Plan of the Century

For Ricky Grunden, the essence of being a financial advisor is not investment strategy and wealth accumulation, although those are important. He sees his role as helping clients live a life full of purpose with as little risk and worry as possible, after which they are able to leave a legacy that will have a positive impact on future generations. Toward that end, Grunden has created a multi-component program built around the theme: “Meaningful Life. Generational Influence.” Grunden Financial Advisory, Inc., based in Denton, Texas, offers fee-based financial planning and investment management to a roster of 90 clients and has about $45 million under management.

Like many planners who took to the profession in its early days, Grunden didn’t learn planning in a classroom. His first exposure to the industry was when he was recruited into the life insurance business in 1974 while still a student at the University of North Texas. “I saw a career path in financial services,” he says. “I saw it as a way to help people and to make a living.”

Although he never finished his undergraduate program, more than 30 years later Grunden continues to make his living in financial services by trying to help people. “I went back to get my degree in 1989,” he explains. “It was gratifying for me personally, but it was not adding to my clients’ bottom line, so I never finished. I just went back to studying things that were going to help my clients be successful.”

By the end of the 1970s he had become a managing general agent of a local insurance agency, but Grunden says he realized around that time that “you couldn’t solve all financial problems with a whole-life insurance policy.” So he quit his job, printed up cards that read “Financial Planner,” and began his practice out of his living room.

Grunden joined John Rhoads in the advisory firm Dallas/Rhoads/Associates in 1986 and got his CFP credentials in 1988. With the addition of a third partner, Dave Lucca, the firm eventually became Rhoads Grunden Lucca. In 1992 the three partners were intrigued by the concept of no-load mutual fund investing and received permission from their broker/dealer (Walnut Street Associates) to test a no-load portfolio alongside what they were already doing on a fee and commission basis. The no-load concept appealed to their clients from the outset and in a relatively short time they had $126 million under management in their no-load portfolio. By 1996 they had given up all their life insurance, Series 7, Series 63, and other licenses and converted to a fee-only practice.

Grunden’s decision to separate from the successful firm he had helped create was part of a personal evolution. “That was all because my partners and I took part in Dan Sullivan’s strategic coach program,” Grunden recalls. “As we began to work through our unique abilities and the things that we really cared about doing, it became evident that John and Dave really wanted to do the investment management business a different way than I did. I wanted to be in front of people solving problems. That allowed me to feel gratified and I think deliver a great deal to people.”

Over the next three years, the partners assessed the situation and ultimately decided to make an amicable separation. After commuting 35 miles each way to Dallas, Grunden set up his own practice in the town where he’s lived for 35 years with his wife and eight children. With a base of clients who made the transition with him, he opened Grunden Financial Advisory on January 1, 2001. “It was a little bit more difficult transition than I anticipated, because I didn’t anticipate that the market would implode,” he says. “There was some nervousness, but it gave me the opportunity to build a practice, a financial planning and investment management firm around culture and concepts that I value.”

Make It a Process

One of the lessons that Grunden learned from Dan Sullivan’s strategic coaching was that “if you’re doing something, create a process out of it and name it.” It’s a lesson he has taken to heart, as even a short visit to his Web site makes obvious. A key component of his planning process is what he calls the Age 100 Growth Plan, which Grunden says he devised because he felt that too many people had narrowed their time horizons and as a result were working themselves into a panic about retirement. He points out that as a society we’ve been trained to think in terms of the goal of reaching age 65, but these days people live a lot longer and are often highly active into their 80s. “The idea is to stretch out your life goals, stretch your investment goals. Stretch them out, so you can say, ‘Okay, if I die, I’m dead, but if I live, how am I going to live?’ What we do under that umbrella is the grunt work. We do all the financial planning, and bring all the pieces together so they can have peace of mind while they’re living the life that they want to live.”

Of course, planning for a life that can stretch for a full century requires a somewhat different approach than for a shorter lifespan. To address that, Grunden has created a three-step process in his financial plans: the wealth-building challenge (addressed separately below); secure future lifetime income; and generational influence.

“The goal is to create enough assets, if possible, to buy a lifetime income, so that no matter what happens in the stock market, whatever happens in your life, there’s always going to be a secure future lifetime income,” he explains. “Typically, we do that through something pretty simple, such as municipal bonds, or CDs, or ladders. Once that’s accomplished, we move on to the next phase.” This final stage is where Grunden attempts to help his clients use the money they’ve spent a lifetime accumulating to influence their children and the next generation for good.

“I’m very excited about the legacy program,” he says, enthusiastically relating how in the last few months he’s met with the grown children of some of his older high-net-worth clients. In these meetings Grunden will explain to the family what his firm does, the concepts behind his financial planning process, and the long-term relationship they’ve had with the parents. Then the parents will talk about their own values, what they hope their children and grandchildren will have learned from their example, and the importance of using their legacy wisely. As a follow-up, Grunden will prepare scaled-down financial plans for each of the children.

The Investment Process

Grunden’s Age 100 Growth Plan is a lifetime concept, but none of it works if the wealth-building challenge is not met. In his quarter-century as a planner, Grunden has taken both an active and a passive approach to investing. Although he continues to run two actively managed portfolios (one is 100% growth, the other the standard 60% equities/40% bonds), he’s come to favor a passive approach. “We have very respectable returns, net of fees, in our active portfolios, where we have a track record back to 1996. But if we make a wrong call or if we weight the portfolio in the wrong direction, then that’s added risk that my clients didn’t have to take to get what the market would give them.”

Grunden’s two active portfolios were started during his tenure with his previous partnership, and when he did a side-by-side comparison of his active and passive portfolios he became even more convinced of the benefits that passive provided. However, when it’s what the client wants, Grunden can be as active as the next advisor. “I was able to develop within the moderate 60/40 portfolio, through a lot of research going back to 1988, a timing strategy on high-yield junk bonds. Up until a few months ago, 30% of our bond money was in two high-yield junk-bond funds and it worked beautifully,” he says. “We got in around November 2002 and we got out of it three or four months ago. Normally if somebody looked at a 60/40 split with 30% high-yield junk bonds, they’d say it was crazy, but it was working.”