From the February 2004 issue of Investment Advisor • Subscribe!

February 1, 2004

The New Faces of Planning

This year's crop of inspiring newcomers breaks the standard mold of financial planners

We all know the standard formulas for Hollywood movies: There's the basic "boy meets girl, loses girl, gets girl back" plot line, the tale of the scrappy underdog who triumphs over impossible odds, the story of the outcast who saves the day, thus melting the hearts of the townspeople and winning the leading lady's affections. But the careers of many financial planners also follow some standard storylines. The most common one goes like this: Our budding protagonist, with his freshly-pressed suit and shiny new briefcase, sets up shop in a wirehouse for a year or two. Soon, he begins itching for greater independence, whereupon he moves to the branch office of an independent broker/dealer. Finally, he establishes his very own firm--one that is initially based in his dining room but eventually blossoms into a highly respected, full-service, fee-based firm. Along the way, our hero learns (a) the importance of networking, (b) the importance of technology, and (c) how much he loves financial planning (cue the soundtrack of soaring violins); if he's lucky, he may also manage to (d) save the environment or (e) find true love (if you don't believe the last two, check out the IA planner profiles in November 2002 and January 2004!). In most cases, this saga takes 15 to 30 years to unfold, depending on the age and ambition of said hero.

But stereotypes were meant to be shattered, and the three individuals who represent "the new faces of planning" this year don't fit the mold. Given that all three are white and male, you might argue that they fit other stereotypes; still, those two stereotypes are based in reality, as evidenced by the statistics about the latest crop of CFPs (see "By the Numbers" sidebar on page 54). The career paths into financial planning are changing, and the new entrants into the field are changing, too. Only one of our profilees has ever worked in a wirehouse (and only briefly); another has never earned a commission in his life. One is a career-changer from a field entirely unrelated to finance; one has a master's degree in financial planning. But they're all smart, personable, and well-educated, not to mention excited about their chosen profession. They admit they still have a lot to learn, but we think you'll learn plenty from them as they report back about their early experiences in the field.

STEVEN YOUNG

Farmer Turned Hourly Planner

Springfield, Missouri

While many planners were spending the early years of their careers sporting pinstripes and cufflinks behind a desk at a Wall Street brokerage firm, Steven Young was a thousand miles away on a farm tractor in Missouri, happily decked out in jeans, boots, and a baseball cap. For two decades, Young, now 52, owned and ran a family farm in the Ozarks, raising pigs and growing grain on his family's 120 acres. He purchased the farm in 1978 as a father-son partnership: Newly married at the time and ready to start a family, Young was eager to raise his children in a bucolic setting, while his father was a newly retired military man ready for a golden-years adventure in country life.

Young had hoped to be a full-time farmer right through to his own retirement, but it wasn't to be. By the late '90s, corporate farming was putting such a squeeze on the family farm that Young began searching for an alternate way to earn his living. "It's like trying to compete with Wal-Mart: When Wal-Mart comes into a rural town, the shops on the square in town get boarded up; when corporate farms move in, it's difficult for family farms to survive," says Young. "Our pockets aren't as deep as the corporations'."

But farming isn't the kind of career where you can just walk away. Most of Young's financial resources were tied up in the farm's land, buildings, and animals, and what wasn't tied up in the farm was in his IRA, a resource he knew he could tap into only if he understood all of the rules.

"I had a lot of questions, and I just wanted some answers," says Young. "That's when I discovered that most financial advisors don't give advice; they either sell you things, or they manage your money." Young didn't want to buy financial products, and he didn't have much money for anyone to manage, since it was all in the farm or his IRA. Baffled, he asked his family and friends where they went for financial advice. "They said, 'Well, we watch the news, and there are some Web sites that have some useful stuff on them....' It turns out there's a whole lot of people who want basic financial advice and have no place to get it," he says.

Finally, an Internet search turned up something that looked promising: A College for Financial Planning correspondence course through which Young could study to become a Certified Financial Planner. "My theory was: The tuition at the time was $2,000, and most of the advisors I had spoken to were going to charge me more than that for things I didn't think I needed," recalls Young with a chuckle. "I said, 'Hey, this is a lot cheaper, and I'll have this knowledge forever.'"

Young signed up for the CFP program simply hoping to resolve his own money dilemmas, but he soon realized that financial planning would make an appealing second career. After taking the CFP exam, he began offering advice to local family and friends, charging a minimal hourly fee. His "big break" came when he read about Sheryl Garrett and the Garrett Planning Network. "They were talking about her unique method of providing planning to middle-income people and charging on an hourly basis, and I said, 'Well, now, that's exactly what I'm doing!'" says Young. He signed on almost immediately, and has been an enthusiastic member ever since.

As a member of the Garrett Planning Network, Young gained access to a whole host of resources that helped him jumpstart his business: templates and sample documents, conferences, networking opportunities with other planners, client referrals, and marketing assistance. "Coming from farming into something brand-new, the network was a great, great help," says Young. "They have samples of everything you can think of, and I've gotten clients through the network without paying a dime"--i.e., when prospects from the region visit the network's Web site looking for an hourly planner in their area, they're led directly to Young.

Like the other network members, Young charges only for his time, either on an hourly basis (usually $100 per hour) or a project fee based on an estimate of the hours required to complete the project. "It's like going to your dentist: If it's time for a check-up, you come in, he does the work, and you pay him on the way out the door," says Young. "If you're happy, hopefully you'll come back to that same dentist, but that's up to you." Young prefers to charge on a project basis so that clients don't feel they always have to keep one eye on the clock, but he does charge hourly for shorter consultations. "I've had some people whom I just talked to on the phone, and then sent them a bill for 15 minutes," he says.

While Young's career change has been a significant one, he believes farming prepared him well for financial planning. After all, farming is a business, and Young has long had to manage risk (preparing for variations in weather and markets, preventing illnesses among the animals), estimate his farm's future expenses (the purchase of grain and soybean meal), and make assumptions about revenues from the sale of the pigs. "On the farm years ago," he says, "we had one of the first computers that came out--I think it was right out of Steve Jobs's garage, an Apple IIe--and we used it to put together a business plan for the farm, and took it to the bank when we wanted to take out a loan." The banker was so surprised and pleased to see two rural farmers walk in with a detailed spreadsheet that he was nearly cheering, Young recalls with a laugh. But whether it's personal financial planning or farm planning, he says, "the whole premise is the same: Where am I now, what objective do I need to reach, and how do I get there?"

Young still advises local friends and family in the small town where he lives, but he upped the ante in January 2002 by opening an office in Springfield, a larger town 90 miles (yes, 90) to the northwest to which he commutes two days a week. On Mondays, Tuesdays, and Wednesdays, he works out of his home office on the farm, fielding phone calls, creating financial plans, reading, experimenting with new software, and conducting research. "To be an advisor rather than a product salesman, you have to keep up with a large body of knowledge, so I spend a lot of time reading," he says. "I also try to block out time in my schedule to do the client projects, rather than scheduling [too many] meetings and then running out of time to do the actual work."

On Thursdays and Fridays, he drives 90 miles to Springfield to meet with his clients from that area. Young says his clients range from newlyweds with very little money to retirees with seven-digit portfolios; their only commonality is that they're seeking advice, and only advice. "I had one guy with a little over $1 million who came to me because he finally figured how much he was paying for asset management. Most people don't think about the fact that 0.25% quarterly, or 1% annually--which doesn't sound too bad--of a $1.6 million portfolio annually is $16,000," he says. With mutual fund expenses on top of a 1% asset management fee, says Young, "you've got up to 2.5% of your total returns going to funds and managers." Young revamped the man's portfolio for a one-time project fee of $650, and the client is now paying 0.22% in ongoing mutual fund expenses.

Such eye-opening savings is bound to have an effect on the rest of the industry sooner or later, says Young, and--with an optimism you'd expect of a man half his age--he's hoping to bring affordable, Garrett-style advice to as many people as possible. "I don't intend to change the world," he says with a smile, "but I do intend to change my community."

MARK ALLEN

Working With Dad, and AmEx

Grand Island, Nebraska

Unlike Steven Young, Mark Allen has always figured he'd grow up to become a financial planner, and he's also always figured he'd go to work in his father's firm, an office of American Express Financial Advisors in his hometown of Grand Island, Nebraska. He has, and he did, and, generally speaking, things are peachy.

But there have been surprises.

As he prepared for his first day at the office in October 2002, Allen had every reason to think he was pretty hot stuff in the financial planning arena: He had a master's degree from one of the top financial planning programs in the country, he'd earned his CFP, and he was just coming off a stint as president of Texas Tech's FPA student chapter. He was convinced he was going to show the old man a few tricks. "On the technical side of things, I really thought I was going to show [my dad] all kinds of things. I would grab him and say, 'Hey, did you know that you can do such-and-such?!' And he would say, 'Well, yeah,'" recalls Allen, laughing. "I really didn't expect that. The people who have been in this business for 20, 30 years--it's amazing how much knowledge they have."

Another revelation, both to him and to many of his former classmates, was the amount of time it takes to build client relationships. "I thought things would happen overnight," he says. "I didn't realize it was going to take so long from the first handshake to a revenue stream. I don't think most students in their 20s have sat down to think about what, for the client, goes into the decision of choosing a planner. It takes a long time." Now that he's dialed back his expectations, "I think it will take me five years or so to get to the point where I can breathe, and where all the work I've put in will start to build on itself and create referrals," he says. "Those things just don't happen in a year."

Still, Allen, 26, seems uncowed by the hard work ahead. After spending much of his first year helping his father convert the firm from a mostly commission-based structure to one based primarily on fees, Allen is now focusing on gaining new clients and expanding the business. He spends time doing what he calls "warm calling" (telephoning people he knows from some point in his life), and he has set concrete goals that he hopes to achieve by the end of the year (he'll reveal only that they're "in the categories of clients, plans, appointments per week, and revenues"). "You have to set goals and write them down, and communicate them with someone who will hold you accountable," he says. "If they're not written and communicated, chances are that you won't achieve them."

He's also adopted the mantra of some of the older planners he knows who suggest that "activity equals productivity." "The more people you see, the more things will happen," says Allen. "It's hard to do when you're getting started--it's hard to get appointments, and you can always find excuses about why you can't get them--but if you do it, things will start happening."

Allen is already considered a partner in the firm; his father is the other partner, and there are five administrative staff members. All net income is funneled into a pot and then split between the principals along certain percentages: one percent for the amount of net income at the time Allen joined the firm, and a larger percentage for any net above that amount. "We kind of picked the percentages out of the sky, but the more we grow, the better I'll do," says Allen. Perhaps as a result, Allen has made it a point to focus on beefing up the firm's infrastructure to allow for additional new hires. "If we get our systems set up correctly, we should be able to add new planners and clients without missing a beat," he says. "Our goal is to grow as big as we possibly can."

And Allen's father, Eric Allen, had no qualms about making him a partner rather than an employee. "It's kind of unique, because I think if he had his way, I would be his boss right now," says the younger Allen. "He doesn't want to think about the management of the firm; he wants to see clients." Indeed, as the practice matures, Allen's father hopes to continue to step away from management responsibilities, and he'll eventually "just show up each day, say, 'What do you want me to do today,' do it, and go home," says Allen.

As Allen works to build up the firm and chart its future, he also tries to take his own advice about planning--but not overplanning--his professional endeavors. "You're going to fail at some things, and if you don't screw up, you're probably not trying enough new things," he says. "You can't sit on your hands strategizing all day and thinking about how you're going to do something; at some point you have to just get out and do it."

MARK GAJOWSKI

Strength in Numbers--Eventually

Brentwood, New York

The short (so far) but incredibly eventful career of Mark Gajowski could essentially be recreated in this way: Take the film about a stereotypical planner's career mentioned at the beginning of this article, chop it up into a dozen pieces, resplice the clips in a seemingly illogical order, and play it back at warp speed, so that what initially covered 30 years now takes up just a third of the time.

In a way, Gajowski, 28, talks like a guy twice his age, peppering his conversations with comments about the olden days when he founded his own firm (five years ago, when he was 23) or took his fourth--or fifth--job. He's had more work addresses in a decade than most people have in a lifetime; he's bought new business cards more often than most people buy new shoes. While many of his peers are just finishing the first reel of the financial planning career's standard storyline, Gajowski has "been there, done that"--and done a half-dozen other things, too. In the last 12 years (bearing in mind that 12 years ago he was still in high school), Gajowski has done the following: programmed databases for a branch manager of EF Hutton as a high school intern, worked for a 403(b) plan provider, served as a trader for a market-timing firm while in college, been the assistant to the principal of a high-end money management firm, established a professional networking group, founded his own one-man firm, moved said one-man firm into the offices of a group health and 401(k) plan provider with whom he'd forged a professional alliance, extricated himself from the alliance when it didn't work out, moved into the branch office of an independent broker/dealer (VeraVest Financial), and, most recently, transferred all 100-plus clients to a new broker/dealer (1717 Capital Management) when VeraVest went belly-up.

If that litany doesn't make you tired, it should. But despite all of the upheaval (not to mention the turmoil of transferring all of his client accounts to a new B/D in only two weeks), the loquacious Gajowski sounds like he's still raring to go. "Despite all of the changes, this has been my best year ever in the business--I made the most money I've ever made, and I have the personal satisfaction of feeling that I've really gotten good at something," he says cheerfully. "I really love this business, and I finally feel like I'm in the groove." Besides, he says, if he'd gone the traditional wirehouse route, he'd probably be abandoning the entire industry by now, rather than eagerly looking for ways to learn and build his business.

True, that stack of various business cards with different addresses on them may raise some eyebrows. But skeptics, take heart: Gajowski has clients who have faithfully followed him through every relocation. "When I left the money management firm and went out on my own in 1999, some of the clients I'd had contact with in no other capacity than as [the principal's] assistant left him and came with me," he says. "They said, 'Hey, we wondered where you went, and we found your name in the Yellow Pages.' It was amazing!" What's more, he's often dipped into his own pocket to pay the administrative costs to transfer clients' accounts. "I've paid to cover termination fees for client's accounts, because how could I justify their paying a $100 fee when I'm the one making them move? If they're going to believe in me, I can't ask them to do that."

In any case, today Gajowski sounds eager to finally settle down in one place, with one address and one phone number that won't change again for a long time. "Right now we've got so much empty space, you could play handball in here," he jokes, referring to the space vacated by many of the VeraVest reps who left for other B/D roosts, while a core group of about a dozen (who have since signed on with 1717 Capital Management) has remained. "So we've got to relocate to a smaller space. But after this: No more!"

It is perhaps appropriate that Gajowski's career has been less of a tidy progression than a series of trials by fire; in his spare time, he's a volunteer fireman in his Long Island hometown, and claims it's "fun" to climb from a ladder truck out onto the roof of a building that has burst into flames. Some of the trials have been more successful than others, but Gajowski says he has certainly gained new wisdom from each experience. Here are a few of the lessons he's learned.

o Don't put the cart before the horse. When Gajowski struck out on his own in 1999, he went all out, snapping up a pricey new printer, building an expensive Web site, and renting office space. "So here I am with my $1,000-a-month rent on my apartment, and my $1,400-a-month rental office unit. The office has a TV, which is a good thing, because I can't afford TV at home; it has a phone, but I've got nobody to call. And I'm sitting in there, cold-calling people in the middle of the biggest bull market in history, eating PB&J because I have no money left," he recalls, laughing. "If I were to do it today, I would do it so much differently. I didn't know I didn't need all that stuff to start a business!"

o Professional relationships are a good thing . . . During the Early PB&J Period, Gajowski founded a business networking group in the hopes of meeting potential clients or referral sources and gaining tips for building his business. Directly or indirectly, this group eventually yielded many of his clients, as well as several friends. "You can't compete with Merrill Lynch on advertising dollars," he says. "You have to get to know people." The group still meets monthly, and has 35 members.

o ... but don't assume they're the answer to everything. Through the networking group, Gajowski was introduced to the principals of a group health and 401(k) plan provider, and they decided to join forces. After blithely spending over $1,000 in legal fees on partnership agreements, Gajowski discovered that his new partners weren't as eager to actually share revenues as he'd anticipated, and he had to terminate the relationship.

o Goldilocks was one smart gal. Gajowski was sometimes overwhelmed by running the entire one-man show himself, and today appreciates the perks of working with others in the branch office of a broker/dealer: He has a mentor right in the office; the lease, phones, and lights are paid for; he has easy access to the latest software and technology. But he wouldn't want to work in a huge office with dozens of people, either. "When there were 50 people in here [before VeraVest closed down and many reps departed], it was hard to grab the branch manager's ear to bounce something off him," he says. "This size group"--about a dozen people--"seems much better." He hopes his current arrangement will be not too big, not too small, but just right.

"I never regret having gone into business for myself," notes Gajowski. "I learned so much about myself, and about people in general. I could write a book." His parting counsel for aspiring planners? "Do what you say you're going to do; admit when you don't know the answer; be honest, never cavalier; be a lifelong learner; and have fun." Sounds like good advice for any planner, no matter his age or level of experience.

Assistant Managing Editor Karen Hansen Weese can be reached at khansen@ia-mag.com.

Reprints Discuss this story
This is where the comments go.