Comprehensive guidance for clients’ retirement-income planning
Comprehensive guidance for clients’ retirement-income planning
Proactive Advisor Magazine: Dave, talk about your background and the founding of your advisory firm.
I grew up with my siblings on our family’s hog and dairy farm near Rochester, Minnesota. While it was challenging, I enjoyed working on the farm throughout my childhood and teen years. Our parents were loving and supportive and showed us the value of working hard and being active members of our community. I was deeply involved with 4-H, the National FFA Organization, and the Minnesota Junior Holstein Association. I attended shows, conventions, and leadership events around the country.
I graduated from the University of Minnesota with a Bachelor of Science degree in animal science. I was a member of a fraternity that had many members with a similar interest in dairy science. We would travel to visit dairy farms with successful operations and also attend conventions and other events. I ended up running my own small dairy operation in college and bought a farm in Wisconsin after graduation. That is where I met my wife, Lois. Marrying her has been one of the biggest blessings of my life. I found not only a wonderful relationship but also an invaluable business partner.
After we had run the registered Holstein farm for several years, I started working part-time in the financial-services field. I became licensed and joined a large national firm that was primarily focused on insurance but also had investment capabilities. I received excellent training and mentorship, eventually deciding to sell our farm and go full-time. I became a vice president and, with my wife’s assistance, managed many licensed agents. In 2004, we decided to start our own firm, Family Financial Associates Inc., where my wife is a partner and office manager. We went paperless well before it was common in the industry and take a lot of pride in providing our clients with excellent service, communications, and customized tools.
I am proud to be an independent advisor, a position held to a high fiduciary standard. I am also pleased to be able to offer clients unbiased guidance without commitment to any company’s products. I am certified as a retirement-income specialist and also in the bucket planning methodology. We have grown to provide a holistic financial-planning process to our clients. We partner with a tax firm that has 30 years of experience in tax preparation and tax planning. Our firm doesn’t stop at helping people with their investments; we also help people transition into retirement in a well-planned fashion and provide guidance on virtually any financial area.
“The bucket planning methodology is at the heart of our planning process.”
Describe your overall approach to financial planning.
Our practice focuses on pre-retirees and retirees. As a client moves from the accumulation phase in their earning years, they must carefully consider both wealth-preservation and income-producing strategies for the distribution phase.
I tell current and prospective clients that the years before retirement are when important investment decisions need to be made. However, I also say that there is so much more to constructing a plan. Clients will need to consider several questions with our guidance: What should you do with your 401(k)? When should you start your Social Security? What about tax planning, Medicare, and legacy planning? How long will your income-producing assets last if the market takes a hit? And, importantly, do you have enough to retire in a fashion consistent with your desired lifestyle? What strategies can help you get there?
The bucket planning methodology is at the heart of our planning process. We segment client assets into what we call “now,” “soon,” and “later” buckets—with suitable strategies for each bucket. The construction of each client’s or family’s “buckets” will look different depending on their attitude about risk and their financial situation and goals.
Our client onboarding includes completing a “connection” questionnaire and a “concerns and priorities” worksheet. This allows us to spend time in our first meeting listening to our clients, understanding their unique situation, and educating them on important concepts. Our second meeting includes an income gap assessment and allows us to determine their essential expenses in retirement. We complete a volatility tolerance assessment to document a risk profile for both the “soon” bucket and the “later” bucket. Our third meeting lays out our plan to provide solutions to the client’s most important concerns and starts the implementation phase.
We address all of the most critical risks that retirees face, including longevity, inflation, sequence-of-returns risk, funding for health care and long-term care, and taxation. We educate clients on what we identify as the three phases of retirement: the go-go, slow-go, and no-go years. Their lifestyles, priorities, and income needs may vary quite a bit within these categories. We have a referral relationship with elder law and estate attorneys and can assist a client in making sure their will and power of attorney are properly set up. Our partnership with Poeschel Accounting adds value as we help clients understand and assess the most tax-effective strategies for various types of assets—pre-tax dollars, post-tax dollars, and tax-free dollars. We believe tax-efficient strategies can have a significant impact on dealing with longevity risk and extending the availability of a client’s income-producing assets.
David and Lois Stellpflug, co-owners of Family Financial Associates Inc.
Talk about your overall investment-planning philosophy.
Our approach to investment planning examines each client’s total financial picture: current and projected financial position, risk profile, time horizon, risk-management strategies, retirement-income needs, tax implications, and legacy goals. We believe the bucket planning approach is a very suitable way to structure assets to preserve wealth, produce reliable retirement income, and seek asset growth over a long-term time horizon.
One of the biggest mistakes I see pre-retirees and retirees make is ignoring the concept of wealth preservation. They continue to invest as though they still had 10 or more years left to grow their wealth. This exposes them to potentially steep portfolio losses and sequence-of-returns risk, increasing the chances that their retirement money will run out. For example, it took over a decade for the average investor in a traditional buy-and-hold strategy to get back to even after experiencing the losses of the 2008–2009 bear market. Since 1929, there have been over 30 bear markets, or about one every three years on average. Even though it is reasonable to expect markets to follow a growth trajectory over the long term, retirees must be prepared with strategies that can help mitigate the risk of steep portfolio drawdowns. That is a cornerstone principle of our investment-planning approach.
A client’s three-bucket strategy is a way of time-segmenting assets and using specific products to provide liquidity for an emergency fund and immediate expense needs, manage risk for longer-term assets, and help provide income throughout retirement. Another core principle of our process is what I explain to clients as the “3 P’s of investing.” What I mean by this is participating in market gains when they are going up, protecting portfolio assets when markets are going down, and performing on a risk-managed basis when markets are choppy. We can select from a full universe of investment products and strategies to develop the specifics of each client’s investment approach. Where appropriate, I believe in the use of fixed-indexed annuities as a potential replacement for other types of fixed-income products.
I also believe that each client’s “soon” and “later” buckets should likely have a blend of strategic and tactical strategies. For example, for a “later” bucket, which covers the period over 10–12 years out from retirement, a client’s portfolio might have a fairly equal blend of more passive strategic funds from well-known investment firms and tactical strategies from a third-party manager specializing in dynamic risk management. The strategic piece will likely perform better in a full-on bull market, but it is balanced out in poor market conditions by the risk-managed tactical strategies that can make adjustments based on the current market environment. We believe this blended approach serves our clients well and can deal with the inevitable ups and downs of full market cycles.
In a few words, describe your firm’s overall mission for clients.
We believe with informed, responsible decision-making and diligent guidance our clients can achieve their financial life goals. Our greatest satisfaction comes from seeing our clients achieve a sense of financial freedom, having confidence in the personalized plan for their financial future.
David Stellpflug, RICP, is the president and founder of Family Financial Associates Inc., based in Eau Claire, Wisconsin. Mr. Stellpflug has over three decades of experience. His firm focuses on comprehensive financial planning, with an emphasis on retirement-income planning.
Mr. Stellpflug and his four siblings grew up on his family’s dairy and hog farm near Rochester, Minnesota. Mr. Stellpflug worked on the farm throughout his childhood and teen years. He was very active in 4-H, the National FFA Organization (formerly the Future Farmers of America), and the Minnesota Junior Holstein Association.
Mr. Stellpflug attended a Catholic high school. He was a varsity wrestler and also an avid fast-pitch softball player in a 4-H league. He later played softball in college intramurals and on town teams. He attended the University of Minnesota, graduating with a Bachelor of Science degree in animal science. Mr. Stellpflug started a small dairy operation while in college and bought a 20-acre farm in Wisconsin after graduation.
Mr. Stellpflug initially entered the financial-services industry on a part-time basis, earning his insurance and investment licenses while working for a national financial-services firm. He later went full-time at the firm, becoming a vice president and managing many licensed agents. In 2004, he started his independent practice, where his wife is co-owner, office manager, and customer service specialist. Mr. Stellpflug has earned the designation of Retirement Income Certified Professional (RICP) and is a Bucket Plan Certified Planner. He wrote the preface to a limited edition of “The Bucket Plan,” a book by Jason L. Smith. He is a member of the National Association of Insurance and Financial Advisors (NAIFA), the Indexed Annuity Leadership Council (IALC), and the National Association for Fixed Annuities (NAFA). He is active in his local church and Lions Club.
Mr. Stellpflug and his wife have four children, 12 grandchildren, and many nieces and nephews. They “love to spend time with family” and are avid pickleball players. They also enjoy boating, fishing, and travel. Mr. Stellpflug is an accomplished woodworker, making “many special pieces” for his family.
Disclosure: Securities and advisory services offered through Packerland Brokerage Services Inc., an unaffiliated entity. Member FINRA & SIPC.
RICP is a registered trademark of The American College of Financial Services.
Photography by Travis Dewitz
New this week:
A mission statement that outlines commitment to clients
David Stellpflug, RICP, is the president and founder of Family Financial Associates Inc., based in Eau Claire, Wisconsin. His firm focuses on comprehensive financial planning, with an emphasis on retirement-income planning.
Mr. Stellpflug has articulated a comprehensive mission statement for his firm, stated in part below, which he shares with prospects and clients on his website:
“Our mission is to help our clients make smart investment and financial decisions through professional relationships based on uncompromising integrity, trust, and personalized service. We accomplish this mission by offering holistic, comprehensive advisory services to help clients prioritize and attain their life goals.
“Our sole purpose is to help our clients arrange their financial affairs in an efficient and effective way; to preserve their capital and obtain risk-adjusted returns consistent with their financial objectives; and, most importantly, provide them with financial freedom. …
“We are committed to providing our clients with a superior level of service as well as ongoing education designed to further their understanding of our financial and investment strategies. Family Financial Associates Inc. will work alongside our clients in articulating, establishing, and achieving their financial life goals.
“We believe in taking a holistic approach to financial planning for our clients. We apply the ‘whole person’ concept in evaluating and presenting the financial options available to the individual client. … We believe with responsible decisions; reasonable expectations; and vigilant, attentive counsel each client can achieve their financial life goals. It is to this end and purpose, on behalf of our clients, that Family Financial Associates Inc. exists.”