Financial guidance that produces tangible results
Financial guidance that produces tangible results
I was born in Staten Island and grew up in New Jersey. I went to college at Boston University, where I studied finance. I graduated in 2003 and landed a position with American Express Financial Advisors. I was proud to have the opportunity to join the financial-services industry and help people with their financial needs. It was primarily a commissionable sales job to start, rather than that of a holistic financial advisor. That said, I gained a lot of insight into how to conduct discovery with clients and learned effective communications and sales skills. Most importantly, I was surrounded by many capable senior financial advisors and investment managers and learned a lot from their mentorship. The training I received was top-notch.
I earned a promotion in 2005 to work as both a financial advisor and manager in the San Diego office of American Express Financial Advisors, which had rebranded itself to Ameriprise. My primary responsibilities were to educate and train our advisors on how to build their client bases and their careers. I was conducting roughly 20-30 meetings a week in those years, so I was exposed to almost anything and everything in the world of personal finance. The volume of meetings provided me with invaluable experience in confidently guiding clients. However, I didn’t totally enjoy the managerial aspects, nor the limitation on which products and services I could offer when providing solutions to clients.
In 2009, my partner, Rick Nerad, and I established Nerad + Deppe Wealth Management to position ourselves as fee-only fiduciaries with the independence to find client solutions from many different providers.
Our typical client is in their 50s or 60s and has investable assets between $500,000 and $3 million. Our clients generally come to us for retirement planning, as well as our specialties of holistic financial planning and discretionary portfolio management. Our mission is to positively impact our clients’ financial well-being, enhancing their probability of attaining financial success.
We have a high-touch, high-frequency service philosophy. We provide our clients with weekly market updates to keep them plugged into their portfolio’s journey and also strive to meet in person two to four times per year. We have a goal of performing a “random act of kindness” annually for each of our clients to give back to those who have shown confidence and trust in our guidance and services.
Our financial-planning process is a bit different. It’s centered on optimizing our clients’ finite resources, rather than emphasizing scenario analysis or forecasting decades in advance as if one had infinite resources. We start by helping our clients realistically forecast their asset accumulation for each of their financial objectives. We then help them understand how taking action in the present can improve the likelihood of achieving those financial objectives.
We operate under the perspective of “ideas don’t move mountains—bulldozers do.” Successful financial planning to us is not all about illustrating where someone might be 10 to 20 years from today. Accurately predicting the myriad variables that influence this illustration, and the turns one’s life might take, can be an exercise without a lot of true value. Instead, helping someone save more money in the present and implement a more disciplined and prudent investment management philosophy will improve where they are likely to be financially in the future. These are not mutually exclusive tasks, but we emphasize implementation—what we can do better in the present—rather than an illustration of purely hypothetical assumptions. Taking care of the present is the key to taking care of the future, in our opinion. That does not mean we do not advocate for present actions that will bear fruit in the future, but the key is taking action in the present.
Our overall investment philosophy is to help our clients meet the minimum annual return necessary to achieve their stated financial objectives with a sustainable level of risk or volatility in their portfolio. We describe this as attempting to make hay while the sun shines, while also striving to find shelter shortly after the inevitable storm arrives. We are strong proponents of the use of technical analysis in our investment approach and understanding the behavioral aspects of markets as a leading indicator.
Risk management is a vital component of our process since it helps encourage behavioral adherence to the underlying strategy. Everyone wants the S&P 500’s current trailing 10-year annualized returns, but few can behave through the hard times—the 10 years before this period—in a way that would have allowed their portfolio to prosper. Prudent risk management optimizes the likelihood of behavioral adherence, which, in turn, optimizes the likelihood of investing for success over the long term.
The foundation of our discretionary investment management services is the goal of helping to optimize all “active” decisions a long-term investor makes: what asset classes to own, when to rebalance the portfolio, what to rebalance the portfolio to. Our philosophy falls in the “tactical asset allocation” camp, so our client’s asset allocation will change as the opportunities and trends in the investable universe change. This is done to optimize the likelihood of achieving the minimum return necessary to achieve financial objectives over the full market cycle, which is generally the result of minimizing substantial portfolio drawdown during unfavorable climates for various asset classes. Using a disciplined, rules-based approach to asset allocations, specific investment selections, and risk-management decisions can minimize portfolio drawdowns and maximize the likelihood of clients’ attaining their strategies’ long-term potential returns.
When thinking about client investment allocations, we first define the minimum annual return that’s necessary to broadly achieve their financial objectives. We then scan the opportunities present in the investable universe with a focus on striving to earn the minimum annual return that’s necessary. Regardless of any individual’s investor attributes, if our work labels equities as an asset class that is “unfavorable,” we’ll underweight the asset class meaningfully. In our opinion, just because someone is young and considers their risk tolerance as “aggressive” doesn’t mean their investments should be heavily weighted to equities. The same can be said for fixed income. Interest rates are hovering around all-time lows, and the yield curve is flat. Just because someone is over 60 and considers themselves “conservative,” that isn’t sufficient reason for their investments to overweight fixed income and underweight equities. In our experience, it’s our responsibility to help our clients understand when to be more aggressive and when to be more conservative with their portfolio, all in an attempt to earn the minimum annual return necessary to fund their financial objectives.
We think both can and should play a role for investors. There’s a time to be passive and a time to be active. For us, this depends on the opportunities and trends present across the investable universe and the process we adhere to in building client portfolios. The polarizing nature of the active versus passive debate is a little puzzling. All passive investors have to make active decisions: what to own, when to invest new contributions, and so forth. And all active investors should have prolonged time periods where they’re sitting on their hands doing nothing. Pigeonholing yourself on one side of the debate seems only to limit the tools available to navigate the ever-changing opportunities and trends across the investable universe. We try to help people look forward, not backward, and recognize that what has worked the best the past 10 years may not continue to work the best in the next 10 years.
Tactics for putting the client at the center of your practice
Steve Deppe, CMT, is a managing member and chief investment officer at Nerad + Deppe Wealth Management in San Diego, California. He employs what he calls a “high-touch, high-frequency” service philosophy to make sure clients know they are at the center of the practice. Mr. Deppe says, “We want clients to be assured we are thinking about their finances and investments at all times, even more than they do themselves.” The high-touch approach includes several elements:
- Mr. Deppe and his partner share responsibility for each client and, whenever possible, attend client meetings together.
- The firm provides weekly updates to all clients on economic and market developments.
- They strive to meet in person with each client two to four times each year.
- The firm’s partners encourage clients to bring any financial questions to their attention, no matter how small they may seem on the surface.
- Client review sessions focus on reviewing the achievement of tangible, measureable results and soliciting feedback on the process and overall client satisfaction.
- Client-friendly technology is employed in several areas, facilitating timely reporting and providing easy access to account information and aggregation.
- The firm has a goal of performing “a random act of kindness” annually for each client.
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Steve Deppe is a managing member and chief investment officer at Nerad + Deppe Wealth Management in San Diego, California. As a senior market strategist and wealth manager, Mr. Deppe provides clients with prudent financial planning and sophisticated alternative investment management.
Mr. Deppe was born in Staten Island, New York, and raised in Metuchen, New Jersey, where he was a talented runner. He attended Boston University on a track and field athletic scholarship, earning a Bachelor of Science degree in business administration, with a concentration in finance. He is a member of Metuchen High School’s track and field “Hall of Fame” and recognized at Boston University’s “Wall of Fame.”
Mr. Deppe worked for American Express Financial Advisors in Boston following college. After a successful start to his career, he was promoted to manager of the San Diego office of Ameriprise Financial. He managed a team of over a dozen advisors while building deep knowledge of advanced portfolio-management strategies and holistic financial planning. He was a franchise owner for Ameriprise for two years.
Mr. Deppe is a Chartered Market Technician (CMT) and is a member of the American Association of Professional Technical Analysts (AAPTA). He has earned recognition multiple times as a Five Star Wealth Manager in the San Diego area. He frequently posts market and technical analysis at his blog, Charts & Sheets.
Mr. Deppe, his wife, and three young children live in a suburb of San Diego. He enjoys the area’s “beautiful weather” and taking part in his children’s “hectic schedule of activities.” He also enjoys running and working out, studying finance and market theory, and watching sports.
Disclosure: Nerad + Deppe Wealth Management LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Nerad + Deppe Wealth Management LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.
Photography by Todd LeVeck.