From the May 2006 issue of Boomer Market Advisor • Subscribe!

May 1, 2006

Boomer market advisor of the year

It isn't often that stress and frustration make us feel good, but that's what happened as a result of our search for this year's Boomer Market Advisor of the Year. We received so many top-notch nominations that the difficulty in deciding a winner reinforced our faith in the advisory business. Almost every entry we considered had the same overriding characteristic -- helping people -- through the advisory practices they've built and charitable endeavors they undertake.

John Schneider, president and chief investment officer of Private Wealth Advisors, takes it a step further. He's involved in just about every charity and has received every local award possible in his hometown of Pittsburgh. He enjoyed "Sesame Street" as a child and now sits on the board of the local PBS affiliate. His love for animals led to a seat on the board of the Pittsburgh Zoo. He and his wife, Patty, are in the process of adopting a child from Guatemala. Amid all of this, he and his partners still found time to amass almost $700 million in assets under management. "We have the infrastructure in place to hit a billion dollars in assets under management in the not-too-distant future," Schneider says. "Our boomer clients are looking for the use of cutting-edge technology and accountability on the performance side. We do well with both."

For the enthusiasm, creativity and forward thinking he brings to helping his clients achieve their retirement potential, we proudly announce John Schneider as this year's Boomer Market Advisor of the Year.

Boomer Market Advisor: You and your partners have acquired almost $700 million in assets under management in just eight years. You believe you are on track to reach a $1 billion in assets under management in the near future. Please explain the investment stategy that's fueled this substantial growth?
John Schneider: We specialize in taxable asset allocation, which is over- and under-weighting certain asset classes based on assumptions about how these asset classes will perform over the next 24 to 36 months. We differentiated ourselves in that we dramatically over-weighted small caps in our allocation decisions before they began to rally. We were also way over-weighted in the international space in this last rally. We've been able to out-perform in our accounts by being early in the over-weighting of certain categories before the momentum starts.

BMA: So you're now over-weighted in health care?
JS: We're over-weighted in health care and pharmaceuticals in our stock accounts. We look at long-term trading ranges between asset classes. We then over- and under-weight based on where they're trading in relation to their long-term trading ranges.

BMA: We know that boomers want a healthy return on their portfolio, but a high level of service seems to be just as important. What do you do to ensure you provide the best service possible?
JS: We do just about everything for our boomer clients. If they need tax planning help, we work with their accountants to make sure they have all their tax documents in order that relate to their investment accounts. If they need estate planning, we find the appropriate estate-planning attorney. We make sure the accounts are registered properly in accordance with what they want to accomplish with their estate plan. We also have all their documents on file within our office so if they ever need anything, we have it and can get it to them right away. We're really busy around this time of year. Accountants are calling and looking for tax documents, asking us what we estimate their taxable income will be for next year and what kind of investment gains we expect. We're a full-service provider.

BMA: And this extends to the money management side of the business?
JS: On the investment and money management side, we have our client sign a discretionary agreement. We can then go ahead and fully manage their accounts and execute on an investment decision without losing valuable time by having to first get their permission. We meet with them at least twice a year to go over any changes in their lives. We want to know anything and everything that would impact on our ability to effectively manage their accounts. We also look at their yearly performance results vs. a predetermined benchmark. We're currently in the process of sending out their performance reports, for both the last year and for the preceding three years.

BMA: What about your approach to financial planning? How is it unique?
JS: Instead of having a comprehensive financial plan that most people put together upfront, we take each individual aspect of a financial plan, rank them and then work on each over the course of the relationship. When someone comes in, after selling a family business for example, they initially want that $5 million dollars invested and they want an income stream. From that come estate-planning issues and issues with property and insurance. But initially, we'll focus on the one reason they came to us. So our financial plan is a document that we continue to build on. If they're here five or 10 years, we've worked though all their issues.

BMA: How far will you go with a one-stop-shop model? Are you going to write the check for their car payment or their mortgage? Or is it strictly superior service as it relates to investing?
JS: We don't have a family office as far as bill paying, mainly because clients have not asked for it. If there was a demand for us to provide a family office type of structure, then we would go ahead and set it up. I think a lot of advisors have started to go in that direction, but I don't necessarily feel there's a strong need for it yet.

BMA: What kind of technology do you employ in your practice?
JS: We have an asset class performance database that's pretty unique. We also have our own in-house database for client billing, reporting and reviews that we built ourselves. It's unique because unlike most [advisory practices], we report on anything and everything a client owns. If they have outside 401(k) plans, bank accounts or a small account at Schwab that they want to manage themselves, we can include all of this in our reporting system. We'll contact the client to get the account values and update the values so they'll have their total financial picture. We're then able to give them advice on the overall portfolio rather than just the investments they custody through us.

BMA: Is it tough to stay on the cutting-edge from a technology standpoint?
JS: We're actually looking now at re-vamping the system over the next few years. It will be a big project for us.

BMA: In addition to technology, compliance is another hot-button issue. Do you have an in-house compliance person?
JS: Yes, we have an in-house compliance officer and we're looking to hire another one.

BMA: Are you looking to hire another one because your business has grown so quickly or because you need to pay more attention in the current environment?
JS: Both. Our business is growing and the environment has changed. There's so much more that's involved now with clients.

BMA: It's almost an industry clich?(C) for advisors to refer to their compliance department as the as the "no-doing-business" department? Do you see it that way? What kind of a constraint has it put on your business?
JS: It is, but in other respects it's helped our business. It's really made us take a hard look at standardizing our processes because it's so important to make sure all your bases are covered. From a due-diligence standpoint it's been a good thing. But to open up a new account takes a lot more time and paperwork than ever before.

BMA: Some advisors say the amount of compliance paperwork actually makes the client trust them less because they wonder about what it is, exactly, they're filling out. Do you find this to be the case?
JS: No, I think our clients understand that this is simply the environment we live in post-9/11. The world has changed and they understand that. And it isn't like they can avoid giving us a photo ID by going down the street. Every advisor requires it and it hasn't hurt us from a competitive standpoint.

BMA: Do you think the IRA rollover market will live up to the hype in the next few years? If so, are you ramping up on your expertise in this area?
JS: A lot of our clients have a high net worth. The IRA is just one part of what can be a pretty extensive portfolio. For a lot of them, the largest part of their portfolio is actually outside the IRA.

BMA: We don't hear that very often.
JS: Yeah, they have a business that they recently sold or a large inheritance. We still have clients that have money in 401(k)s and they've matched it and they have a couple million dollars in there. But we don't see much more than $2 million or so in a retirement plan. And we're very cautious about tax planning with our clients. We manage more money in individual stocks, individual bonds and index funds where we can better control their tax situation. And honestly, despite what other advisors might think, doing an IRA rollover is pretty simple. You roll it over into an IRA and taxes aren't due until you take the money out. If you plan adequately and make sure they have plenty of income that can be taken out over time rather than all at once, it's fairly simple. But if somebody has $2 million in highly appreciated stock, that's more complicated. That's really when we have to determine when the profits should be taken and how quickly?

BMA: Are you well-versed in exit planning and succession planning and strategies like that?
JS: Definitely; my partners more so than I. That's their backgrounds -- tax and estate planning and business planning. If there is ever an issue, I can always go to them.

BMA: Are your boomer clients thinking about exit planning issues related to their businesses, or is it too early at this point?
JS: I find that people are retiring and selling their businesses at a younger and younger age. My client base continues to get younger. I've seen the average age of my clients drop in the past five years. I see a lot of people in their 40s and early 50s as clients that have done a great job of accumulating wealth. But we still have a lot of older clients that typically come from the larger investment houses -- Goldman Sachs, US Trust, Northern Trust or the banks. Their assets haven't performed the way that they thought they should over the last five or 10 years and they're looking to go with a firm like ours that has had a better track record.

BMA: What about business continuity and succession issues in your own practice?
JS: Actually, my partners and I are currently working on making sure that we're going to be around for the next 30 to 50 years. There are the three of us and there's about 10 years difference between us. And that's important when we think of our long-term business plan. One partner is approaching 60, another is approaching 50 and I'm approaching 40. We're not going to retire at the same time. That's a very important piece to a successful and long-term business.

BMA: You're involved with quite a bit of charity work in the greater-Pittsburgh area, and you sit on a few boards. How do you run a successful business and still find the time?
JS: I do sit on a number of boards, but we're moving more toward working directly with the person who gets the end benefit. We're doing Habitat for Humanity as a firm. We rotate shifts on Tuesdays, Thursdays and Saturdays. We have people in our company that can go out and work directly with the person who's going to receive the benefits rather than sitting on a board with 12 people. We're also getting involved with Big Brothers and Big Sisters. I'm still chairman of the investment committee for the local PBS station as well as some other things, but I think the next phase is to get the entire company out there and get all the employees involved.

BMA: We know you started your practice in 1998 and began preparing for boomer retirement at that time. Now that they've officially hit age 60, is there anything left for you to do from a preparation standpoint?
JS: Not really. We have a high-quality staff and smart people working with us. As this boomer market begins to turn over, we're prepared. The biggest driver for our boomer clients is that their money is safe with an advisor that performs well. That's the area we focus on. And that's really not going to change from the last generation to this generation. Everything else over and above that is great, like cutting-edge technology, Internet access to their accounts, estate and tax planning, and making the paperwork easier to deal with. That works well in terms of having a better service model, but the two biggest drivers are making sure their money is safe and that it's invested properly.

BMA: They ultimately have to feel comfortable no matter the technology or other bells and whistles you provide.
JS: Right. This is the money that they're going to live off. This is now their business for the next 20 or 30 years and they need to receive income from it. That's where we're focusing 90 percent of our time and energy. If we can help the boomer market by providing additional services beyond that, we'll definitely do it. But the primary reason they hire us is for our performance level.
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