Just about any advisor can help someone with substantial assets get his financial house in order and set up a plan for the future. Dennis O’Brien of Coastal Financial Advisors in Farmingdale, New Jersey, can do that too, but that’s not the part of the business that gives him a thrill.
It’s helping people like the newlyweds with $70,000 in credit card debt who recently came to see him that really gets him charged. “Everyone has problems,” he acknowledges. “But it’s the ones with more problems that I enjoy the most because you can really see the resolution and I get to experience their joy at having gotten through those hard times.
“For the client with a lot of debt, I get them to send in their papers and then we sit down and talk for a couple of hours to resolve their issues,” he explains, noting that his fee for such a session is $600. “Then they’ll come back and I’ll do their tax returns and we’ll do an update and find out how they are at that point.”
His clients range from those like the aforementioned couple who have, in essence, a negative net worth to those with several million dollars under management.
“I don’t really use AUM as predictor of my business,” O’Brien says. “I view it as a doctor’s office. If somebody needs help, I’m going to help them.”
As an example, he cites a call that he got from someone in California, at the end of the day on Monday, September 30, after he had spent the entire day on the phone with clients concerned about the failure of the federal rescue plan for financial institutions that morning in the House of Representatives. That individual had called a local advisor and was told that the firm minimum for new clients was $3 million. “Clearly he didn’t have anywhere close to that,” O’Brien explains. The local advisor referred the rejected client to NAPFA’s Web site, which is how he ultimately found an advisor in New Jersey. “He somehow came across my Web site and reviewed it and he liked what I said about charitable giving and he wound up calling me,” says O’Brien. “We had a good conversation, but I don’t know if we’re going to work together because he’s on the West Coast, but it’s a good possibility.
“I believe in helping people that need it and not necessarily because they have a lot of assets,” he says.
O’Brien describes his approach as comprehensive financial advising. “I’m sure there are a lot of people that use that term, but I actually do everything,” he says. “I work on giving people tools and skills to get their house in order. Once their house is in order, then we can work on reaching their life and financial goals.”
Coastal Financial Advisors is a one-man, fee-only firm, but O’Brien’s fees are not entirely based on a percentage of assets under management. “I look at the complexity of the situation. I have a factor where I tie in the complexity, their income, and their net worth–their assets. So AUM is a portion of my fee calculator, but it’s not the whole thing, because I use their income also as a factor.” For his comprehensive planning clients, he says his fees range from about $3,000 to $14,000 a year.
“I know a lot of advisors just write up a 30-page plan. They use packaged software and give it to their clients,” he observes. “The clients take it, put it on the bookshelf, and they forget it and move on and then [the advisor] just ends up managing their money.
“I actually meet with my clients more frequently. I don’t write a canned package. I meet with them for different sessions–cash flow management, insurance review, investment management and review, I do their tax prep and then their tax planning,” if necessary.
When O’Brien starts working with a new client, he begins by organizing their various financial documents, which helps him understand the client’s situation and needs. To this end he provides each with a file container–a portable, plastic box divided into sections for important documents such as bank and credit card statements, home and car papers, wills, financial statements, insurance policies, important phone numbers, and childcare arrangements.
“No one has come in here yet that has all their documents in any one place,” he notes. “They’re usually all over the place. Some that do have files have them filed in different places and this system gives them one place to keep everything. It’s nice to have them in a file cabinet, but this kind of unit provides something that they can pick it up and run with if they have to.
“When explaining its purpose, I describe a situation like when Hurricane Katrina hit New Orleans or the fires in California, or right here in New Jersey, the flooding in Trenton a couple of years ago,” he says. “This allows people to just grab some of their most important documents and run with it. This way if they have to stay in a hotel, or wherever, they have the most important documents that they need to get their life started again. Now, it’s not their photos and it’s not their clothes or all their personal material, but it is all the 800 numbers they’re going to need, it’s their account numbers, and it’s enough to make phone calls to say, this is where I am, re-route my mail, or make the phone calls to the insurance company.”
Prior to launching his advisory practice, O’Brien was immersed in the technology sector, working for Bell Labs and its various permutations, so he has a real love for and understanding of technology. He provides all new clients with Quicken software and spends an entire session showing them how to use it. “It helps them get their cash flow organized,” he says. “I have just about every client using it. It helps them see what their spending is. We print out the reports on an annual basis to look at where their money is going, and then we talk about it from there. I can also use it when I prepare their taxes. I can ask them to print out a couple of reports to tell me how much of a charitable deduction to take or how much expenses they had for something.
“I do the same thing for the self-employed and small businesses,” O’Brien continues. “The same principles apply, although with them I use QuickBooks.”
Another service O’Brien provides to his small-business clients is in the area of their 401(k) plans. He’ll typically do an analysis of their current situation and then show them the hidden and excess fees of which they may be unaware, and talk to them about bundled versus unbundled plans. “For the plans I provide true transparency,” he says. “So when we start talking about 401(k) plans or SEP plans, they know exactly what they’re going to pay, how they’re going to pay, and who they’re going to pay. The administrator gets their portion, the recordkeeper gets theirs, and I as the advisor get my share. I help them understand their fiduciary responsibility. Frequently they’re really not in touch with their fiduciary responsibility. They’ve been doing things a certain way and they don’t want to change and yet when I start talking to them, they realize that maybe they’re not doing the right thing for their employees.”
If the client is interested, O’Brien will also hold education sessions for their employees–the plan participants. Being a solo practitioner limits the size of the 401(k) plans that O’Brien is willing to take on and he sets his sights on ones with fewer than 200 participants or less than $5 million in assets.
Nonprofits for Fun and Profit
The third leg of O’Brien’s practice, and one that he intends to develop further, involves working with nonprofit institutions. He initially got involved with the local United Way chapter, putting together a class on governance for board member of nonprofit organizations. As is the case with his individual and small business clients, one of the areas of emphasis for O’Brien was helping nonprofits with disaster contingency plans so that in the event of a calamity, they can get their services up and running again as quickly as possible. He worked with the United Way to develop a curriculum for the course and then found an advisor who had done a lot of nonprofit work and a nonprofit consultant to teach it.
Through his work with the United Way, O’Brien met the executive director of another local nonprofit group–Family & Children’s Service of Monmouth County. “I ultimately joined the board there and right now am the treasurer. It’s a $5.5 million nonprofit and I’ve worked with them through the years on various committees and issues,” he says.
Although it’s been time consuming, the group needed help and O’Brien felt compelled to offer it. He’ analyzed expenditures on phone and Internet service and helped cut expenses by $10,000 a year alone. He also reviewed the group’s insurance and found it wasn’t properly covered for some of the things their members and employees were doing.
He’s currently helping them start an endowment. Although that is his area of professional expertise, O’Brien provides his services pro bono, because as a board member, it would be a conflict of interest for him to take them on as a client. “So I do not manage those assets, but I’m helping them with their investment policy statement. Interestingly, they’re going to be a hundred years old next year and they’re just starting an endowment.”
While it might seem that focusing on nonprofits would require a different set of skills, O’Brien says that’s really not the case. “It all goes back to what I do with all of my clients,” he explains. “They’re very similar principles–working with cash flow management, managing assets, helping them with basic, fundamental management issues.”
The only real change is that in some cases there may be some restrictions on investment choices that he doesn’t find with his individual and small business clients. As an example he cites Catholic Charities, where he serves on the board of trustees for the Diocese of Trenton, which has some restrictions based on Catholic doctrine about where its money can be invested.
In addition to his pro bono work for nonprofits where he serves as a board member, O’Brien has also begun to cultivate others as a part of his practice. He’s currently working with the executive directors of two New Jersey-based groups who are looking to start endowments to fund their efforts.
Although such decisions would need to be approved and ratified by each group’s board, should they go forward, O’Brien hopes to be hired to manage the assets should the endowment plans be brought to fruition.
He says his typical passive strategies would come into play and would likely include many low-risk investments. “A lot of nonprofits want a guarantee, so it would be very Treasury-oriented, very safety-driven.”
At some point, O’Brien acknowledges he may decide to expand his practice to include some support staff or even another advisor, but he doesn’t see it happening anytime soon. How big the practice gets really depends on who its clients are and what they need, he says. While he’s not out looking for new individual clients, O’Brien says he rarely turns someone away if he thinks he can really help him. “At this point I’m able to do the things I want and work with the people I want to work with, which includes the nonprofit area,” he says. “I go out looking for the kind of people I want to work with. When I fill that up, then I’ll decide what I want to do, whether I want to hire somebody or just continue doing it myself.”