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Financial Planning > Tax Planning

An interview with Speaker of the Month Deena Katz

By Staff Writer

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“Financial planning worldwide has exploded,” says Deena Katz, president of Evensky, Brown & Katz, a family advisory firm in Coral Gables, Florida, and Investment Advisor’s speaker of the month. “The U.S. has made a wonderful pathway for other countries” that want to initiate and refine financial planning practices.

At the FPA Success Forum 2002, being held from September 28 to October 1 in New Orleans, Katz will host an international community gathering to discuss issues surrounding international financial planning.

What will you discuss at the Success Forum?

First of all, you have to put it in the framework that this is the international council, and that these are international attendees. And it is really exciting because financial planning worldwide has exploded. There are government regulations places like Singapore and Malaysia, and [elsewhere] in the Pacific Rim, that are requiring people who have been mostly selling insurance to [also] do some kind of financial planning. So it is a very exciting time for them.

Why do you think this is becoming a new field internationally?

Many countries have been producing wealth. For example, when I started out in this industry in the 1970s, anything that was made in Japan was a piece of junk. Today, my car, my television set, and just about anything you can think of is made elsewhere. So everyone is getting a share of the world economy, and that means that people are making money. Now people in other countries are not worrying just about getting along, but about investing. So they are seeing how the value of financial planning–just as we did 25 or 30 years ago–can change lives.

You will also be addressing the evolution of the profession; can you get into this a bit?

Here in the U.S. [we've] made a wonderful pathway for other countries, and they don’t have to make all the mistakes that we did. If you think about when we first got telephones in this country, we put telephone poles up all over the place. In China, everything is wireless. So it is the same thing in financial planning; they don’t have to have the fits and starts that we do. They are working with their government to create professional standards for financial planners, which is something we have been struggling with for 30 years. They are also in an evolutionary phase with their clients. They are, for the most part, commission-based, and are working toward a fee structure. So it is important for them to know where they are in that stage, and how countries like New Zealand, Australia, and South Africa have made great strides in moving along their profession. So [the Forum] is a big sharing opportunity.

Is there anything planners should keep in mind regarding the recent rash of corporate scandals?

You know, there is more information out to the public than there ever was before, and most people haven’t a clue what to do with it. And you can tell that because every time there is good news, the market drops. So it is important for us to keep perspective. Our biggest problem today is lack of consumer confidence in the companies [consumers] are thinking of investing in, and in reporting standards.

However, in the long term this is a good opportunity for us to become closer to our clients. People are very distrustful of institutions now, but they are very trusting of one-on-one personal relationships. Accountants are getting hammered, and part of me says it’s about time because financial planners have been hammered forever. But you have to look past all of that nonsense and work with your clients. Trust is gained one person at a time.

As the third quarter is upon us, what should advisors tell their clients in regard to their losses?

Well, hopefully they are doing some nice tax harvesting with some of those losses. Also this is probably a good time to buy stocks, because it’s a fire sale. The truth is, in my estimation, things are shaking out so that the P/Es make sense. I don’t think the market is as overvalued as it was. This is not the disaster that we think it is. In fact, people are still spending and the economy is relatively healthy. Instead, it’s the lack of consumer confidence that has made such an impact, just the way consumer ebullience made an impact in the 1990s. Everybody got on the bandwagon and greed took over. Now, it is exactly the opposite.

What is the biggest lesson you have learned professionally?

Probably that the most important thing that I do is communicate with people. And if we can learn early on in our careers to communicate well, to say what we mean, and manage not only others’ expectations of us but their own expectations, we will be successful in whatever we do.

What are your future market predictions? What sectors do you think will recover fastest from the downturn?

I happen to be a person who believes very much in diversification. I think we are about to have more of a ride down before we get the elevator up. But I firmly believe in our economy and our markets, and I think they will shake out. I am certainly not telling people to get out, and I am not encouraging people to panic. If we look at the economy as a whole, we need to understand that people are still using electricity and the telephone, and people are taking pictures at Disneyworld. Life goes on pretty much the same as it did before. Although the economy gets shaky from time to time, there are still things we are going to use and do that don’t change.

How do you determine asset allocations?

That is really hard because what drives asset allocation is your own personal goals and objectives. On the other hand, if I were going to put together a reasonable portfolio for, say, an endowment, I would suggest 60% in stocks and 40% in bonds. That is sort of a baseline portfolio and as goals, objectives, and resources are dumped into the mix, we adjust that portfolio up or down.

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