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“Make a plan.” with Paul Partridge and Tyler Gallagher

I’d like to see more men and women take the planning part of financial planning seriously. A prudent investor should have a year-by-year plan. Including where to invest. Why. And how to take the money out when you need it (because withdrawing money from the wrong account at the wrong time can hurt performance and cost you […]

I’d like to see more men and women take the planning part of financial planning seriously. A prudent investor should have a year-by-year plan. Including where to invest. Why. And how to take the money out when you need it (because withdrawing money from the wrong account at the wrong time can hurt performance and cost you higher taxes).

As part of our series about what one should look for when hiring a financial planner or adviser, I had the pleasure of interviewing Paul Partridge, co-founder and managing partner of Sage Financial Partners in Springfield, NJ (https://sagefinancialpartners.com/). The focus of Paul’s practice is retirement planning and investing — helping clients secure a comfortable retirement by protecting wealth, controlling taxes and growing assets without taking big risks. He’s been a visiting scholar at High Point University and was editor of the book, “Changing the Face of Accounting.”


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?

I grew up in a middle class home. Neither of my parents graduated from college. Through hard work and sacrifice my father was able to save a little bit of money. A stockbroker he played golf with convinced him to invest the money in Microsoft stock. That turned out to be great advice, and that investment paid for college for my two sisters and me, and funded a retirement nest egg for my parents. The only financial advice I ever heard from my father was, “Don’t sell the Microsoft.” When Dad died, Microsoft was at an all-time high and the advisor suggested selling it. My mother refused. The stock steadily fell, and my mother lost a bunch of money. After years of watching it go down, she finally sold — right near the bottom. So she basically locked in her losses.

That experience got me thinking about investing and more specifically retirement investing. I thought, “There’s got to be a way for people to have a better, more reliable outcome.” And that’s been a driving motivation in my career.

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?

Back in 2008 during the stock market crash, a gentleman came to see us. He was a broken man. He’d lost a lot of money speculating in stocks. He’d lost his job as well — a job that paid him over $300,000 a year. He was panicked that he couldn’t pay his mortgage and couldn’t pay for his kids to go to college. He wept openly and pleaded with us to come up with a plan to remedy his situation. My partner and I agreed to help, and told him to come back in a few weeks. When he returned, we expected him to applaud our ingenious plan. Instead, he rejected everything about it. Turns out in the interim he’d landed a new position, which totally changed his outlook and demeanor. He ridiculed our plan as being way too conservative and for not including any of the type of investments he favored (the ones where he’d sustained sizable losses by the way).

That was an awakening moment. Two lessons learned:
1) people are most influenced by their most recent experiences
2) financial decisions are often more emotional than logical/rational

Are you working on any exciting new projects now? How do you think that will help people?

Over the years we’ve noticed a discrepancy between what people “think” is in their portfolio vs. what they actually own. For example, lots of sixty-year-olds declare themselves conservative or moderately conservative investors. But then their account statements show that 90% of their savings is tied up in the stock market. This is not a conservative portfolio for someone knocking on the door of retirement.

We have a new, free calculator on our website that helps investors determine their Personal Risk Score, and if they have the right mix of investments in their portfolio.

It can be a real eye-opener when people discover that their investments are not aligned with their Personal Risk Score. The calculator can help you find a mix of investments to best match your Personal Risk Score and overall investment goals.

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?

When we first started out we were generalists — we’d help anyone with anything, whether it was college planning, retirement planning, business exit strategies, whatever.

Our business got better for us — and we’re able to serve clients on a much higher level — when we put 100% our energies and focus into retirement planning and dropped everything else. Instead of being pretty good at everything, we wanted to become experts at one thing — in our case, retirement planning and retirement investing.

The takeaway is you can’t be good at everything. So find your niche and go deep.

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?

The three pieces of advice I’d give are:
(1) Listen more than you talk. (That’s probably good advice for anyone.)
(2) Add value. By that I mean do more than what’s expected. For example, we try to add value 3 ways before we even have a conversation about investments. First we help clients FIND money — by showing how to maximize Social Security benefits (most retirees don’t capture all the benefits they’ve earned and to which they’re entitled). Second, we help them SAVE money — usually by looking at income taxes, RMDs (required minimum distributions) and taxes on Social Security and pointing out opportunities to potentially lower these money drains. Third, we build a plan to PROTECT their money — because there’s less time to make up for losses later in life. It’s only after we cover these three bases that we begin to talk about investments, allocations, stock selection, etc.
(3) Do no harm. Doctors take a Hippocratic oath that says, “Do no harm.” I think financial professionals should have a similar oath. Many men and women we meet have a decent amount of savings. They don’t need to take excessive risk with their money. Sure, they’d like to have some growth, and we can do that, but step 1 is don’t lose money.

Ok. Thank you for all of that. Let’s now move to the core focus of our interview. As a “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?

1.) What do you specialize in?

According to Cerulli Associates there are over 300,000 financial advisors in the U.S. And most of them are generalists. Meaning they treat their clients generally the same. Whether you’re 30 or 60, they fit you into one of their generic investment templates regardless of your age or circumstances.

But what if you’re not a generic person? What if you’re a 67-year-old divorced woman who’s worried about running out of money in retirement? A generalist may not cut it for you. A specialist with expertise in Social Security, Medicare, retirement planning, retirement investing, and asset protection might be a better fit.

There are financial professionals who specialize in business owners . . . college professors . . . union members . . . ultra wealthy investors . . . doctors . . . dentists . . . professional athletes, etc. Find one that matches your particular financial situation and risk level. Verify that their strengths are in sync with your needs.

2.) What will you do for me besides invest my money?

Does your financial life extend beyond where your assets are invested? For most, the answer is yes. All sorts of things play a roll in our financial health — mortgages, property taxes, car loans, insurance, etc. And how we deal with one — or not deal with it — may impact our pocketbook beyond whether our portfolio is up or down this week.

Some advisory firms are concerned only about the ups and downs in the stock market. There can be a cost to this type of tunnel vision. For example, I’m always surprised when I meet men and women who don’t regularly discuss taxes with their financial advisor. I recently saw a case where a business owner’s advisors were chasing after an extra one or two percent in the stock market while ignoring $3 million in potential tax savings. A firm with a big-picture perspective that included taxes might have better served him.

It’s important to know what services a financial advisor provides besides money management. For example, if you’re doing a complete financial plan, you’ll likely need someone who has experience in insurance as well as investing.

3.) How are my accounts and investments impacted by taxes?

Why do we save? For many, a primary goal is funding retirement. Since taxes are often a big expense item in retirement, saving money on taxes can have a significant impact on our retirement lifestyle. Many advisors perpetuate the myth that taxes will be lower in retirement. Our co-founder is an accountant who startles prospects with this simple question: “If your taxes are lower in retirement, doesn’t that mean your retirement income is less than your working income?”

Is that what you want? If so, feel free to ignore taxes. Otherwise, make sure your advisor is knowledgeable about the tax code and can point out potential ways to lower your tax bill. Once aware, you can have a discussion with your tax professional. Being alert to taxes is especially important if you believe taxes are going up in the future.

Investing your money without paying attention to taxes is like owning a restaurant and not watching the cash register. You may have a nice amount of cash coming in but you may have a lot disappearing, as well.

4.) How will you protect what I have?

Let’s say you have an investment that loses 50%. How much does it have to grow to recoup your losses? The answer is not 50%. It’s 100%. You need to double your money just to get back to where you started.

This simple math exercise underscores why losses hurt investment performance more than gains help. This is especially true as we get older and don’t have the time to recover.

If investing is a tradeoff between risk and return, you’ll want to know how a potential financial advisor manages risk given your risk tolerance. For example, how we invest for retirement should be different than how we invest during retirement.

On the wall of our conference room is this quote from Benjamin Graham, Warren Buffett’s mentor: “The essence of investment management is the management of risks, not the management of returns.”

An advisor itching to talk about growing your money before talking about protecting your money may be an advisor to be wary of.

5.) What’s your own investment plan?

Our office sits 22 miles west of New York City in New Jersey. Over the years we’ve met lots of people who work in the financial markets — from stockbrokers to hedge fund managers. An observation: When it comes to their own money, Wall Streeters often avoid the very products they sell to others every day.

What does that tell you?

It’s fair game to ask an advisor how they manage their own money. After all, you’re not asking them to divulge their net worth or give an account-by-account audit. But this is a good way to get past the smoke and mirrors and to uncover the advisor’s personal investment philosophy. And don’t you want to know if the financial advisor puts his money where his mouth is?

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?

Actually it’s the wealthy that probably need financial advice the least, because they’re able to sustain losses more than someone with fewer assets.

A strange question I hear often is, “At what age am I going to be eating dog food?” The surprising thing to me is that the person asking this question is typically not penniless. Usually it’s someone in their 50’s or 60’s with between $1 to $2 million in savings. Lots of folks have done fine saving money on their own. But when they get to the point where they have to start taking withdrawals, they’re in new territory and are less confident. They’re worried about making a mistake and the money running out. This is when a good advisor can be especially valuable — by safeguarding assets and designing a safe, reliable distribution plan that protects their lifestyle.

Also . . . almost anyone can make money in up markets. It’s in down markets when an advisor earns his or her stripes. There’s an old saying that goes, “Smart people learn from their mistakes; wise people learn from the mistakes of others.” That’s what you’re doing when you go to a financial advisor — you’re leveraging collective wisdom.

Recently I saw where Nationwide conducted a survey on whether working with an advisor is beneficial. The data showed that retires working with a financial advisor reported receiving 17% more in monthly Social Security benefits that those who do not ($1,551/month vs. $1,324). They also reported being much more able to do the things they want in retirement (90% vs. 56%).

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?

I could name a number of people. Bill Comeau is a person who gave me guidance at an important crossroad — in my first real job after college. At the time I was very involved in playing and writing music. I was trying to decide if I should focus on a business career or pursue musical interests. Bill was a successful businessman and a successful musician, so I respected his opinion. He gently guided me to choose business in a way few other people could have. He saved me from going down the wrong path.

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. 🙂

Most people don’t go on vacation, or to the grocery store, or even to the mall without a plan. Yet when it comes to their investments, they don’t bother with a plan. They cobble together a collection of random investments — sometime heavily weighted in the stock market — and their “plan” is to cross their fingers and hope the market doesn’t go down.

Many investors have learned the hard way that hope is not a plan.

A Harvard Business Study compared graduates who wrote down their goals versus those who didn’t. The 3% who had a written plan earned 10 times more than the 97% who didn’t have a written plan ten years after graduation.

I’d like to see more men and women take the planning part of financial planning seriously. A prudent investor should have a year-by-year plan. Including where to invest. Why. And how to take the money out when you need it (because withdrawing money from the wrong account at the wrong time can hurt performance and cost you higher taxes).

How can our readers follow you on social media?

https://www.facebook.com/SageFinancialPartners

https://www.linkedin.com/company/35477396/admin/

Thank you so much for joining us. This was very inspirational.

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