Living the Dream

RG: I was a young advisor in 2000-01. At the time, there were a lot of people in my client base that were into tech stocks. I needed to find products that guaranteed income. I gravitated to FIAs. But I don’t want to paint myself as one of those one-track guys. For me, there’s red money and green money. Green money is money that you know what it’s going to do. With red money, there’s more upside, but you don’t know what it’s going to do. The risk goes up. But to get back to your question, the dot-com crash in 2001 was the impetus. The safety of FIAs was the guarantee I needed for my clients versus the risks involved in tech stocks. Then, there was another build-up in risk until we had another crash in 2008. Again, people gravitated to safety after that. But you constantly need to educate the clients and explain to them that they need to know how much they are willing to risk and how much they want to keep safe. When times are good people forget very quickly the risk that’s out there.

SMA: You have a practice that’s really unique with clients in the tech valley of Northern California and also in Hawaii. If you could tell us about the niche you’ve carved out and what you consider the foundation to success in your practice?

RG: First of all safe money works anywhere. That theme resonates everywhere. The investors in the two areas are very different. In Hawaii my clients are much more conservative. While in the tech valley, it can be a very hard push to get people to that safe money. We have big challenges [in the tech valley] because people want to play the stocks. The task is to convince them to look at their assets and ask: “How much do you want to keep safe? Let’s at least reallocate to get your risk tolerance in line.”

SMA: Talk a little bit more about how those client bases are different.

RG: In Hawaii the clients are more laid back, practical, reserved. You see a lot more pensions there, and houses are paid off and maybe they have a second house they’re renting out. They have money, but they want to hang on to it. While in California, you find people totally caught up in the latest, greatest widgets and cars. They’re keeping up with the Joneses. That’s why they got caught up in the housing bubble. At this point, you’re still talking to people, helping them answer the question: “How do I keep my home?” In California, the housing bubble has been harder for people to overcome. With the tech bubble, they still had equity in their home. That’s why the recovery this time will be longer and more difficult.

SMA: You already had a successful practice in California. How did you make the leap to include Hawaii?

RG: With the Hawaiian market, I had frequented there throughout my military career. When I retired, I decided: Hey, let’s see what happens with a seminar. It went very well although I made many cultural mistakes like when I wore a suit. After that initial misstep, I switched to a Tommy Bahama shirt and khakis. The interesting thing is looks can be deceiving. Prospects might come into the seminar wearing flip flops and shorts. They might look like they have nothing, but have assets in the millions.

Gagaza’s Keys to Success:

“I’d rather build a business of referrals than have a few big clients.”

“There’s the whole idea of managed money. I don’t like charging a fee, but I can. I can still help manage their money. So there’s a fine balance of red and green money. And there are lots of things to do in managed accounts to help manage that risk.”

“I don’t want to become a jack of all trades. That gets you nowhere. The key for me is to help my clients preserve their money and have lifelong income.”

“Safe money. I want to help clients keep their money as opposed to having too much at risk. It’s all about preservation of principal. I’ve always believed in preservation of principal, but now I emphasize that more than ever and I emphasize the risk in the market.”