Philip Saponaro • Wilmington, DE
Lighthouse Financial Consultants • NEXT Financial Group Inc.
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Proactive Advisor Magazine: Phil, talk about how your career in financial services has taken shape over the years.

I graduated with a degree in industrial engineering from the University of Delaware and took many courses in computer science, statistics, math, and accounting. I worked a late shift at a Chrysler assembly plant during college to help pay for my education and thought that I might pursue a career in either the automotive or energy fields in logistics or operations management.

I did work for a brief period for a local oil company in logistics, but this was a time of turmoil for vehicle manufacturers and energy companies due to the volatility of oil prices. I thought my educational background would also be well-suited to financial services and worked initially for a small insurance firm focused on disability insurance. I was then recruited to join John Hancock, where I worked in consultative sales of insurance products and gained my first professional exposure to investment products. I knew then that this field would be a good match for my quantitative skills, analytical approach to problem-solving, and interest in working to help people address their financial objectives.

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For the next 20-plus years, I worked as an investment advisor in the banking channel in Philadelphia and then in Wilmington, Delaware. That was when I started to achieve real success in my career, which included building a small team, helping numerous clients with their investment needs, and being responsible for investment recommendations for a significant amount of client assets. One of the major pluses of this type of position was working with so many clients over the years. I gained a deep understanding of how people view their financial goals and how I could help educate them about various investment options.

In 2006, I decided it was time to become an independent and founded Lighthouse Financial Consultants. I have worked with a few different broker-dealers since I started the firm and am very pleased with my current relationship with NEXT Financial Group Inc. They provide excellent support when I need it, and they do an outstanding job of vetting the providers of various investment products.

How would you describe your mission in working with clients?

I see our mission as giving each of our clients the customized guidance and professional service necessary to help them develop a plan of action for achieving their financial goals.

We provide goal-planning in the areas of wealth accumulation, preservation, and distribution strategies. We also offer retirement planning, including Social Security planning; college-funding planning; insurance and long-term-care planning; and a focus on tax-efficient investment planning. In areas such as legacy and estate planning, our firm will help clients identify their goals and a broad plan of action but will usually also recommend seeking the services of a qualified attorney.

I believe my real strengths lie on the investment side and in helping clients take a holistic look at their entire financial picture. I think clients greatly appreciate my depth of knowledge regarding investment planning and how I can educate them on the many investment options that exist within today’s complex financial environment.

Discuss your overall approach to investment planning.

I think there are three guiding principles that help differentiate our approach to investment planning and implementation.

First, and perhaps most importantly, we take a highly customized, goals-based approach to developing investment plans with clients. We consider their overall financial objectives, attitude about risk, time horizon, and how their investment objectives mesh with their retirement-planning goals, whether they are still in the accumulation stage or are moving into the distribution phase. We help clients determine short- and long-term strategies that are best suited for achieving their objectives, monitor the progress they are making, and periodically review and revise—if appropriate—our recommendations. We recognize that financial- and investment-planning needs change over time as clients experience life transitions or unexpected events.

Second, I do not believe in some of the investment conventions of the past. I think history supports the need for most investors to more closely manage risk. We do not recommend a cookie-cutter 60/40 investment allocation or investment allocation models primarily based on age. The idea, I believe, is to find ways appropriate to each client to manage the risk-return balance based on their individual risk tolerance, liquidity needs, and specific goals.

I look for ways to provide additional layers of risk management and alternative investment products that are less correlated to equity and bond markets. Alternative investments can play an appropriate role for many clients in enhancing returns and having a relatively strong ability to weather volatile financial markets. There are several alternatives that might be appropriate, depending on the client’s overall investment objectives. We will also consider the use of guaranteed-income products for clients in retirement for some portion of their plan if that suits their objectives. We have a wide universe of investment, guaranteed-income, and insurance vehicles to consider and are always looking to develop an investment plan with a risk-reward balance that suits a specific client.

Lastly, I do not consider myself to be a stock picker, nor do I have the time and capacity to monitor sophisticated investment strategies daily for our client base. In many cases, we use the resources of third-party investment managers, especially those that offer risk-managed tactical strategies. Our overall objective for clients is both reasonable growth and capital preservation. We do not have an objective of achieving market-beating returns, primarily because the assumption of risk would be too high. Our third-party managers, in general, provide rules-based strategies that have the ability to adjust exposure and allocations according to current market conditions. In this way, they can be more aggressive when market conditions are favorable and mitigate risk when conditions are not favorable.

I use third-party managers because they have access to highly professional research and portfolio-management tools and the ability to make changes to portfolios efficiently based on their proprietary models and indicators. I primarily use managers that have demonstrated an ability to show consistent results over time, place an emphasis on risk management, and whose strategies will generally perform as they were designed to do. I constantly review the performance of our existing money managers and periodically evaluate new managers who might have an appropriate investment capability for our clients.

What would you like a client to say about your firm to a friend or family member?

Most importantly, that we have provided them with professional and responsive service and that they have a high comfort level in working with us. It does a client very little good if you present the most sophisticated investment strategy in the world when they do not fully understand how their money is working for them, the risks they are exposed to, and the roles of various investment products in their portfolio. There are no guarantees overall, of course, but we are working at all times to enhance the probabilities for our clients to achieve their financial goals.

“We take a highly customized, goals-based approach to developing investment plans with clients.”

Almost all of our new client prospects are introduced through an existing client or a personal relationship that I have developed. Several of our older clients introduced their children to us years ago, and, while it is hard for me to believe, some of those individuals and their spouses are now approaching retirement themselves. We encourage all of our clients to help their children and grandchildren to become more educated about financial matters.

I enjoy working with young people who are just starting out in their careers and are interested in understanding how they might start building an investment portfolio. We discuss setting goals and the types of investment vehicles that might be appropriate for their financial situation, age, and attitude about risk. I love having these types of conversations with young people—it reminds me why I feel my career is so rewarding.