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.
Farmer Turned Hourly Planner
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.”
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.