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Sluggish Economy Seen as Boon for Financial Planners

By MIKE ALLEN – 5/26/2008
San Diego Business Journal Staff

It may be tough times for mortgage bankers and brokers, but if you’re in the financial planning sector, this could be the best of times.

“Business has never been better,” said Jacob Cooper, co-owner of Total Wealth Management, a Mission Valley-based financial advisory firm. “Our business is almost recession-proof. When things are going well, people want to invest, and when there are down times, people circle back and realize they can’t throw darts at stocks and win. They need a plan.”

Retirement planners say they are being inundated from a surge of baby boomers, the oldest of whom are getting ready to retire. Those looking to retire within the next 15 years, about 77 million by one estimate, are seeking help in figuring how to maintain their lifestyles after they leave their jobs.

Total Wealth Management, which Cooper founded in 2005 with partner Douglas Shoemaker, has increased its clients to about 300, rising by an average of about 25 percent annually. TWM’s assets under management, which Cooper declined to reveal, have tripled during the same time.

The slowing economy combined with one of the most volatile stock markets in recent years has caused many workers nearing retirement age to re-evaluate their investment decisions, and reduce their exposure to stocks.

A recent survey done by the Bank of America’s Retirement Solutions unit found that in San Diego, 40 percent of those surveyed changed their retirement assets by reducing their stock investments. The same survey showed that 46 percent of those queried here were less inclined to invest because of the current economic situation.

That type of behavior is probably not wise, said Jeff Carney, president of the retirement unit. “If you try to time the market, you’re going to fail,” he said.

Carney said determining how much a person will need in their retirement years, and how to best get there are things every worker needs to do. Bank of America provides a retirement calculator at bankofamerica.com that shows how much a worker will need, and what steps can be taken to achieve the desired savings.

Chris Rand, a certified financial planner working for Met Life in San Diego, said more workers are seeking out professional planners, especially because so many are relying on pension plans where investment choices are made by pension fund managers.

What was previously a service that was geared to wealthy people is now viewed as a necessity by many middle class workers, Rand said.

Over the past three years, MetLife’s local staff has doubled to about 50 advisors, said company spokeswoman Holly Sheffer.

Rand, and many other financial planners usually charge fees for their services that vary according to how extensive the services are and whether the firm will be managing the person’s assets.

J. Graydon Coghlan, who operates a financial planning firm based in University City, said his fees range in average from 1 to 1.25 percent of a client’s assets. Yet those with larger portfolios and a lower risk tolerance (meaning less time spent managing the portfolio) generally pay lower rates.

Coghlan has been picking up more clients from a wave of corporate consolidations that have resulted in many workers taking early retirement payouts and receiving their pensions in lump sum payments.

“All of a sudden their handed three quarters of a million to a million dollars to manage and they have very little experience in managing that kind of money,” Coghlan said.

Depending on their time horizon for beginning withdrawals on their accounts, and what their risk tolerance is, Coghlan maps out a strategy that puts in emphasis on preservation of assets, he said.

Coghlan declined to provide his firm’s total assets under management, but said the number has doubled in the past three years, and has increased by an average of more than $40 million annually.

Founded in 2002 with four persons, Coghlan Financial now has 19 employees, including seven financial advisors working at three offices in San Diego, San Ramon and Los Angeles. A fourth office is planned for Sacramento.

While there’s a plethora of data out there to help folks plan their retirements, and figure out how they can best achieve their goals, most people are just not inclined to do it on their own, Coghlan said.

“A lot of people just don’t have the interest,” he said. “They’d rather pay someone else to do it and do something else with their time.”