When his wife decided to stay home with their son two years ago, leaving the family with a sole income, Scott Hatmaker knew it was time to get serious about his financial health. Though he had been approached by a few college buddies who had gone into financial planning, he felt uneasy investing with a friend, and knew there were better advisors out there–in fact, his dad had been a longtime client of Creative Financial Group Ltd., one of the top firms in Atlanta.
But there was one problem: Scott and his wife, Amy, had only $150,000 to invest. Even with his dad as a reference, Scott thought it might not be enough to get in with Creative Financial, which ordinarily requires its clients to have $500,000 in investable assets. "I figured the best I could get was a cookie-cutter financial plan to execute," says the 31-year-old executive from Atlanta. "'Here you go, now do this.'"
It's a common dilemma. Many top firms require portfolios of at least that much before they'll welcome you into the fold. And private banks? Forget it. Their minimum initial investment by law is $1 million. So while big-money guys have their own personal brokers to call on, most upper-middle-class investors are stuck with one of two unappealing choices: small-time commission-based financial planners, who spend more time pushing life insurance than managing investments, or big brokerage houses, which treat even relatively well-heeled investors like small potatoes.
But the Hatmakers figured out a way to get million-dollar service for their modest portfolio. And you can, too. We've outlined five strategies that upper-mid-tier investors can use to get the same kind of service ordinarily available only to millionaires. We're talking about face-to-face advice from seasoned professionals who can help you with every corner of your financial life. Start here, and for more great wealth advice, here are 5 Ways Billionaires Think Differently Than Most People.
1 | Seek out a junior planner
While most elite firms may have published minimum-investment requirements that seem to rule out the smaller investor, remember the first rule of finance: Everything's negotiable. Many top firms, in fact, have "junior planner" programs they won't tell you about—unless you ask. When the Hatmakers approached Creative Financial about managing their money, they were assigned to a young advisor named Walt Helms, who was then 30 years-old but who had been working with the firm for more than four years. Helms says that when his firm gets a referral to a client who falls under stated minimums, but who has the chance for growth, Creative Financial will call in a junior planner like himself to oversee the account. "We want to build clients who will be with us for a long time," says Helms. "I am going to be able to grow with the client for 15 to 20 years."
Working with a junior partner didn't mean that the Hatmakers got shorted on service. Every move Helms made in their account was watched over by one of the firm's experts. "The same people who are investing $5 million are overseeing these accounts," says Helms. In fact, a junior planner may provide even more personalized service. Every meeting Helms held with the Hatmakers was at their home.
2 | Get out of town
You're more likely to find a high-net-worth advisor who will give you the time of day if you look in a medium-sized city, or just on the outskirts of a major metropolitan area. That's what Gary Waugh did. A then-manager for Sears in the Chicago suburb of Hoffman Estates (he's now working for Macy's), Waugh never thought he could get personalized service for his $250,000 portfolio. He knew about some high-rated investment firms in Chicago, but figured they were out of his league.
Then, at a dinner party, Waugh heard two retired teachers talking about their great investment advisor in the central Illinois city of Rockford. Brent Brodeski, a Rockford native, had founded Savant Capital more than a decade before and run it with such expertise that he had earned a place on just about every "best advisor" list. But because Rockford was a city of just 150,000 about a hundred miles west of Chicago, its market size forced Savant to drive minimum investments down far below those of advisors serving the big city. While top planners in Chicago and the surrounding suburbs demand a seven-figure investment, Savant requires just $250,000. The level of service, though, can be exemplary. "I thought I'd get the entry-level guys," Waugh says, "but the service was personalized, detailed, and top-of-the-line all the way."
The same strategy applies to other metropolitan areas. There are top-ranked advisors in central New Jersey for New Yorkers, in the East Bay for people in San Francisco, in Colorado Springs for Denverites.
3 | Pool your assets
To achieve even the relaxed minimums at top money-managing firms, you may have to tidy up your financial house. Case in point: Before they linked up with Walt Helms and Creative Financial, the Hatmakers held their assets in four separate accounts. Scott had a company stock plan through one company and his 401(k), and Amy had a stock plan with her employer as well as a 401(k) of her own. But by combining the values of all four accounts, the Hatmakers met the relaxed minimums set for Creative Financial's junior planners.
It doesn't have to be just about combining spousal assets, either. Brodeski, of Savant Capital, works with investors and their parents, in-laws, even brothers and sisters. The enhanced assets offer the investing family more clout, and Brodeski points out that most advisors like building those familial relationships to enhance their client base. "While I cannot speak for all advisors, we really like and encourage family relationships," Brodeski says. "We are willing to take on kids, grandkids, and other close family relationships of good clients--even though they are below normal minimums. This way, if we're successful, we already have a relationship with the future heirs."
If you do team up with family members, it's important to hash out your investing styles and strategies beforehand--or plan to keep your assets separated. Many advisors are willing or even eager to help you do that. "The only caveat is that though you're pooling your assets, the underlying accounts should still remain segregated," says Brodeski. "Otherwise, one runs into tax, estate, liability, and logistical challenges. Also, one family member may be more aggressive while the other is conservative."
4 | Find a broker you can talk to
If you feel like all you need is a competent broker to execute your stock trades, focus on getting one with whom you can develop a personal relationship. It helps if you can find a broker with a local office, where you can get to know the person who's handling your money and who wants your business. Several brokerages position themselves as good options for the investor in the $250,000 range.
Charles Schwab, for instance, gets high marks from financial advisors, and has a network of 340 offices nationwide. "Schwab provides quality service combined with reasonable costs for this [middle-class] market segment," says Helms. "And their branches provide plenty of opportunity for face-to-face discussion."
5 | Pay by the hour
ShutterstockMany wealthy and sophisticated investors pursue the long-term strategies exemplified by Warren Buffett: buying stocks to hold forever and avoiding the complex derivatives that crashed and burned in the financial crisis. And if it's information on a stock or a fund or a bond they seek, the Internet generally provides all the research they need. So why pay a money manager every year, when you may not have even made a trade that year?
Such thinking has given rise to the idea of the hourly planner. These advisors will give you all the advice you need, but no more than you feel like paying for. If you have a reasonably good idea of how you want to invest, you can rely on an hourly planner for the advice you need without having to keep that person on the payroll. "You don't keep your dentist or CPA on retainer," says Sheryl Garrett, a financial advisor, "so why keep your investment advisor that way?"
Hourly planners tend to be more veteran advisors who find that moving to an hourly structure allows them to focus on fewer cases, so the clients end up benefiting from their experience. Fees are generally $150 to $300 an hour, depending on the individual advisors, who provide written estimates up front for whatever level of services the customer wants. It's an inexpensive way to get high-level personalized advice without feeling as if your advisor is thinking more about his future than yours.
And when it comes to financial advice, that just may be the Holy Grail.
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