Jim Bowen • Indialantic, FL
JD Bowen Financial Group • LPL Financial
Read full biography below

A discipline in managing risk.

It was really not as much of a change as you may think. In my command position in the service, I was responsible for hundreds of U.S. Army personnel and their families. From that experience you understand the responsibility that a soldier has to his or her family when they might be deployed overseas on a moment’s notice or for an extended tour. There are so many things to be done to have their family prepared: powers of attorney, health-care planning and surrogates, and financial readiness and contingency planning.

As a leader, I was involved in such issues and was also in the tougher role of Survivor’s Assistance Officer, dealing with the impact of the death of a soldier on their family. These experiences gave me a deep understanding and appreciation of the role of planning and readiness. After the service and my teaching job, I made the decision to work in an industry where I could address the serious life and financial issues that people have. I am motivated by serving clients.

Philosophically, I started as a conservative value investor. The dot-com bust taught me a lot about investing styles, client behavior, and psychology. I was only in my first decade of advisory work when that hit, and I saw the frenzy of greed in the run up to it, even among my own clients. I also saw the intense fear and despair when the markets crashed. Fortunately, we had exit plans for clients who were insistent on being more aggressive in that market. But I certainly learned that neither of the two emotional extremes of that period was something that clients should experience again.

I firmly believe that the slow and steady route of risk-managed investing over time is going to win out. The math has been done around that concept many times to prove it. It also is an approach that is going to help alleviate that fear and greed mentality that many investors fall prey to.

It did not take very long for me to understand that there are third-party investment managers that have developed a discipline to create the kind of risk-managed approach I was looking for.

What is particularly appealing to my firm and our clients is a manager’s development of exit strategies and offensive market timing. Our clients cannot tolerate deep portfolio losses, and these money managers work to reduce the downside risk. But our clients also need to grow their assets for retirement, so we look for managers who are equally adept at performing well in a bullish market environment. You need to have both sides of the equation when selecting active money managers for client portfolios. This risk-managed approach does not always lead to outperforming the market, but it does suit our client needs and attitudes.

Here, on the Space Coast, we tend to find a lot of middle-management professionals from the technology and aerospace industries, particularly engineers. Our clients come from all backgrounds and professions, but in terms of age they are mostly close to retirement or in retirement. Our sweet spot is in active and defensive market timing as it relates to investments, and that fits well with this demographic. Our clients tend to have comfortable incomes and assets, but generally they are not high-net-worth families.

They cannot afford to lose 30% to 40% of their assets. If you have even a 20% drop in your portfolio and are drawing down 4% to 5%, it is a huge hit that is tough to recover from. We do not think clients should be risking their current or future lifestyles by accepting the full risk inherent in the financial markets—risk must be managed.

There are three key ones: risk management, time management for our practice, and manager diversification. I have talked about the risk management piece and our desire to work with managers who have a strong defense and a strong offense in place. It is not appropriate, in my opinion, to use passive modern portfolio theory in today’s investment world. Reviewing and rebalancing on a quarterly basis does not provide the kind of risk management we want for our clients—active management is much more in line with our philosophy.

Time management refers to what many top advisors in the industry frequently speak about. When you have worked long and hard to build a successful practice, you need to decide if you are going to manage money or manage relationships. It is very difficult to do both effectively with a large number of clients. When we reached that point and that realization, we began to use third-party managers extensively. That is not a default position by any stretch—they serve our client needs very well.

Third, it is very advantageous to be able to work with a number of different managers and different strategies. Some managers tend to specialize in a specific asset class or strategy, while others offer many different types of strategies. But they all bring a focus on risk management and their own strengths, skills, and philosophies. The most critical factor is whether or not they consistently deliver on their stated parameters.

I like having the ability to match the right manager resource or combination of resources for a specific client portfolio need. Whether a client is very conservative or very aggressive, we can put together portfolio strategies that should meet their needs. We work hard with clients to develop shared expectations. The bottom line is that we want to meet clients’ reasonable objectives, while exposing them to the least possible amount of risk.