From the September 2005 issue of Investment Advisor • Subscribe!

September 1, 2005

Proud to Be a Rep

Gary Charlebois has built his business on helping people plan for retirement and feels he can best serve his clients' interests as a commissioned broker/dealer rep

Like many planners who adopted the profession in the 1980s, Gary Charlebois got here in a roundabout way. Fresh out of college in 1976, he went to work for Kelly Services, the temporary staffing firm known for its "Kelly Girls," and was eventually transferred to Wichita, Kansas. The transition to the heartland's prairies was adjustment enough for Charlebois and his wife Lori, both of whom were born and bred in southern California, but when they realized that any further escalation up the Kelly corporate ladder would mean company headquarters in Detroit and the legendary Michigan winters, Gary decided to leave the company. He signed a non-compete agreement under which Kelly agreed to pay his relocation expenses, but once he got back to the West Coast he also had to find a new line of work.

Around the same time he sold a piece of real estate and gave a stockbroker $3,000 of the proceeds to invest for him. "He quickly took my $3,000 and made it five hundred," recalls Charlebois in a good-natured manner. "That's $500, not $500,000." With that lesson under his belt, the chastened investor decided to learn more about the investment world himself.

Over the next six years he worked for two different financial services companies, which is when he was first exposed to the idea of complete financial planning. "I realized it was something I needed and that there were probably a lot of other people who needed it too," he says. He found that working with clients to help them plan for the future gave him a great deal of personal satisfaction. What he didn't like was being required to push his employer's products. He says he felt that both firms "were opportunists, looking at what they can make from clients, not for them. I knew I wanted to do financial planning, but after six years of doing it wrong, I wanted to do it right."

As far as actually taking the steps to set up his own business, Charlebois gives most of the credit to his wife. "She said, 'If you're going to stay in this business, you've got to become independent. You've got to start doing the due diligence on the investments yourself, design the portfolios, and take responsibility for your clients' futures'."

It was also Lori Charlebois who suggested that Gary become a specialist. When he decided that he'd like to be able to help people with their retirement planning and pension distributions, she suggested the name Pension Portfolios.

Pension Portfolios opened its doors right around when one of the first waves of corporate downsizing was reaching its crest. Through some buddies he had flown with in the Air Force Reserves, Charlebois began holding retirement seminars for GTE employees. When that company announced they would no longer allow planners to conduct seminars on company property, he began speaking at other venues, such as the local Rotary Club. Because he's never afraid to ask for the order or the referral, Charlebois would give 10 of his business cards to anyone at one of his seminars who liked what they heard, and ask them to pass the cards on to anyone they knew who was thinking about retirement. He continues to do that to this day.

"We were lucky to get in before the proliferation of lump-sum distributions," Charlebois explains. "My foot was already in the door and I was specializing in that area. And as the baby boomers all age, the floodgates are just going to open. The amount of money that's going to be coming into the rollovers in the next decade or two presents just a phenomenal opportunity to become a specialist in that particular area of retirement planning."

For Charlebois, a typical client or prospect is someone between 40 and 60 years old likely to be retiring with distributions in pension and 401(k) funds of anywhere from $200,000 to $1 million. "Many of them unfortunately spend more time each year planning their two-week vacation than they spend planning their longest vacation ever, which is their retirement," he points out. "Many times new clients have been offered distributions as an incentive by their employer, or the company is downsizing. They're taking that incentive to leave the company and all of a sudden they feel that they're very rich. We have to educate them that it's a lot of money in a lump sum, but that money's got to last a lot of years. The three years that we saw in the beginning of the millennium woke up a lot of people to the importance of taking some time to begin understanding this and making the right decisions for them and their families."

Independent Affiliation

While the trend among financial planners has been toward a fee-based or fee-only business model, it's a trend that Charlebois has adamantly resisted. Since he began his firm he's been associated with a broker/dealer. He was originally affiliated with the Integrated Resources group and says that after his experiences with his two previous employers, he sold very few of the Integrated products. That group was one of the pieces that came together to create Royal Alliance, with which Charlebois has been affiliated since its inception. "What I've always enjoyed is that Royal Alliance and SunAmerica/AIG have never put any kind of a quota or any expectation of us pushing any of their product. One of the things I've always appreciated is that my B/D allows me to select what I think is in my client's best interest."

He says that as a registered rep Royal Alliance has provided his firm with supervisory guidance and expertise on compliance issues, not to mention an annual audit, which gives him the confidence to welcome regulators with open arms. Charlebois also speaks highly of Royal for "providing a platform with a plethora of different investment choices," including annuities, mutual funds, REITs, and direct investments.

Another benefit that Charlebois has received from his broker/dealer affiliation is membership in a study group that was formed 15 years ago of advisors from different markets. The majority are still affiliated with Royal Alliance, although several other B/Ds are also represented, as some of the original members have made new alliances. "This is a group of us from San Diego to Honolulu to Las Vegas, and we get together once every three months in one of the different members' locales and we just brainstorm what's happening in the industry, the software, the broker/dealers, and the investment community," he says "We're not in competition with each other so we all want to share what's working for us, and what's not."

Among recent topics of discussion for the group has been the possible elimination of 12b-1 fees. "It gets to be very disheartening to think that you're always working in your client's best interest. The clients do not complain about what you're getting paid," Charlebois explains. "Many of us have built a large book of business and knowing if the market treats us good and we give good service, the clients will stay with us. It would be terrible if all of a sudden they yanked all of our trails from us. There'd be a whole bunch of us now that would have to become fee-based planners and it would probably be more expensive to the client than if they had just continued to pay the 12b-1 fee off the different mutual funds and the annuities."

He points out that Royal Alliance requires that before he or one of the other advisors at Pension Portfolios sells a product, the client be given an explanation of the investment (EOI). "I show them what the cost of the A shares or the C shares is, I show them the price breaks, if I deal with an annuity, I tell them what the surrender charge is, and how many years the surrender charge lasts."

Charlebois asserts that he has always taken pride in putting the client's best interests first. "What I've always done in my first meeting, and in seminars, is to tell people what to look for in a financial planner," he notes. "We also tell people that if we're the first financial planner that they're talking to or looking at, they need to interview two or three others because they better make sure that whoever they're going to invest their largest paycheck ever with is working in their best interest, and not the best interests of the company they work for or themselves.

"I also explain to people in the first meeting the three ways I get paid," he continues. "I get paid substantially up front in the form of a commission, and the commissions are published in the prospectus and are the same if you bought the mutual fund or the annuity or the investment from a person sitting in a bank. The second way is from 12b-1 fees, and the more I make for you in the long run, the more I make for myself. The third way I'm paid and the most important way is that if you're happy with what I'm doing for you, you'll be happy to send over your next-door neighbors, family members, and co-workers to the representatives of Pension Portfolios. I want to treat my clients the way I'd want to be treated. That has worked extremely well, and that's why we've built such a successful practice."

A Teacher at Heart

While Charlebois says that his Web site has been an important aid in marketing his practice, his most effective tools have always been his seminars and referrals from existing clients. "There's a person in our study group who said that he's never asked for a referral, but I'm just the opposite," he says. "Asking for the referrals has worked out tremendously for us. I'd say that 90% to 95% of our business comes from people who are happy with what we're doing for them." It's existing clients who tell their friends about Charlebois's quarterly retirement seminars and urge them to attend.

Charlebois also encourages clients to bring their adult children to his seminars so they can be exposed to the importance of retirement planning. "I guess one of the things I wanted to do throughout my life was to be an educator," he reveals. "That never happened, but now when I do my seminars I feel that I'm educating a lot of individuals on how to reach their financial independence objectives."

In addition to his retirement seminars, Charlebois also stages product seminars three or four times a year, in which a vendor representative will talk about market updates, changes in the insurance industry, or what's new in annuities. "These sessions give us the opportunity to educate our clients, so we've always told speakers to be aware that for most of our clients the investment world is something new. If the speaker starts talking about different coefficients and price/earning ratios and betas, it's going to go over their heads." The fact that so many attendees have told Charlebois how much they learned and how they understood some of the concepts for the first time attests to the importance of knowing one's audience.

"I have fun educating people," says Charlebois, whose enthusiasm rises as he talks about educating people on the importance of planning, planning early, the miracle of compounding interest, and the rule of 72. "If you educate people to the rule of 72, it really seems to open their eyes. We tell people if they will just divide the interest rate that they're getting into 72 it will tell them how long it will take for their money to double."

In his seminars Charlebois uses the example of a $3,000 trust paying 6% interest set up at birth and maturing at age 60. As he takes the audience through the math, they see that 72 divided by 6 is 12, so the amount in the trust will double every 12 years, or five times by age 60, which means that the original $3,000 would have grown to $96,000. Then he suggests that the $3,000 instead be put in small-cap mutual funds, which historically have averaged 12.7% a year. At that interest rate, the money would double about every six years, which would mean 10 doubling periods by age 60. "I'll ask, 'If your money at 6% grew to $96,000, how much would it grow at 12%?' and most people think that it's twice that amount." When they realize that instead of $96,000, the amount is now in excess of $3 million, the miracle of compounding really begins to sink in.

While Charlebois has built his business on helping other people plan for retirement, retirement doesn't figure into his plans any time soon. He turns 56 this month, but his wife jokes that he won't begin his retirement until she's on the phone dialing 911.

"It's been rewarding," Charlebois says of his near quarter century in financial services, "and not just monetarily, but because of the fact that I think we've honestly helped so many people achieve their dreams.

"I've always shared with folks that we have a tremendous void in this great country of ours," says Charlebois in his role as financial educator. "The void is that we're given an education, we're taught how to go out and get a job, but we're not taught what to do with the money we earn to build toward the future."

Managing editor Robert F. Keane can be reached at bkeane@investmentadvisor.com.

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