Daniel Namey • Jacksonville, FL
Namey Financial Group, Inc. • H. Beck, Inc.
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Proactive Advisor Magazine: Daniel, what types of clients are you trying to cultivate? Do you have a specific target?

Here, in north Florida, we get a lot of clients who are retirees, or are near retirement, referred to us—people who need help with distribution plans, growth, and protection of their accumulated assets. They are entering a new phase of life and have a lot of important questions about retirement—will their assets last? Should they be engaged in equity markets? Can they grow assets without having to worry about the next market crash?

We have also always had a strong focus on small-business owners of companies with anywhere from 25-400 employees—for their company 401(k) needs as well as for wealth management for owners and key executives.

Tell me about that sales process.

After the initial contact with a business owner, we work on developing a relationship that can lead to handling their company’s 401(k) needs. Our strong relationships with third-party administrators, insurance companies, and asset managers are a key part of building the trust needed to earn the business.

Follow-through is a must. You need to do what you say you will do with respect to servicing the company’s qualified plan. Then you are on solid ground to ask for the business of personal wealth management for the owner and executives. A holistic financial plan—insurance needs, tax-reduction strategies, estate planning, asset management—with a single point of contact is efficient and effective for the business owner and for my practice.

Is the process similar for other clients?

Yes. The first thing we do is establish who we are and start building trust with the client. We look at the client’s entire financial history, including life insurance, long-term care, retirement planning, 401(k)s, and legacy planning. We really drill down on putting together a complete plan, including asset management.

 

How do you view the asset-management piece?

Essentially, we divide it into buckets—short-term, medium-term, and longer-term money, each with its own specific goals. We generally will break it into different areas and outsource investment management according to the needs and what is appropriate.

Talk about the role of active management.

We transitioned to a greater use of active management back in 2009. We were in front of our clients a lot during the financial crisis—dealing with a variety of stressful situations. I made the decision to transition to outside money managers who have strong track records and the ability to stay on top of their strategies at all times.

The bottom line is we have access to many different money managers. We evaluate the best match for our clients to help fit their goals and objectives. And they, then, actively manage the account based on their quantitative systems.

They have the flexibility to move money to better-performing sectors, go to cash, or allocate more to alternative investments—all depending on the strategies we select for the client’s portfolio. But the key factor is that they are implementing their strategies at a high level and with a very disciplined process. I only utilize carefully selected money managers for my clients. Those managers employ exhaustive due diligence to select investment strategies.

How do you explain this active management approach to clients?

Our philosophy is risk management, and we look to mitigate portfolio drawdowns like those seen in the last two market crashes. As part of this we will explain that there is a good chance our strategies may not produce gains as high as buy-and-hold investments in a very bullish market. But hopefully, at the end of the day, these active, diversified strategies will produce more favorable average returns over a full market cycle.

I like to explain to clients that if they have a loss of 50% in their portfolio, it takes far more than a 50% increase to get back to even—it takes about 100%. The idea is to keep projected returns in a much tighter range of performance, with less volatility, than just by following the markets. This is where active management comes into play, and this is the message I am giving to clients. This does make sense, especially for those with a lot of concerns about retirement and the safety of their principal.

What examples can you share of what has happened to a prospective client that did not use active management?

There are several, but in one particular case this gentleman had run his own business for many years and was fairly successful. He had money tied up in his business as well as typical portfolio asset allocations.

When 2008 hit, he had a double whammy of weaker business results and a portfolio almost cut in half. At the time, he had kids in college as well as other cash-flow needs. He had to put off selling his business and retiring and instead took out loans on his business and his building.

Would active management of his portfolio have been the answer to all of his problems? No, but it certainly could have helped put him in a better position to deal with a difficult financial situation.

Instead of having to liquidate investments at fire-sale prices, active management is designed to manage the risk that could have mitigated his portfolio losses. While drawing upon assets before retirement is never a great solution, in this case, it was necessary. With the right financial planning upfront, we hope most clients never have to experience that type of situation.

Building on that story, what would your message be to a new client about active management?

I typically ask a prospective client, “Wouldn’t you rather have your portfolio managed actively, with someone actually at the controls watching the markets each and every day?” Active managers have systems in place, proprietary or otherwise, that are oriented to make changes based on market conditions. It is non-emotional and disciplined. That is how I want my personal money managed.