The New Faces of Planning

Malcolm, a financial advisor for nearly six years, joined fee-only Sanders Financial Management in 2000 as an analyst, and has quickly made a name for himself in the business. “My first job out of college was with IBM,” he says. “I was in their global financing subsidiary.” But it didn’t take long for him to realize that corporate finance wasn’t the right fit for him. “I really wanted to work with people as opposed to entities,” he says. “I went back to school at night to get my MBA knowing I wanted to go into financial planning.”

As a co-owner of the practice, Malcolm, along with three other advisors, focuses on the emerging affluent. “We have found a great niche of clients with investable assets between $300,000 and $2 million,” he says. “We don’t really go after what most advisors would consider high-net-worth” clients. These clients are small potatoes for larger firms with $1 million to $3 million minimums and are often ignored, he says. “Given that they have $300,000 to invest, they have outgrown do-it-yourself investing and outgrown a part-time stockbroker. They need a professional.”

Currently, his firm serves more than 100 clients and has just over $90 million in assets under management. “We have deliberately kept our practice small so we can provide personal attention,” he says. “Our client-to-staff ratio is 18 to one.”

Doing most of his own investment research, Malcolm primarily invests in individual equities to meet his clients’ needs. “We build a core of the portfolio around individual stocks,” he explains. “We are big believers in diversification so we use everything–large, small, value, and growth.” Shying away from mutual funds because of “double-dipping on the fees,” he also uses preferred stocks, bonds, and REITs in his clients’ portfolios. “It’s a very active and labor-intensive process,” he explains. “We are not shoving [clients] off into managed accounts or mutual funds, or delegating anything out to other advisors or other managers.”

Although he is always on the lookout for new clients, Malcolm says he’s not making cold calls. “Seventy-five percent of new clients come from referrals,” he says. But, more important, “a lot of clients come to us because they want to be fee only.” And fees are something Malcolm feels very strongly about. “I’m a big fee-only zealot,” he says. “I see the future [of this business moving] to fee-only with an emphasis on service rather than products.” That’s why he believes small firms like his are going to continue to be successful. “[Most of the larger firms] are product-driven and are institutionally incapable of delivering personal advice and customized attention,” he adds. “Our financial plan is not a product pitch. Clients want to know what they need to do to achieve their goals,” not shuffle through endless charts and paperwork.

Being able to sit down face to face with his clients and help them plan their own course is what makes all his hard work worth it, he says. “To help them achieve all of their financial dreams is the most gratifying thing.”

The Problem Solver: Tony Stureman

Krouse Kern Wealth Management, Inc.

Tony Stureman, now 35, spent the first five and a half years after college in the electronics industry. “That went nowhere fast,” he recalls. “I went back to school and started studying business.” After earning his BS in finance from Indiana University, Stureman worked as an analyst for nearly a year until he ran across an opportunity to buy an advisory business in Northwest Ohio. “My nature is to try to be a problem solver and to help people,” he says. “Financial planning is a natural fit and serves a need that I have.”

Young and eager to push his career into high gear, Stureman and his wife bought the business and left their home in Indiana. “That was a fun time,” he says. “We had just gotten married, just bought a house, my wife was expecting, and then this opportunity came along. It was a little mom-and- pop outfit already up and running with a lot of clients, and not a lot of assets.”

At its peak, Stureman was managing about 500 accounts, each between $40,000 and $50,000. “Trying to serve that number of people took a lot of time,” he says. “I suffered from squeaky-wheel syndrome. The people who called all the time got all my attention. It was frustrating and very difficult.” To boot, it was a commissioned-based business model. “To make the business profitable I had to open new accounts and sell products,” he says. “The business was getting bigger and bigger, I wasn’t able to serve my clients very well, and I was at home less and less.” As his client base grew, Stureman knew something had to change. “I knew I was just going to have to start over.”

After six and half years of working on commissions and running himself into the ground, he began picking his practice apart and figuring out what he wanted from his next business and how it would be successful.

“CPA’s were a key contact for me as I was trying to lay out investments,” he says. “To do it the right way we had to have input from a tax standpoint, from an estate planning standpoint, and almost every time that person was a CPA.” Seeing the value of CPAs led Stureman to start a wealth management firm by partnering with a CPA firm.

By March 2003, Stureman had sold his practice in Ohio and partnered with Krouse Kern & Company, a CPA firm in Ft. Wayne, Indiana. “They were looking for someone to develop their wealth management program for the CPA firm,” he says. “I met with a friend who worked there, ended up going to lunch, and literally came up with this whole plan on a napkin.” Together, they formed fee-only Krouse Kern Wealth Management, Inc. (www.kkwealth.com).

The only advisor in the office, Stureman currently has 12 clients with average net worths of $1 million to $1.5 million, all of whom are small business owners. Although his practice is very small, he says he’s in no rush to increase his client load. “Coming from a business that was so big and unmanageable, I have been very cautious about growing too fast,” he says. The minimum account requirement is $300,000, and for the time being, Stureman says he’s very selective about the clients he takes on. “At some point we will want to take this to the next level and develop a formal marketing plan, but right now, I am comfortable and I think my partners are comfortable growing slowly.”

His investment strategy is a little different than most other financial advisory firms out there. He’s part of the St. Louis-based BAM Advisor Network that preaches, and practices, passive asset class investing. “BAM was developed by a CPA and has already done their homework and asked all of the same questions that I would have asked,” he says. “They found a management style that fits their firm, and we use the same thing.”

Passive asset class investing is similar to indexing, he notes. “In other words, if we owned t