This is Chet Helck’s first appearance on the IA 25. Click here to view the complete list and Special Report schedule for extended profiles for each of the 2013 IA 25 honorees.
When we began our interview, Chet Helck pointed out that he started in the financial industry as a customer. In his first career, with John Deere, he accumulated enough company stock to see he needed professional advice when a competitor failed and he watched colleagues at that firm “get wiped out” when those stocks plummeted. With an advisor’s help, he was able to diversify his own portfolio so he wasn’t overweighted to company stock.
“In the course of getting to know the advisor and learning more, going to seminars and getting some experience with investing, over time he started to try to recruit me into the industry, and eventually I saw the benefit of that and started as a financial advisor,” Helck said.
That’s a humble beginning for the CEO of Raymond James Global Private Client Group who, as of October, is also the chairman of SIFMA, the trade organization representing securities firms, banks and asset managers.
The biggest challenge for advisors over the next year is simply dealing with the uncertainty in the markets and in consumers’ minds, according to Helck.
“People are still somewhat in shock from the business cycle we’ve just been through with the Great Recession, the failure of major financial institutions, the decline in market values,” he said. “Even though the market’s come back, flirting into all-time record levels—the first time we hit these levels was well over a decade ago--we’ve been through a long period of time where people have not seen a lot of positive market momentum that’s helped them accumulate the kind of returns they’ve hoped for.”
On top of that, Helck said, “we’re facing an environment with huge fiscal issues in the economy: still relatively high unemployment, sequestration, a huge deficit, possible tax increases. All sorts of challenges create a wall of worry that people are concerned about.”
Further compounding the problem is that with the baby boomers, record numbers of investors are retiring. “With the traditional form of retirement planning, which involves moving out of equity investments into fixed income investments, where the yields are so incredibly low that you can’t meet income requirements, it’s hard to get clients to have confidence in doing anything and certainly in being able to accomplish objectives without taking undue risk.”
To mitigate those challenges, the most successful advisors have become so by working “with clients early to try to accumulate enough principal where generating sufficient income is more doable,” Helck said. “Where they have not had the ability to do that, where it’s already retirement time and you’ve accumulated all you can and you now have to live with what you’ve accumulated, the strategies to create income have gotten to be far more sophisticated.”
That increased sophistication requires assistance from a financial advisor, Helck said, but also makes the job of the financial advisor far more challenging. “Rather than just generating interest in dividend income, it requires more elaborate strategies where you accumulate and then start liquidation of certain parts of the portfolio, preserving enough to meet short-term cash needs.”
Helck noted that some clients and advisors may be trying to approach the income problem by taking too much risk, typically in fixed income. “By overweighting fixed income, by going too long in duration at a time when rates are very low, or by dipping down too low in the credit quality realm to try to generate extra yield when indeed it’s not suitable for the client: That’s what we have to guard against and talk clients out of doing.”
Despite some encouraging signs in the market, Helck hasn’t seen clients in a rush to get back in. “There’s still such a huge amount of cash and cash-equivalent, and short-term fixed income kinds of dollars available, that it doesn’t indicate that clients are too aggressive.” However, he noted, they may be getting too aggressive in their search for yield by “going too far out on the duration curve and dipping too low in credit quality.”
At SIFMA, Helck is looking closely at the way the industry is perceived by investors. “My most important goal for this year is to take on the issue of public trust and confidence,” he said. “Trust and confidence in our institutions, in our markets, in our products and in our leadership has reached down to a level where it’s critical that we address it in order to restore that trust. The markets can’t function in a healthy manner, the economy won’t regain momentum, employment won’t reach its target levels, and we won’t see economic growth until we have confidence in the future.”