Delivering Relationship Based Financial PlanningIt starts with an extensive discovery process. We get to know a client or client couple on a personal basis and discover what might be keeping them up at night, what their long-term financial priorities are, and how they might rank those priorities.
Proactive Advisor Magazine: Louie, talk about your path to founding your advisory firm.
In college, I initially thought I would pursue a career in international business. But the more I was exposed to finance, the more it became apparent that I wanted a career in financial services. After graduation, I entered the accelerated MBA program at Mount St. Mary’s University and worked part time at Merrill Lynch in a paid internship.
When I finished the MBA program, I interviewed with several national firms and all of them made offers. But I knew a managing partner at Chesapeake Financial Group, which was part of MetLife and located close to my hometown. I thought the training I would receive there would be very beneficial. That turned out to be the case, and I can point to several senior advisors who became my mentors. I was proud to have won an award for production during my first year. However, the important thing was that my mentors helped me focus on learning how to educate clients, comprehensive data gathering, and developing a sound financial-planning process. I spent about seven years with the firm, growing as a financial advisor and building a business.
In 2009, I heard about an opportunity with a firm called WorkforceTactix, which was looking to start a wealth-management division. They primarily consulted on health insurance and employee benefits, and I focused on building out their capabilities in the areas of 401(k)s, retirement and executive planning, and individual financial planning. I enjoyed working alongside a group of insurance professionals to design full-service solutions for employers. I also began my partnership with Founders Financial Securities in 2009. Founders is a highly professional organization with a core mission and mentoring programs that stand apart in the industry. Our shared philosophy and their resources helped move my practice to the next level.
In 2015, I established Maryland Wealth Management as a completely independent wealth-management firm, continuing to partner with Founders Financial Securities. MWM’s guiding principle is a focus on the client relationship. It is paramount that the client’s needs come first. My philosophy over the years has been that if you make the relationship highly valuable to clients, not only will they benefit, but your business will grow.
What types of clients do you work with, and what is your financial-planning process?
My operating philosophy was developed to help define and attract the type of clients we would like to work with. My ideal clients sincerely want to improve their financial future, value building a long-term relationship with their advisor, and are open to education and guidance.
We do have a few target segments within the broad mass-affluent market. My father is a physician and my wife is a nurse supervisor at a premier health-care provider, so my network includes many health-care professionals. They are generally busy people, highly intelligent, and often have complex financial needs. They are an ideal segment to work with.
I also have a lot of experience with small-business owners. In working with this segment, I have discovered that it is important to learn the management style of the owner and immerse myself in the company’s culture. This is helpful when it comes to formulating the philosophy of how they structure their 401(k) and other benefit programs. It also helps me build relationships with the owner and key employees. Gaining their confidence and trust often leads to relationships that go beyond business programs to personal financial planning for senior management.
An increasingly important area for our business is working with clients on their retirement-plan investments held within plans such as 401(k)s, 457s, and 403(b)s. With the self-directed option becoming increasingly available, we can provide valuable guidance to clients. Rather than having a client go it alone and being limited to the options offered within the plan, we think managed money options offer them enhanced opportunities for sound investment planning and risk management.
Our financial-planning process is consistent with our mission as a firm; we call it “relationship-based financial planning.” It starts with an extensive discovery process. We get to know a client or client couple on a personal basis and discover what might be keeping them up at night, what their long-term financial priorities are, and how they might rank those priorities. From there, we will gather all relevant financial documents and accounts to find out where they stand across a broad spectrum of financial-planning dimensions. Once we have completed the first meetings, I then recap what it is that they are trying to accomplish at the end of the planning process. I view this as setting the relationship foundation.
“I am a strong believer in risk mitigation in portfolio design.”
Once I am confident we are on the same page in terms of priorities, the next step is a preliminary plan. This is the broad strategy for helping them start on the journey to accomplishing their objectives, both “must haves” and more aspirational goals. I review various “what if” scenarios and describe how financial plans might look under different assumptions. I emphasize that their plan will be completely customized to their goals and objectives, time horizon, and risk profile.
The third stage is putting the final plan together and presenting it to the client. We closely examine the assumptions behind the plan options and identify how their current and future assets might be employed. It is a goals-based planning process. I try to label various accounts, strategies, or investment vehicles with names that the client can relate to tangible, specific goals. Once we have agreed on the plan, we discuss the implementation and timelines. We also lay out the details and expectations of our working relationship. The final stage is conducting periodic plan reviews. I view financial planning as an ongoing process that is always subject to revisions and refinements. I want to know if the client is satisfied with the results and progress toward their objectives, and if they perceive any outstanding pain points. I always want to grow and strengthen the relationship, and feedback is essential to the process.
What is your broad approach to investment and risk management?
A client’s investment plan should be oriented toward their objectives, risk profile, and time horizon. Some common elements of most of the investment plans we develop for clients include a diversified blend of actively managed and passive strategies, which we monitor for performance over time. This might be described as a “core and satellite strategy” approach.
I am a strong believer in risk mitigation in portfolio design. Where appropriate, that might come in the form of some allocation to annuities. But I think that you can diversify and manage risk effectively in many instances without the cost burden of annuities. I am open to considering any tool or strategy that can help manage risk and provide a cost-effective investment solution for clients. My philosophy is that where there is innovation, you should study it. You should consider how it could make you a better wealth manager and help your clients.
About 80% of our client accounts have investment strategies managed by third-party professionals. I work with two other advisors within our broker-dealer reviewing our broker-dealer’s vetted universe of managers. The important factors we look at are performance history, the management and stability of the firm, and the end-user experience.
When clients are closer to retirement, we look especially closely at the risk-mitigation capabilities of outside managers, for both income and growth-oriented strategies. They will usually have a manager-based risk-mitigation strategy or an algorithm-based approach. I tell clients that these strategies are like the bumpers placed on a bowling lane for inexperienced bowlers. They don’t guarantee that you are going to get a strike, but they are geared to preventing “gutter balls,” or large portfolio losses in times of market stress. We tell clients we are not trying to predict absolute market lows or sell at market tops. We want portfolio management that will help smooth out volatility, have a goal of achieving competitive returns over full market cycles, and strive to avoid steep portfolio drawdowns.
How would you like clients to perceive the experience of working with you?
My goal is for them to see me as someone who works selflessly in their best interests, someone who has a strong character and is open, friendly, and sincerely interested in their life and aspirational goals. Nothing is more satisfying than helping clients understand complicated financial concepts and seeing them come to understand how they can be used to help them improve their financial lives.
Online and physical document ‘vaults’ provide value to clients
Luis (Louie) Padilla, MBA, is the principal financial advisor and founder of Maryland Wealth Management (MWM), located in Sparks, Maryland. He says his firm was established “with the belief that the client relationship comes first.”
He adds, “Creating meaningful touchpoints with clients is part of our overall strategy for building relationships. We do this through a thorough financial-planning process, periodic client reviews, newsletters, and personal communications around important milestones in a client’s life.
“After every client update meeting or annual review, I upload documents and important action items from the meeting to a virtual ‘client vault’ that also contains important financial documents for each client. But I think we have a unique twist on that process. At the end of the first year of a client relationship, I also place a copy of their annual review or statement in a small safe that is fire- and waterproof and give that to the client. I also include a sheet listing all of the accounts they hold through our firm, with passwords. It also has space for other key accounts they would like to permanently record.
“They can keep this safe at their home, keep one key, and give one to their spouse or the executor for their estate. While the online ‘vault’ is invaluable, I find that this physical ‘vault’ is something they find very useful and valuable. They can use it to keep their updated financial documents, passports, social security cards, birth certificates, and so forth. The client feedback on it has always been very positive.”