Respect the past—Build the future

Patrick Hamill, CWS • Toledo, OH
Hamill Financial Services • Sigma Financial Corporation
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Proactive Advisor Magazine: Patrick, talk about joining the business your father started.

I cannot give enough credit to my father for introducing me to the financial world and years of great training. Although he has now been in the business for over 50 years, he is still actively involved and comes to work on a regular basis. I also give him credit for steering clients through a lot of ups and downs in the markets; he has seen just about everything, good and bad, yet has maintained a level attitude through it all.

How have you put your imprint on the business?

We have done everything hand in hand, really. But with my training and certification as a wealth specialist, I think I have been fairly instrumental in helping to evolve the practice. We have made the change to a fee-based advisory practice and to taking a holistic approach to overall financial planning. We tell clients that the planning phase informs everything we do, and execution of insurance, investment, and other recommendations must follow that. I believe clients have seen real benefit from the advisory model, both in terms of cost efficiency and the types of sophisticated investment products and strategies we can bring to them.

What is your approach on the investment side?

Planning and the objectives our clients are working toward will dictate that. We can bring a full range of investment and insurance products to the table to meet their needs. We find third-party managers who use a more active approach to portfolio strategies more appealing since the financial crisis. Risk management is more important than ever, especially with many of our clients in or near retirement.

Explain how you introduce the subject of active management to clients.

I have one particular approach and story I use with clients. I tell them my son is now 16 years old. When I look back to the progress of the markets since he was born, it has been a pretty rough ride. The S&P has returned about 2% on average annually since he was born, just under 4% with dividends reinvested.

However, along with those pretty meager returns by historical standards, we have also seen two devastating crashes in the S&P 500, with losses over 50%. Why would anyone consider that to be a benchmark that should be used as the standard for investment performance, especially if you think about it in terms of risk and reward?

That conversation leads to a thorough discussion of risk management: what lens to view returns through and the importance of keeping portfolio losses to a minimum. Clients will often come in with a preconceived notion that investing in the equity markets is all about outperforming the market. Certainly that is what they are exposed to on television business shows and in magazines. But it is very unhealthy for clients to think that those large loss years can never happen again.

I explain that trying to control the damage of large market drawdown years is critically important in the long run. Our use of third-party active managers is one of the ways we can do that.
These managers can provide portfolios that mitigate risk and have the ability to respond on a timely basis to current market conditions. That is a new concept for many clients, and I believe this really adds to the value we can provide as a firm.

How do clients respond to that active-management story?

Very positively. If they are a new client, I ask them to think about the actual returns they achieved during the dot-com crisis or the mortgage crisis. Almost all of them will have had pretty miserable experiences for their portfolios. I also show them some basic conceptual charts on the types of trend-following strategies an active manager might use. These are quantitative strategies, not based on human emotion or judgement calls.

The strategies cannot achieve perfect timing of market trends, of course. But that is not the point and would be a highly unrealistic objective. The concept is what is important: attempting to capture as much of the upside of the market as possible and avoiding much of the downside. Even though we have had those low average annual returns in the S&P 500, each year has been anything but average. There have been substantial opportunities for gains, and plenty of times to try to avoid losses as best possible.

What does your client base look like, and what overall process do you use with them?

We are in a somewhat unique situation, still slowly moving some of my father’s clients over to my direct management. As a firm, we are totally committed to the holistic planning process. We have a good number of clients and a wide range of people in terms of age, occupations, and so on. Retirement-income planning is very important to the vast majority, but we get into many different areas, such as college planning, Social Security strategies, legacy planning, and the full range of insurance products, including guaranteed-income products.

I really like to go through the process of building a balance sheet and an income statement for every client, and each client receives an investment policy statement as we finalize their plan.

“Clients appreciate the nonemotional process, the quantitative orientation, and the fact that these sophisticated strategies are now available to them.”

It is very interesting to me how various types of clients respond to the concept of active investment management. Some older, more conservative clients need quite a bit of education since they have been under the impression that making frequent portfolio moves is a sign of an aggressive strategy. That could not be further from the truth, as many active strategies can be very conservative.

Clients with a stronger risk appetite tend to really grab hold of the active-management story very quickly. They appreciate the fact that, perhaps for the first time in their financial lives, a highly professional firm is actually watching out for their portfolio on a regular basis. They understand that their strategies are working for them in line with their overall objectives and risk profile and grasp the idea that some level of drawdown is entirely possible within that framework. They appreciate the nonemotional process, the quantitative orientation, and the fact that these sophisticated strategies are now available to them.

This has really become a differentiating factor for our practice. For more conservative clients, we can offer strategies through our money managers that are highly risk managed through portfolio construction, use of a variety of asset classes, and have the ability to adjust market exposure levels. For clients on the aggressive side of the risk spectrum, we can look at strategies that can be leveraged to the upside or go inverse the markets. There are many portfolio options for everyone in between the two extremes. Using these expert money managers also frees me up to do what I do best—focusing on the overall financial plan, strategic recommendations, and building strong relationships.

Patrick Hamill is an investment advisor representative for Sigma Financial Corporation and a principal at
 Hamill Financial Services, based in Toledo, Ohio. He was born and raised in the area, where his father ran a successful insurance and investment advisory practice.

“After a couple twists and turns after college, I soon followed in my father’s footsteps. I realized that my lifelong exposure to financial decision-making had really made an impact and led me to join my father to build my own career in financial services,” says Mr. Hamill.

A graduate of The University of Toledo, where he studied marketing and finance, Mr. Hamill has also earned the CWS (Certified Wealth Specialist) designation. He is passionate about “drilling down into each client’s life situation” and “having the planning discipline lead the investment process.”

Mr. Hamill and his family reside just outside of Toledo. “Much of our personal time is consumed by our three kids’ sports teams, but we have been involved over the years in many of the activities of our church,” he says. This includes participation in outreach efforts and Christian-based retreats for individuals in the prison system in parts of Michigan and Ohio. He and his family also “love to head out to the lake country where we have a house and can just enjoy the natural beauty and quiet time.”

Disclosure: Securities offered through Sigma Financial Corporation, member FINRA and SIPC. Investment Advisory services offered through SPC, a Registered Investment Advisor. Hamill Financial Services is independent of Sigma Financial Corporation and SPC.

Photography by Scott Stewart