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Light Shiner

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“My major crusade at the moment is absolute returns,” barks Gene Balliett over the phone in describing his current passion. He’s been down other roads before. Coming out of Ohio farm country and after spending time in the Air Force, Balliett found his first professional love in the newspaper business as news editor at the Cincinnati Enquirer.

He moved to New York for editing and writing jobs at Newsday and then at several magazines, notably Medical Economics, and discovered he could make a living as a practice management consultant to physicians. He nosed his way into personal finance through the consulting and a long gig running seminars for doctors and their spouses. He still has many physicians as clients at Balliett Financial Services, his fee-only firm in Winter Park, Florida, and boasts “this is the best staff ever–two CFPs, a shrink, and an editor.” Despite his success, Balliett still can say without embarrassment that he “loves being in the company of people who have figured out something I haven’t,” and that he considers himself “a light shiner–I’ve always been driven to find out.” Balliett is no starry-eyed idealist, however. He brooks no patience with “Trojan horse marketing,” and “CFPs who pretend to be financial planners in order to sell a product–that should be illegal. When I’m emperor . . .”

He may not wear purple, but “this walking newspaper” still has the chops to write his own interview, in which this IA Leader shows the forward thinking that informs his actions and benefits his clients.

What trends do you see in planning?

When I follow the money, I see lots of it passing through legal documents prepared by law firms with knowledge of business law, tax law, tort law, investment law, real-estate law, family law, elder law, estate law, and trust law. Financial planning seems like an inevitable activity for law firms. It can help a big firm blanket whole families’ legal needs, including succession planning and multi-generation estate planning–while they capture most or all of their assets under management.

When will that begin to happen?

When more law firms realize 1% of $1 million is not only possible but also of $10,000.

Who’ll make the investment decisions?

In some cases, lawyers themselves. More often, I’m guessing, law firms will own or contract with investment advisors or fee-only financial advisory firms that focus on absolute returns from investment in listed securities and their no-load alternatives. Some will outsource because doing so gives them someone to blame and puts distance between themselves and a business activity that attracts litigation whenever the Dow goes south.

Outsource to whom?

Mostly to firms that have a convincing process likely to obtain absolute returns for portfolios–either up every year in bull and bear markets alike or up double-digits for averages of three, five, and 10 and more years.

Every year? Is that reasonable?

RIAs and others would say it is if they can demonstrate positive performance for each of the calendar years starting with 2000 and carrying through to the year to date. Just about everything that can happen in the stock market occurred in those years–up, down, and squirrelly. The threefold challenge is to identify bull, bear, and squirrelly markets in time to profit from each; second, to identify the right securities to own; and third, to take timely action via a process; no sweaty palms required.

Not everyone agrees that absolute returns are likely. Not everyone will achieve them. And yet Value Line Investment Survey names more than 208 listed stocks that moved higher, usually by double digits, in each of those six challenging years. Of those, 143 are up in 2006 YTD, and averaging 28.30%. All 208 are on my firm’s watchlist; we update it daily for recent price performance and weekly for deletion or addition based on positive YTD price performance. So, too, are a few mutual funds and ETFs.

Rydex is a leader in bear-market planning and absolute-return strategies. ProFunds, too, needs to be considered. Also, 40 competing hedgefund-like long-short mutual funds are listed at Of those, 10 were up double digits in the last year reported; four in the last three; and only one in the last five. Just two were up double digits in the last three months reported.

What about alternative investments?

I am a fan of no-load private equity. I believe business ventures can be better than listed securities for obtaining absolute, double-digit returns. I have acquired some beauts for myself and a few venturesome clients. Since mid-2003, one deal has returned more than 30% yearly, cash on cash. I tell clients only about ventures I’m willing to invest in for myself.

And the future of financial planning?

As an ex-editor, my judgment may be tilted toward information as opposed to advice–and I think that’s a good thing. After 39 years as an advisor, I am convinced that clients with good information in hand have little need for advice. So my staff and I produce and distribute eight monthly newsletters and investment-research reports to our clients, plus a flash report when I think the securities markets may be near a significant turning point.

Also, I ran a seminar for clients every year, 1984 through 2005. I couldn’t think of anything new to say in 2006, but in 2007, I can talk about our absolute-return research, the markets, the economy, and how we’re hedging inflation, deflation, and terrorist activity within the U.S.

Two of our monthly publications are distributed by traditional mail and e-mail. The others go by e-mail only, except when a client asks for a hard copy. The two mailed are the 12-page Gene Balliett Monthly Report and the two-page Market Outlook.

In your 12-pager, what subjects have you covered in, say, the last five or six months?

How Medicare has grown into incomprehensibility, how technological development will improve our lives, inconsistent disclosure in personal finances, eight legendary investment strategies, and the best vacation ever (never mind the expense).

One issue each quarter is devoted to Q&A–two 8.5 x 11 pages with each of our four advisors on family finances. They are Richard Almeida, CFP, Kathleen Stevens, CFP, Dee Balliett, M.S., and me. Dee is a mental-health counselor also trained as a financial advisor and financial coach. I am a CHBC [Certified Healthcare Business Consultant]. Like my CHBC colleagues, I advise doctors on both business and family finances. Since 1987 or so, however, the two have become so complicated and hard to keep up with that I had to choose between them. That’s why I’ve sub-specialized in personal finances for the last 10 years.

We have a fifth advisor, Phil Balliett, our son. He was writing Assembler for mainframes and moonlighting in Compiled Basic for me when I stole him from Dun & Bradstreet in the ’80s. He advises our clients on both software and hardware. Also, Phil heads our in-house investment research activities. I’ve trained him to assume the leadership of our investment activity. I will retain an advisory role.

Did the markets of 2000-2002 change your investment approach?

They did, except that I have never respected Modern Portfolio Theory, efficient market theory, or a buy-and-hold approach that’s not built on dollar-cost averaging. I still believe in letting winners run and selling losers quickly to raise cash for reinvestment in a better opportunity.

What’s different?

My quest for absolute returns and greater reliance on fundamentals. Also, I gained even greater respect for certain strategies and strategists (for more on them, go here).

What else do you see ahead?

I think many of us need to move heavily into financial information. The more and better Dee, Kathy, Richard, and I inform our clients, the less our clients need our advice and the more time we can devote to our investment process.

Second, I think more planners ought to be their clients’ resource managers. Phil and I maintain a section of for NAPFA members. At the top of the section, we provide links to 15 kinds of fee-only providers, from arbitrators, healthcare providers, and repair specialists to public insurance adjusters, tax specialists, and therapists.

Third, I think NAPFA ought to create two national study groups–one devoted to fee-only alternatives to securities, their due-diligence issues, and a solution to their liability-insurance problem; another to outsource management to fee-only practitioners other than ourselves.

Fourth, I think NAPFA ought to seek working agreements involving cross-participation in the regional and national conferences of the various fee-only organizations. Finally, I think a lot more certified advisors who sell insurance need to reject Trojan Horse salesmanship and make the transition to fee-only and NAPFA. Insurance agents tend to be genuinely nice people who haven’t yet discovered the hidden dark side of the products they’ve been trained to sell to unsuspecting consumers. Once they figure it out, they become terrific fee-only advisors.

Will any of that happen?

Well, if you can think of it, you can do it. However, accomplishing anything worthwhile within an organization takes some serious doing. So, my final answer to your question is: Maybe not.

Editor-In-Chief James J. Green can be reached at [email protected].


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