Do you need a securities license? It’s a question that gets asked a lot in this industry. And, based on our circulation numbers and the various surveys we’ve conducted over the past year, the people who read our magazine are pretty split on the subject.
In the April edition of Senior Market Advisor, managing editor Andy Stonehouse asks two successful advisors – Jerry Tokunaga of Sacramento, Calif.-based Wealth Solutions Group and Richard Dragotta of Paramus, N.J.-based LPL Financial – to give their thoughts on the subject.
|Pictured left to right: Jerry Tokunaga and Richard Dragotta.|
It’s important to note, as you will see, Tokunaga has chosen not to pursue a securities license while Dragotta is a big proponent. The following are highlights from those conversations:
SMA: Why have you made the decision to remain unlicensed?
Tokunaga: I never have to apologize to my clients. The only way an indexed annuity loses money is if the client withdraws money. If your lifestyle changes, you know you’re covered. Is the alternative worth the risk? Would you like to have an investment with 100 percent security? These are the propositions I can make to my clients. What’s intriguing is that … well, some people say that these products are boring, yes, but if safe is boring, then boring is the new sexy. What we practice is safe money. Ninety-five percent of my clients have no intention of ever taking more than the RMD out of their annuities; they cannot outlive the money, and they’ll never run out of income.
SMA: What was your average client’s reaction to the financial meltdown?
Tokunaga: After the market crashed, people are much more skeptical. and everyone’s become much more risk averse. But they’re still confused. They don’t know that there are four types of annuities, so they’ve just heard about the bad ones. Our job is education. A lot of my clients are in the 70 to 80-year-old range, and many of them have been hoodwinked in the past. People are frozen by so much conflicting information. Our job is to try to resolve those issues and bring clarity. When it comes to playing the market, you have to consider your threshold of pain. One of my clients had a million dollars in the market, and now he’s only got $650,000. What’s your threshold of pain?
SMA: Tell us about your licensing.
Dragotta: I hold my Series 7, 63, 65, my 9 and my 10, and my 53. I also got my ChFC designation, and I’m a CFP, which made sense with financial planning as the basis of my foundation. The other designation means I focus on retirees. There was certainly some time, commitment and energy required to get all the licenses and figure out what I needed — and, frankly, many of them were a formality and aren’t really applicable to dealing with people — but I don’t know any other way to compete in this business without being able offering a breadth of products and services. I’m a big believer that you should never stop learning; otherwise, you get stuck in the mud, and it all passes you by. I don’t see non-licensed guys as my competition. The high-net-worth individuals that I deal with as clients are seeking out a well-rounded person to work with them. I come in and give them choices to attack the puzzle and create the equations that are going to work for them, and 90 percent of the time, I win their business after an initial appointment. I sincerely believe that if you’re not licensed, you really need to get re-motivated if you truly want to capture bigger assets.
SMA: What is your approach with your clients?
Dragotta: When I first meet with clients, I wear my financial planner cap, something directly related to my Series 65 — I review their plan, offer planning services and charge a fee for that. Free financial planning, to me, means that there’s an agenda at work. I do the work; then I come back with a rough draft, with a lot of projections and a lot of “what if” scenarios. I don’t make investment recommendations at that point. If they decide to go ahead, I wear the investment advisor/consultant hat, and I can start to formulate investment proposals, again, largely fee-based. I’m also a pretty good advocate of variable annuities as one solution, though not the only solution. They’re clearly very helpful in alleviating the short-term volatility. I also think that ETFs provide the best bang for the buck, provided we can manage them with a tactical model. And then there’s good old bonds, which are more of a “buy ‘em and hold on” solution. I also handle mutual funds, and hybrids of all of the above.