A risk-oriented approach that fits client attitudes and goals
A risk-oriented approach that fits client attitudes and goals
After studying business in college and serving in the military, my intention was to secure a position in the financial-services field. I was working for a retail optical chain, and one of my regular customers was a representative for New York Life. He liked my focus on service and the way I presented myself. He asked if I had ever considered financial services as a career—exactly what I had been looking for. I did well in the interviews and became a sales representative. I learned a lot working for New York Life, quickly saw some success, and appreciate that opportunity.
My next few positions in the industry were primarily in the banking channel, working as a private banker and financial advisor for national, well-known firms. These positions allowed me to obtain more training, delve deeply into investment planning, and learn how to address a range of people’s financial needs, from high-net-worth clients to individuals and families with low and moderate incomes. I liked the banking channel and working for first-class organizations, but it became apparent to me that I really wanted to become an independent financial advisor and have the ability to pursue my own business plan. Working in the bank channel, your parent company expects the focus will be on their proprietary investment products. I wanted the freedom to offer clients investment products from many different sources, depending on the client’s needs.
I became an independent advisor and, around the same time, started working with teachers in Miami-Dade County—primarily selling insurance and fixed-index annuities. I had become an approved vendor and learned a great deal about the financial-planning and investment goals of this audience. I saw a tremendous opportunity with a largely underserved group—not just teachers, but also a wide range of individuals who are part of the Florida Retirement System (FRS).
In 2016, the founders of Aragon Capital reached out to me to discuss joining the firm. I was impressed with the vision of the management team and saw how we could work together. I told them I was very dedicated to growing my business and laid out my business plan for the future. I am very pleased they saw the value I could bring to the firm. I have a great deal of freedom to run my practice in a way that best fits my clients. It is very different from the culture of the banking channel, encouraging entrepreneurship and promoting independent achievement within a team atmosphere.
At my prior broker-dealer, I gained experience working with third-party investment managers that offer risk-managed, tactical investment strategies—the opposite of buy-and-hold passive products and strategies. Aragon Capital was willing to enter into selling agreements with some of the managers that I recommended. That was extremely important to me as I continue to move to a fee-based advisory practice for my clients. There is no set definition of the type of client I will work with—they come from many different occupations and have a wide range of income and asset levels. The commonality is that they are seeking guidance on ways to build a sound financial future. I believe my strong background in finance, banking, and advisory work makes me well equipped to offer that guidance.
One important aspect of my business model is my emphasis on FRS clients. The majority are teachers, but I also work with police officers and city workers, predominantly in Miami-Dade County. I tailor my planning approach to fit each client and look to provide financial guidance that addresses all aspects of his or her financial life. If I do not have deep experience in any given area, I will help clients find a resource that will serve them well. The primary goal of this type of client is to see steady growth in their retirement assets while minimizing risk to the degree possible. As I tell clients, I want to make sure they are being well compensated for any risk they are taking.
While my process remains basically the same, there are significant plan differences depending on the type of employer a client works for. Essentially, all FRS participants are initially offered the choice of a defined benefit/pension plan or a defined contribution/investment plan. They also have one opportunity to change their election during their career with an FRS employer. Many can also choose to take part in the deferred retirement option program, or DROP. I am knowledgeable about a range of retirement plans, including 401(a) plans, the primary investment plan for FRS, as well as 403(b) and 457 plans.
Helping clients understand the specific features of their plan is one major way I add value. We often get on the phone together with FRS to review their plan benefits. Part of my role is helping them look at all of the available options and make decisions in line with their attitude around risk, their future distribution preferences, and tax exposure, as well as having their beneficiary choices aligned with their objectives. Most of these clients have never worked with a financial advisor, so I place a great deal of emphasis on education. I want to help clients understand broad investment principles and where their retirement plan fits within their overall financial picture. We look at the asset allocation choices available within their plan, which may entail life insurance, annuities, or various investment classes.
I tell new clients that my primary goal is to help them understand why their money behaves the way it does. If they have existing assets in the investment plan, no matter the size of the account, I’ll run a portfolio analysis and explain why the account has performed the way it has. We will have a discovery meeting so I can really get to know them, understand their risk tolerance, review their goals in a systematic fashion, and explain to them how it all ties in.
Most people are conditioned to think, “I am just going to set my investments up initially and not touch them. I may lose money over some periods but eventually my account will grow.” I do not think that is an appropriate approach for investors, and especially those who are getting close to their retirement age. I introduce them to the concept of managed money, where professional money managers can employ research, sophisticated models, and risk-managed strategies on behalf of the client. That is usually a real eye-opener for most people and, once they understand the basic principles, something they are very interested in. While there are no guarantees, I can say that tactical money management, at least for my clients, performed as it was intended to during the downturn in the first quarter of 2020. Overall, clients were very pleased to see that.
Active, tactical investment strategies have various tools to manage risk, including the ability to change portfolio allocations with changing market conditions; increase or decrease exposure to the overall market, sectors, or asset classes; or even move 100% to cash. The majority of my clients are conservative investors and are not looking to outperform the S&P 500. When the market’s doing well, they want to participate in those gains. The important thing is that their investment plan is staying on track over the years. When the market is doing poorly and declines are in the headlines, that is when my clients get concerned. I think tactical money management has helped me greatly in managing expectations and addressing concerns about downside exposure. That risk-oriented approach fits both the attitudes of my clients and the objectives of their long-term plans.
RIA firm resource supports advisor entrepreneurship
Edgardo Castro, of Aragon Capital in Fort Lauderdale, Florida, spent the early part of his career in the banking channel, working as a private banker and financial advisor with well-known national banks. He says, “I liked the banking channel and working for first-class organizations, but it became apparent to me that I really wanted to become an independent financial advisor and have the ability to pursue my own business plan.” Mr. Castro joined Aragon Capital in 2016 and was attracted to “the vision of the management team” and the opportunity “to work together in a mutually beneficial fashion.”
Aragon Capital believes its operating principles, listed below, make it an attractive RIA firm for growth-oriented advisors:
- Our dedication forces clients to focus on their entire balance sheet, rather than simply on liquid asset performance in a vacuum.
- Our marketing is focused on building our brand in the market and bolstering our wealth advisors’ referral-based marketing efforts.
- Our team of experts in specific relevant domains … much like that of a family office.
- Our dedicated research and portfolio management structure is available to assist in sales and service efforts.
- Our education and knowledge is focused on building fundamental knowledge in our employees.
- Our strong operational infrastructure, including capabilities such as client operations, trading, and compliance.
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Edgardo Castro is a financial advisor with Aragon Capital LLC, located in Fort Lauderdale, Florida. Mr. Castro has worked in the financial-services industry for over 14 years. He has provided financial and investment guidance to high-net-worth clients, the mass-affluent segment, retirees, and state and local school and government employees.
Mr. Castro was born and raised near Houston, Texas, and spent several years of his childhood in Honduras. The eldest of four children, he says his parents “exemplified a strong work ethic and created a great family life for all of us.” He developed a passion for playing baseball during his school years that he continues to foster by participating in an adult baseball league. Mr. Castro attended Wharton County Junior College, where he earned an associate degree in business administration. He also spent time at the University of Houston before being called to active duty in the U.S. Army, where he was a health-care specialist.
Mr. Castro entered the financial-services industry as a sales representative for New York Life. He also served as a financial advisor in the private banking channel, working for national firms, including JP Morgan Chase, Wells Fargo Advisors, and HSBC Securities. He joined Aragon Capital in 2016. “The firm provides great support and resources as I implement my business plan,” he says. While Mr. Castro works with individuals and families from all backgrounds, he has a strong focus on the financial-planning and investment needs of employees within the Florida Retirement System (FRS).
Mr. Castro enjoys spending time with his son and daughter and taking part in the many outdoor activities available in southern Florida. He is active in his church and likes to study the Bible. He is a sports fan and enjoys travel and reading. Mr. Castro says his adult baseball league is “very competitive, and it is not unusual to play with or against former college and professional players.”
Disclosure: Aragon Capital LLC is an independent registered investment advisory (RIA) firm located in the South Florida area. The opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk, including loss of principal.
Photography by Jennifer Jones