Brian Glaze • Burlington, NC
LPL Financial

Larry Ware, CRPC, CLTC • Burlington, NC
LPL Financial
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Business partners embrace the evolving technology and best practices that make the most sophisticated money-management strategies available to their clients.

Proactive Advisor Magazine: Thank you both for joining me today. How did you come to form your partnership?

Larry Ware: Brian and I have known each other for many years through a relationship that started when we both worked for Southeast Regional Bank broker-dealer. I covered a regional area as an investment consultant, and Brian was working as a licensed banker at one of the branches. We found over time that we worked exceptionally well together and shared a common philosophy on client service and how to approach the investment process.

Brian Glaze: Larry deserves a lot of credit as the mentor in the relationship regarding investment services. My responsibilities and role over the years at the bank evolved into handling client investments, but I pretty much had a soup-to-nuts exposure to all aspects of retail banking. I think understanding the ins and outs of the loan process, insurance products, and a variety of other banking services is a valuable additional perspective I can bring to the client planning process.

One key concept describes what we most believe in as an investment philosophy: protect and grow client assets while minimizing risk.

How would you describe your shared client philosophy when it comes to client investments?

Brian: We had a lot of success in our partnership at the bank and were recognized as one of the top producing teams. When we left, we were responsible for about 1,200 client relationships and about $100 million in client accounts. We both believe in superior service and being extremely attentive to client needs. At times this might involve a fair amount of client hand-holding, but I prefer to think that we minimize that by being very upfront with clients as to investment expectations. One of the most important things in this business is clearly explaining alternatives to clients and outlining the accompanying risks and potential rewards. Having this shared set of expectations from the beginning of the relationship helps defuse issues down the road and has contributed greatly to our success.

Larry: Brian mentioned the number of clients we had, and that was very gratifying. But it was also one of the reasons we decided to form our own advisory partnership. We wanted to provide more in-depth relationships with our clients throughout the financial-planning and implementation process, which is difficult to achieve with that many relationships.

We are dedicated to developing a highly personalized planning process that can cover just about any aspect of a client’s financial life. There is really one key concept that describes what we most believe in as an investment philosophy: protect and grow client assets while minimizing risk.

Let’s talk about that core concept—how do you go about pursuing that?

Larry: Most importantly, we go through a full discovery and financial-planning process with clients over several meetings. It is definitely preferable that the spouse be involved, at least in the initial and final phases. And though it is a very extensive exercise, we try and simplify things by identifying the top three to four financial-planning priorities for that individual or family—whether it is college planning, debt reduction, legacy planning, or overall retirement goals. Within those priorities, we then identify the framework around the key issues of the investment time frame, the specific taxation situation, and appropriate risk level.

Brian: Once those overall parameters are set, we can get into a fuller examination of appropriate asset-allocation buckets and investment alternatives. We have become strong advocates of an active money-management approach for the investment side of the ledger. That means several things: making sure that risk is managed first, not worrying about market predictions or investment biases, and developing portfolio alternatives with the potential to perform well in either up or down markets. And, though various strategies might be very sophisticated and quantitatively based, we believe in keeping our education and explanations for clients at an easy-to-digest level.

How do you explain an actively managed approach to clients?

Larry: It begins with a discussion of risk and their specific risk profile. We use the suitability questionnaires of our third-party money managers and specific software that helps quantify their risk profile.

Brian: Our money managers provide excellent educational materials for clients. We look at things like the cycle of the S&P 500 over a 20-year time frame and show clients the reality of the volatile swings it has experienced. Though anyone who has been in the market certainly knows this on a gut level, it is something else to see it laid out. Few clients are aware that while equity markets have historically risen 59% of the time, for the other 41% they are either in a sideways or bear market.¹

We then use that information as a springboard to ask the question, “Why would you want to invest using strategies that are likely not going to work almost half of the time?” This leads nicely into a discussion of the benefits of actively managed strategies versus a buy-and-hold approach.

Larry: Right. One of the primary benefits of active money management is the potential to avoid or minimize those large losses that come with severe bear markets. We also like the ability to select from a wide range of equity, bond, and alternative investment strategies. These can be used in a great variety of combinations, dependent on the client’s risk profile and objectives for that specific investment allocation. These strategies have the ability to go to cash, go long or short an asset class, and to rotate through various allocation or weighting scenarios dependent on market conditions. We feel this is a much stronger and proactive approach to today’s investment environment. Returns may not be as great during bull markets, but the overall approach aims to work well over the long term and has the ability to smooth out returns. And for the aggressive investor, there are several strategies available that may use leverage, if that meets their specific objectives for some portion of their portfolio.

These strategies have the ability to go to cash, go long or short an asset class, and to rotating through various allocation or weighting scenarios dependent on market conditions.

How has active money management been beneficial to your practice?

Brian: Active money management has fundamentally changed our approach to marketing our practice, how we talk to clients about their investment alternatives, and our core story. We explain to clients how this is a step beyond modern portfolio theory or classic asset allocation and is really one of the most sophisticated types of money management out there for managing risk. Clients know that they have full-time money managers monitoring the markets, technical signals, and trend changes. Our job is to find the best money managers and then manage the managers.

Larry: We can confidently tell clients that we think active management will serve them well over full market cycles. Many clients have lived through at least one, and maybe up to three, extreme roller-coaster round-trips in the market. Active management gives us the opportunity to address head-on what we feel is most important to our clients for their investment portfolios: providing for competitive returns, managing risk, and minimizing portfolio drawdowns.

¹Reported by a market study conducted by Flexible Plan Investments Ltd. Research Department on the S&P 500 Index from 1953 to 2012.