time for clients.

We then had the explosion of the information age and the acceleration of a trend toward more globally connected and correlated financial markets—followed by the dot-com crash. That was really a wake-up call, just as I was entering the industry. Things were never really going to be the same, and the threats of exaggerated booms and busts, one could argue, were always going to be with us.

Clients were looking for a different way to have their money managed. We know that some element of risk is always going to be in the markets and in all asset classes. The trick was finding a way to manage client money that put risk management at the top of the agenda. This coincided with third-party managers seeing the same trends and the same types of attitudes among advisors’ clients. Several lowered their client minimums and allowed a much broader spectrum of people to have their money in professionally managed strategies—strategies or programs that used to be reserved only for very high-net-worth clients.

This has become a compelling factor in building my business, and one that my clients appreciate. It all depends on the clients’ objectives, but I would estimate that 90% of my clients have active management incorporated into some aspect of their overall portfolio.

How do you communicate the benefits of active management to clients?

First I discuss the history of the markets in a way similar to what I just mentioned. We believe that with global economic cycles and connectivity, risk management is critical to avoiding large portfolio losses in any given period. I tell clients that if they have a 40-to-50-year time frame where they do not need to touch any money, and it is likely they can periodically stomach 50% losses, then a buy-and-hold approach might be an option. But in our opinion, that is not the best decision for the vast majority of clients.

For starters, most people cannot handle the emotions of steep losses to their hard-earned savings or retirement accounts. It is just human nature. One of two things happens: They might panic out of the market at the wrong time, near the worst of the decline, and only get back in again when it is nearing a top in the next cycle. Or they become so risk averse that they are unwilling to consider the proper mix of strategies that can help them optimally grow their assets over the long term.

I tell them that active management seeks to offer a solution to those issues. With third-party active managers, we can select suitability-based strategies that match clients’ specific risk profiles and the levels of potential drawdown that they feel comfortable with.

Carla Zevnik-Seufzer, Cassandra Brashier, and Angela Zevnik

Second, with any of our active strategies, one of the key premises is how the money managers we engage look to make portfolio adjustments as market conditions change. Their strategies, for example, may attempt to take a more defensive posture if their models are starting to see markets trend to the downside. And then they can reposition when the outlook becomes positive again, looking to find sectors or asset classes that should work in a positive fashion.

It takes a lot of education, but it is well worth it for clients and for my practice. It is truly in line with my personal objective of helping people find a suitable way to manage their finances. Nobody can predict the future, but this is exactly the rationale for active management and its reliance on quantitative and systematic strategies.

We simply want to increase the probabilities that clients can avoid the worst of downturns and capture as much as they possibly can in terms of gains. It is all about educating people on the value of not losing badly in those down years, and still being able to pick up gains in up years.

If you can keep hitting base hits, you don’t always need to hit a home run to win the game. From that perspective, active investment management matches well with our clients’ emotional and financial needs, and also provides a differentiated approach for our firm.