Go beyond their title. Everybody is a “financial advisor”, branch manager, or something similar that is very generalizing. These don’t always tell you what a professional can or will do for you. Instead, check out licenses, designations, and talk to them. The big licenses are Series 6, 63, 7, 66, 65, and an insurance license.
As part of our series about what one should look for when hiring a financial planner or adviser, I had the pleasure of interviewing Garrett Konrad. Garrett has been working in the financial services industry since 2009, becoming a partner of his firm in 2014 and spearheaded major changes in the firm’s direction and scope of services over the last 10 years. He has experience in both a wholesale business model recruiting and training advisers as well as in a retail business model where he provides one-on-one planning and services to clients directly.
Thank you so much for doing this with us! Our readers would love to ‘get to know you’ a bit more. Can you tell us a story about what brought you to this specific career path?
Itwas extremely accidental! If we go back to the beginning, I was in college studying music production and I wanted to be a professional musician. I wanted a job to earn a little more money and interviewed for the role of administrative assistant in my father’s firm. It was a side job that grew into a career as I became more enamored with the industry. In 2014 I became a partner of the firm, in 2016 I launched the state registered investment adviser arm of our business, and things have just continued to grow from there.
Can you share a story about the most humorous mistake you made when you were first starting in the industry? Can you tell us what lesson or takeaway you learned from that?
I was young when I joined this industry. All the mistakes I made were humorous looking back, primarily because they were so simple and dumb. The biggest one that jumps out to me is making assumptions about clients and potential clients based on their job or industry. Again, I was young. I thought you had to be a CEO or a movie star to make real money. I remember one of our reps introduced me to a single mom making greeting cards and, in my mind, I made a judgement on if there was anything we could help with… It turned out she made $850k a year making greeting cards and had quite a bit of planning that needed to be done around tax liability, efficiently managing some business debts, saving for an early retirement, etc that I did not anticipate at all. After several similar experiences, I learned you can’t judge a book by it’s cover and, more importantly, there are brilliant creative people out there who are taking simple things like greeting cards, cardboard boxes, pizza, housing trim, etc and putting together smart business plans that lead to wild success, job creation, and more. It’s beautiful and meeting those people is the best part about working in this industry.
Are you working on any exciting new projects now? How do you think that will help people?
I indeed am. Right now I am very customer experience focused. I have been invited to a specific CRM invite only user group put together by my firm’s custodian where about 12 advisers from around the country are sharing ideas on effectively utilizing their CRM tools for both onboarding and service processes. We’ve only had one introductory meeting so far, but I’m excited to participate. I am also working with a software developer to create a very intuitive digital version of our financial questionnaire for new clients. We’ve seen a four page financial questionnaire be a tremendous burden and even a barrier to working with us for many potential clients. At the same time, we need good data in order to provide the best service to someone. By introducing some logic and “gamification” to the questionnaire I think it will be far easier, more fun, and less burdensome for people to engage with our firm, while still providing us the very detailed data we need to do our best work.
Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Is there a takeaway or lesson that others can learn from that?
Most of my career has been sustainable growth, and I am one of those people who always looks to what I can do better rather than what I’ve done successfully. That being said there was a more definitive tipping point in 2016 as I was completing my Series 65 Exam. The major difference during that time was my attitude. I had this enormous level of confidence and security with my breadth and depth of experience and I also had this shift in my perspective. Every time a potential new client left my office, I’d think to myself “I don’t need to work with this person to survive. I choose to work with this person because I feel I can make a difference for them.” and this shift in my perspective lead to a way of communicating and interacting with clients that I feel gave me a whole new level of success. When you operate from a place of abundance rather than scarcity or self-concern, you free yourself to serve others at a much higher level which will always come back to reward you.
What three pieces of advice would you give to your colleagues in the finance field to thrive and avoid burnout? Can you give a story or example?
1. Always keep learning — Our industry is one that trends a bit older. That is by no means a bad thing. We have a wealth of wisdom and experience in our industry as a result. From time to time I meet colleagues who do things because “that’s how we’ve always done it” and today that is a very quick way to become irrelevant. I recognize I’m a baby in the industry with my 10 years of experience, but even with a shorter time period of experience I continue to learn, un-learn, and re-learn. No matter how much experience you have, don’t let it become your own stumbling block, don’t forget everybody knows something you don’t, and every moment you aren’t improving yourself a competitor out there is.
2. Stop fretting over revenue — Be authentic, genuine, and serve people. Your business will grow.
3. Manage your time meticulously — I’m by no means the busiest guy in the world. Time management is really important though to avoid burnout. I heard someone say once that “there is no work/life balance. It’s just life balance. Work is part of it, family is a part of it, so is everything else”. Instead of work days/vacation days or weekdays/weekends, I just have components that I try to fit into every day. The components are (in no particular order) exercise, time with my family, productive time in my business, productive time ON my business, sleep, and relaxation. My days don’t always have ALL components. Most of my days include majority of this list though. I’ll also throw in here that I wish I was the typical business person who can get by with 4 hours of sleep. I’m just not. I require a full 8 hours to be on my A game.
Ok. Thank you for all of that. Let’s now move to the core focus of our interview. As an “finance insider”, you know much more about the finance industry than most consumers. If your loved one wanted to hire a financial advisor (not you :-)), which 5 things would you advise them to find out about before committing? Can you give an example or story for each?
There are definitely a handful of things I recommend figuring out. I think the best way to determine all of these things is by interviewing several advisers that you are considering working with before making a decision to do business with someone. Before we get started, I’d also like to recommend you apply these 5 things collectively rather than just applying, say, number 3 and ruling them out because you don’t like what you see. Really take the time to apply all of these to a few different advisers to give you the best perspective and experience to make a final decision.
1. My first piece of advice is: go beyond their title. Everybody is a “financial advisor”, branch manager, or something similar that is very generalizing. These don’t always tell you what a professional can or will do for you. Instead, check out licenses, designations, and talk to them. The big licenses are Series 6, 63, 7, 66, 65, and an insurance license.
○ A Series 6 and Series 63 allow a professional to work as a registered representative for a broker dealer, they are basically a salesperson who’s products are securities (investments) similar to a realtor/broker relationship. They get compensated by commissions when they sell a securities product. They are held to what is called a suitability standard and they have arguably the most conflicts of interest due to this and their commission only compensation model.
○ A Series 65 allows a professional to work as an investment adviser representative of a registered investment advisory firm (RIA). These professionals can’t be compensated by commissions, but instead provide services for a fee. They can provide investment advice as well as portfolio management services. Their fee is most commonly a percentage of assets they manage, but it can also be an hourly fee, flat fee for service, and there are other creative business models out there. They are held to a more strict fiduciary standard and have arguably the fewest conflicts of interest due to this.
○ A Series 7 and Series 66 are sort of a hybrid where the professional can work as both a registered rep for a broker dealer AND an investment adviser representative for a RIA. This is probably the most common set of licenses as most national firms require this of their reps.
○ An insurance license is commonly held by all of the above and it allows the professional to give advice and sell insurance products like life insurance and annuities. This license does allow for commissions from the sale of insurance products and is considered separate from any securities related advice, recommendations, or compensation models.
There isn’t necessarily one arrangement that is better than another for everybody, just consider what your needs and preferences are as well as if any conflicts of interest will be an issue . Series 6/63 is probably cheaper over the long run if you are going to buy and hold an asset for a long time. This also can be a good arrangement if you are a DIY type of person who wants help from a professional narrowing down choices. The Series 65 is great for advice, planning, and portfolio management. The thing to watch out for here is the services received for any fees paid. Make sure the fee you pay is appropriate as a percentage and make sure you are receiving the scope of services promised for that fee. Some advisers’ portfolio management strategies are more complex and more labor intense that would command a higher fee while others are more passive and would command a lower fee. I’ve seen clients come in with statements from other firms where another adviser is charging 2% of assets under management on top of the net expense ratios in the mutual funds being used for a passive strategy which is far too high. Series 7/66 is good for both arrangements, I’d say just watch out for which hat they are wearing when they engage with you. They can operate on both the broker dealer and the RIA side so I always want the client to understand when they are being served by a registered rep held to a suitability standard in a brokerage account vs. an investment adviser rep held to a fiduciary standard in an advisory account.
2. What is the planning style of the adviser and/or the firm? It’s good to find out if planning and advice is provided at all (or do they only carry a Series 6/63?), if so are they taking into account inflation and/or taxation in their financial plans? Many people have become concerned with this idea of having a magic number they need to save. We’ve all heard about the 4% rule as a prudent percentage of a portfolio you can spend down each year. We then reverse engineer that into how much money we need to accumulate to meet the magic goal number. If someone makes $60k a year and we divide that by 4%, we come up with $1.5M and many people look at that and call it a good goal for a retirement nest egg. Does the adviser you are considering working with take into account the tax liability and control a client will have in retirement based on the accounts they have? We may end up needing much more or less than $1.5M if the client has it all saved up in a 401k that’s fully taxable vs. a Roth IRA that is spent tax free. We also need to remember inflation erodes our purchasing power over time. Assuming 3% inflation, expenses double about every 23 years. So that $1.5M for a 40 year old quickly becomes $3M needed at retirement to have the same lifestyle that $1.5M affords today. That person also needs to plan for 25+ years in retirement, so we need to plan for giving ourselves raises in retirement to keep up with our rising expenses as well! Our $1.5M magic number might need to be more like $4-$6M and you don’t want to end up with too little saved! Also roped into this piece of advice: ask about their planning process! With “FinTech” (financial technology) becoming more advanced, we financial service professionals have unbelievable resources for creating plans, modeling scenarios, providing portfolio management, and the list goes on. All of this tech helps deliver very specific and tailored services to each client, however there needs to be an overarching consistency in processes that an adviser can explain to you so you know what to expect out of the relationship. Every adviser is different not just in their menu of services, but how they go about delivering those services. Speaking personally, our firm had education, onboarding, and planning down to a science for years. We have a robust 10 step process that is rigid enough for consistent client experience, but flexible enough to remain highly personal. We were just terrible once the initial year or so of work was done though! We were always operating reactively later in the client relationship. We had to spend some serious time and resources figuring out how to make our ongoing service experience as thoughtful as our initial services experience. For clients who were more hands on, they may not have minded our old processes. If you like constant proactive communication from your adviser, annual reviews set a year in advance like your dentist, etc you probably would have been quite frustrated with us back then. Find out about these processes up front.
3. Do a search on BrokerCheck and read any of their disclosures. Anybody can go to brokercheck.finra.org and do a name search for the advisers they want to consider working with. You can get information on which of the exams they have passed we discussed previously. You can also see any customer complaints, disciplinary action, how long they have been in the business, and more. This is a very underutilized tool everybody has access to. The other thing to read is any disclosure material they give you. Investment adviser reps for instance have a document called an “ADV” and there are different parts of this brochure. The Part 2A can be long and boring about the firm and it’s services. It is well worth reading through this to learn more about the firm. If you are going to skip the 2A, PLEASE read the Part 2B. This is specific to the investment adviser rep and discloses work experience, education, certain disclosures like if they have a bankruptcy in their past, etc.
4. Find out how historical returns are calculated. This is both important for you to understand and to find out exactly how an adviser would communicate this to you. Everybody has heard someone on TV, radio, a written publication, or in person talk about an asset’s “average” rate of return, right? Did you know there are multiple ways to calculate an average though? A simple average is created like we learned in grade school math: sum all of the returns, then divide by the number of inputs. I’ll use an example from the S&P 500 index returns between 2006 and 2009 to illustrate the problem with this. The returns during that four year period were 13.62%, 3.53%, -38.49%, and 23.45% respectively. Get out your calculator with me and triple check my math. If we take the sum of these we have 40.6% minus 38.49% which equals 2.11%. Divided by 4 inputs, that equals an average of 0.5275%. A positive result over that 4 year period. The second way of calculating this return is called the annualized total return. Also called a geometric average or actual annualized return. It is far more accurate when calculating a return on your investment because any time you introduce a negative value into a simple average, it would skew what your actual results are and a simple average does not take into account compounding interest. We care about what our money was or could be worth at the end of the day, and as a result we want to be paying attention to annualized total returns.
5. Set your expectations appropriately. I cannot believe how many potential clients and existing clients came through my doors telling me they won’t work with me unless I can get them a 12% return because someone on the radio said that’s normal, or one of their accounts is supposed to be earning a 15% annualized return because a former adviser told them that’s normal. The most frustrating is when I hear “your projected portfolio returns are too low, I need higher returns”. In setting your expectations please remember to answer these two questions: 1. What has the market actually done and what is realistic to expect, NOT factoring in emotion, marketing hype, or anything else. 2. What are you hiring an adviser to do for you? Let’s answer number one first. From 1936 to 2018, the S&P 500 total return with dividends reinvested averaged 11.95%. I see where that 12% expectation came from! The annualized total return over that same period was only 10.45% though. This also assumes an 83 year time horizon which the typical person does not have, and statistically the longer the time period, the closer you will track to the average. This also assumes no fees which is pretty much impossible. At some point you will pay a transaction fee, custodian fee, net expense ratio to a fund manager, management fee to an adviser, or a combination of these fees… Just tacking on a 1% management fee brings our return down to 9.45%. The S&P 500 is an index comprised of 500 large market cap United States company stocks. When you put together a portfolio you probably have some international stocks, maybe some small or mid cap companies’ stock, etc so this isn’t quite apples to apples, but not everybody is investing in 100% stocks either, some of your assets may be fixed income or other asset classes. Therefore I suggest a high water mark of 9.5% a year at MOST and commonly use 8.5% down to 4% depending on how the portfolio is constructed. This leads us to that 2nd question. What are you hiring an adviser to do? Most people have some end goal for these assets they are accumulating, right? Is it helpful if an adviser helps you plan for retirement using a 12% annualized total return only to arrive at retirement and realize your short on money? Look for somebody who is going to set realistic expectations with high probability of being able to meet those expectations. I run my wife’s and my own personal financial model assuming an 8% annualized total return net of fees. I have our assets split up about 95% equities/5% fixed income and insurance products appropriately for our risk tolerance. I could get lucky and earn more which would be icing on the cake. I’d rather use 8% now to increase the probability that I will get to retirement and be satisfied with my decisions along the way rather than bet my wife’s and my retirement on a best-case-scenario outcome.
I think most people think that financial advisors are for very wealthy people. This is likely not actually true. Can you explain who would most benefit from hiring a financial advisor and why? Can you give an example?
My wife and I were talking about this the other day. She was commenting “your job is to help people keep more of what they earn and grow what they already have. Why doesn’t EVERYONE have a financial adviser?”. I think some of it is self inflicted. There are many advisers who have minimum investable assets or minimum net worth requirements to engage with someone. These are commonly the firms doing more widespread advertising. It creates this perception that you have to be very wealthy to hire an adviser. I personally think everybody could benefit in some form or another from working with an adviser. If you are a DIY fan though, I would say at least consider working with an adviser if you own your own profitable business or if money causes you stress or any other negative emotional reaction. If you own your own business there are multiple layers of complexity in your plan that affect your business and you personally. There are usually very meaningful tangible benefits to working with an adviser in that situation. If you experience any negative emotional reaction caused by thinking about money, budgeting, etc then there is usually an underlying issue(s) which can be put onto an adviser’s shoulders. They can work on and fix issues while being more calculated and strategic rather than emotional.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
Oh man, so many. My father introduced me to the business and gave me my first shot. It took months of interviews to get that admin job too… Also, several reps who joined our firm while I was still new to the industry really held me to a high standard in my first support role. Being so young, new in the business, and the boss’s son, it was extremely helpful to have at least a few people unafraid to tell me what I was doing wrong and demand more out of me. It was frustrating in the moment, but helped me get up to speed and accel in the industry quickly.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
This is off the cuff so I probably don’t have as much detail as I should, but I’d love to create a movement making it trendy to live below your means. My business partner coined a phrase “everybody is broke, some people are just broke at higher levels.” and it frustrates me how true that is today. With social media fueling comparison and marketing becoming more advanced and strategic every day I cannot believe what people spend money on and how much of it they are willing to exchange for a product. Everybody is spending money like life is a sprint. It’s a marathon and I believe we would enjoy it substantially more if we could pace ourselves… I bought my own birthday present this year on September 12th. My birthday is in May. I’m not saying you can’t buy yourself a fine swiss watch, I’m just saying there is nothing wrong with delaying that fun splurge and spreading things out over time. I knew we needed to re-roof our house and do some other things. Even though we could pay cash for all of it, it just didn’t feel prudent to take it on all at once when we could spread it out over a few months.
How can our readers follow you on social media?
Thank you so much for joining us. This was very inspirational.