James Kraatz • Shelby Township, MI
Faith Investment Services LLC • Peak Brokerage Services LLC.
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Proactive Advisor Magazine: Jim, talk about why you started your firm and how you see its mission.

I started Faith Investment Services with our co-founder, Stacy Calder, in 2002. After more than 11 great years working with Aid Association for Lutherans, I wanted to increase my focus on faith-based financial services. Our goal was to create a firm culture offering clients a full range of financial-planning and wealth-management services, including retirement-income planning and risk management, with a specialized capability in faith-based investments.

Our mission is to provide education, guidance, and customized strategies that can help our clients fulfill their faith-based purpose in life. We assist families, businesses, churches, and ministries in better utilizing the financial resources they have been blessed with. Through faith-based financial strategies and morally directed investing, we believe clients can feel confident about their financial future, prioritizing how that future reflects their unique values.

While Stacy and I wear our Christian faith on our sleeves, we do not limit our client base to those interested in faith-based investing. We invite anyone sincerely looking to improve their financial lives to see if our firm is a good fit for their needs. For all clients, our team of professionals can create a comprehensive financial plan that seeks to preserve, protect, and grow their wealth, using a variety of investment and insurance products and services. When appropriate, we can also provide access to and coordination with specialized professionals in areas such as Medicare and long-term care, estates and trusts, tax planning, and charitable giving.

How has your background shaped your financial-planning process?

I have always been committed to deeply understanding my clients’ objectives. During my years at Aid Association for Lutherans, my clients were primarily members of Lutheran churches in my area. I made a point of meeting clients at their homes, where they felt comfortable sharing their personal financial information, goals, and concerns. I got to know their families and see what was most important to them, which helped me develop an empathetic and consultative approach to financial planning.

I also spent several years working with Faith Financial Planners, which offered excellent resources for technical training. We had quarterly training sessions and peer-to-peer sharing of best practices. They introduced us to holistic planning, using the sophisticated software needed for faith-based investing and full-service financial planning. I served as a board member and vice president of a related company, the Faith Financial Network. We have also handled supervisory responsibilities as an OSJ for broker-dealers that we have worked with. These experiences have given me a thorough background in financial planning and a deep understanding of the investment industry.

What does your firm’s planning process look like?

We understand that retirement is the largest financial undertaking for most Americans. Our goal is to build a custom-tailored financial strategy for each client that supports their retirement vision. This process involves collaborating with clients on three fundamental steps: discovery, evaluation, and plan design.

We start with an introductory meeting to get to know one another and see if the relationship is a good fit. I often begin by saying, “There has to be something going on in your life where meeting with us has now become important. What is that?” This opens the door to a free-flowing conversation covering many areas of their lives and their most important priorities. I explore their retirement fears and goals, concerns about long-term care or taking care of a parent, and worries about running out of money. Part of this conversation is getting a good sense of their personal beliefs and values—and understanding the role their faith plays in their lives.

For our second meeting, we ask clients to fill out a questionnaire that assesses their household budgeting and helps estimate their income for living expenses in retirement. We also ask, “What is on your bucket list, now and 20 or 30 years into the future?” This meeting includes a thorough discovery of their current financial situation, including assets and liabilities, insurance and benefits programs, and potential future income streams. Using our planning software, we analyze several different scenarios to develop their customized retirement income and investment plan.

At the next meeting, we present a written executive summary of the plan, including an investment statement and a list of the client’s goals and objectives. We are prepared to discuss the pros and cons of different approaches and the rationale for our recommendations. We always tell clients at the end of that meeting, “You will not be asked to make a decision today. Please go home and pray about it. When you’re ready, that’s when we’ll proceed.” Once we agree on the plan, we create an actionable timetable for implementation and set up a schedule for future review sessions to monitor progress.

“A growing number of investors want to align their finances with their faith.”

What is your broad investment philosophy?

A client’s investment statement and the ensuing strategy specifics are based on the client’s risk profile, financial objectives, and time horizons. We believe in a bucket approach to allocating investment resources, seeking to reach the appropriate balance between income-producing elements and more growth-oriented strategies.

We often earmark specific elements of a plan for specific goals, such as providing retirement income, funding aspirational goals in retirement, contributing to educational funding for children or grandchildren, charitable giving, or leaving a legacy. A concept that resonates with clients as we look out into the future is the idea of “go-go, slow-go, and no-go” phases of what is hopefully a lengthy retirement. While clients cannot fully control their health, our goal is to plan for having the appropriate financial resources for each phase.

We spend a good amount of time on client education, addressing topics like market cycles, the mathematics of market losses, the sequence of returns, and the impacts of longevity and inflation. These issues tie directly to our belief in the importance of risk management in preserving and growing assets. We work with different third-party investment managers that employ specific risk-management techniques in strategies that seek market opportunity while mitigating portfolio drawdowns in unfavorable market environments.

The cornerstone of our investment philosophy is aligning investment strategies and selections with our clients’ personal beliefs and values. A growing number of investors want to align their finances with their faith. We use a sophisticated tool that screens investments based on criteria related to faith and moral beliefs that can be customized for each client. Using Morningstar data, the tool can screen both individual company stocks and companies that are part of over 18,000 mutual funds and other investment products.

Importantly, we also work with third-party managers that can apply this same screening methodology in faith-focused strategies. These strategies use multiple risk-management tools, going beyond basic asset-class diversification to manage market risk and seek competitive risk-adjusted returns. These strategies can address a wide range of suitability and risk profiles appropriate for our clients.

I explain to clients the value of third-party investment-management firms with highly qualified researchers, strategists, and traders. Their daily focus on the global financial environment and market trends helps facilitate timely, proactive adjustments to positions as appropriate. I tell clients I am the quarterback of the team, providing overall portfolio guidance and oversight while the team members develop and execute the specific strategies.

James Kraatz and Stacy Calder, co-founders of Faith Investment Services LLC.

How ideally would you like a client to describe working with your firm?

I hope they would say they enjoy working with us; trust us to provide honest, ethical, and knowledgeable guidance; and that we reflect our Christian values in our work and relationships. Some of our clients have been with us for over 30 years. We are proud of this and grateful for the opportunity to build deep and enduring relationships with our clients.