Family Planning

Faith and family are the cornerstones of Paul Hixson’s life and, by extension, the financial planning profession. The family part is easy to see, since four principals at Financial Management Professionals, which has offices in Lake Charles, Louisiana, and Austin and Beaumont, Texas, are all named Hixson. They include Paul’s brother and two cousins, each of whom holds the CFP designation. The role of his religious faith is more subtle.

That the different cousins should be in the business is not unusual–branches of the Hixson family have been in business together for generations. “We’ve always been a family, regardless of what business we’re in, that requires excellence,” says Hixson. “There’s nepotism, but it’s nepotism with requirements that you be qualified. That’s how our family has been able to operate so well. We understand each other and understand and expect that level of excellence.” He adds with a laugh, “And we know where to find each other.”

Most of the firm’s financial planning is done in the Austin and Lake Charles offices. The Beaumont office concentrates on administering qualified corporate retirement plans for many of the firm’s business-owner clients. Even though Paul and his brother John are in Lake Charles and first cousin Milton and his nephew Kevin are in Austin, the four principals remain in constant contact and make all investment decisions collectively. Each brings his own background to the table, which they feel gives them the ability to arrive at a balanced decision. It also allows each to know what the others are doing. That, Paul notes, gives the firm a continuity that is important to clients. If one of the four is unavailable for some reason, another can step in and help any client.

“The family element is, I guess, one of the things that make us unique,” says Paul Hixson. The Hixson family business history goes back at least to Paul’s grandfather, who went into business with his brother in the late 1800s. In the 1930s, that same grandfather began a new venture with his three sons (two of whom were the progenitors of FMP’s principals) in the funeral business. “Before that, they had been in multiple types of businesses, but that was the business that stuck,” explains Paul, joking that “we understand death and uncertainty.” The funeral business was started in 1933 and grew to include an insurance company. By the time the company’s founders were ready to retire, Magnolia Financial Corporation owned funeral parlors throughout southwestern Louisiana and Texas and had life and health insurance business in 14 states. The company sold the funeral business in the late 1970s and the insurance business, where both Paul and Milton Hixson began their careers, in 1992.

As family members began to look for new business opportunities, Milton, a CPA by training, opened a fee-only advisory practice and moved to Austin, where he thought the business had a better chance of getting off the ground than in Lake Charles. He founded FMP in 1987. After two years, the business had grown large enough that his nephew Kevin joined the firm. Paul came on board in 1995 to open the Lake Charles office. The fourth principal–Paul’s brother John–joined the firm in 1996.

“We always seem to migrate back together because we trust each other. Integrity and trust is important, particularly in the financial business,” says Paul. “When you’re dealing with other people’s money, it’s everything.”

The Planning Business

Today, the seven advisors at FMP serve around 500 clients, primarily in Louisiana and Texas, with total assets of $265 million. The firm charges clients a base fee to cover overhead costs, and then a percentage of assets under management, which starts at one percent and migrates down as the asset level increases. With few exceptions, the minimum for new clients is $250,000.

Hixson describe the firm’s clientele as individuals and small businesses with some variation according to the market. Austin has a high-tech community, meaning a more white-collar clientele. “Lake Charles is more of a blue-collar market,” Hixson says of the city that owes much of its prosperity to the oil business. “We help retirees that have saved a million, a million and a half, from the refineries, which have excellent retirement plans. So there’s a broad spectrum of clients that we serve.”

One niche is physicians. “They need planning, but are usually too busy to do it, and are often taken advantage of because of their lack of time to pay attention to their money. We take discretionary control and manage their assets actively.”

Hixson notes that the firm’s physician clients are usually in the top tax bracket and have asset protection issues. “Both of those factors give us a way to provide additional value by helping them tuck away a larger number of dollars pre-tax,” he says. “We don’t place a major focus on asset protection, but there are ways to maximize their protection based on the types of instruments used.”

If the doctor has outside income, such as from an investment in an MRI cooperative, Hixson will often suggest an additional qualified retirement plan. “Because there are no employees, they can max that out as far as their contributions,” he explains. “For a lot of doctors that have been practicing for a while, a defined benefit plan works extremely well. Typically their staff is younger and there are not a large number of people involved, so [the doctor] can tuck quite a large sum away pre-tax and because of their [high] tax bracket, even if they’re providing some benefit for their employees, it’s a sweet deal for them. It has to be the right situation and structured properly, but there are creative ways of doing that within the code.”

For all his clients, however, Hixson stresses the importance of having a plan. The firm tries to arrange face-to-face meetings with every client once or twice a year, although, as Hixson notes, clients are welcome to call anytime. Every three to five years, they sit down and go over the financial plan and make adjustments as needed. “We have some clients that have no desire [for a formal plan], but by and large we encourage our clients to plan because the way we invest is a reflection of their plan. We’re trying to keep them on track relative to that three to five years down the road. If we go through a three-year bear market, like the one we just experienced, what happens? We’re able to tell the client, ‘These types of environments have been factored in and here’s where you stand and you’re okay’.”

Hixson also notes that in the early stages of retirement, some people get carried away with their spending and having a plan helps keep outlays in perspective. “We can keep them on track so they don’t wake up some day and say, ‘I’m out of money,’ or, ‘I’m going to have to significantly reduce my lifestyle.’”

The Investment Business

The investment strategies at Financial Management Professionals are centered on mutual funds. “We tend to stay away from individual securities with the exception of exchange traded funds. We do make use of those in some of our strategies.” The firm has constructed a variety of portfolios ranging from all bonds to all stocks with a number of blended options in between.