“5 Things To Look For When Hiring a Financial Planner or Financial Adviser”, with Randy Kurtz and Tyler Gallagher

Does the advisor mention risk at all? Most advisors focus their pitch on their past returns. But they cannot guarantee they’ll repeat their results. People facing retirement are more concerned about losing money than making a lot more money. If the advisor doesn’t center the conversation around risk, they probably don’t understand it.

As part of our series about what one should look for when hiring a financial planner or adviser, I had the pleasure of interviewing: Randy Kurtz, Chief Investment Officer at Upper Left Wealth Management. Randy Kurtz is a nationally recognized expert on risk. A Registered Investment Advisor and CFP® managing individuals’ assets, he’s been challenging the financial industry’s status quo for over a decade. Randy feels the standard 70/30 portfolio allocation Wall Street is doling out comes with far more risk than clients realize. His goal is to transform the industry by turning the client-advisor relationship from a return-centered conversation to a risk-centered one. He created the DataDriven Process, a method of investing that aims to reduce a client’s likely range of outcomes without reducing expected return. Return doesn’t exist without risk, and this philosophy is the backbone of his firm Upper Left Wealth Management. Randy’s methodology means his clients have a clear plan to reach their goals. Upper Left Wealth Management is risk-focused, delivering lower volatility portfolios, planning solutions and advice to individuals nearing retirement. In 2019 Kurtz founded DataDriven Advisor to transform an advisors’ business with super-diversified portfolios. The DataDriven Process aims to lower volatility and a portfolio’s risk. Lower risk means less fluctuation, so the advisor can spend less time defending their value and more on client concerns. With superior presentations and outsourced trading and rebalancing, advisors can thrive.

Thank you so much for doing this with us, Randy! 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 wanted to be a great stock picker. I began working at Bear Stearns on a seven billion dollar mutual fund. I didn’t agree with the Wall Street practice of charging clients regardless of performance, so I started my own firm but only charged fees if I outperformed the S&P 500. I did pretty well, and at one point was ranked in Barron’s as the top performer in the country. But I never spoke to my clients. I never gave them advice. Even if I outperformed the S&P by a few percentage points, I wasn’t changing my clients’ lives.

I wanted to make more of an impact. I needed to become a holistic advisor, not just managing portfolios but providing financial planning and estate management advice. I read every book I could find on financial advice. On the portfolio side I found that people who are on track care more about risk (getting knocked off course) than they do about returns (making a killing in the markets). I had been an expert on returns, but my new life required me to become an expert on risk.

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?

When I was a stock picker, one stock I researched looked like it would pay a large, 1-time dividend. This was in 2006. I picked up a graduate school textbook — from 1999 — to do some research. The textbook said I should be able to make a tidy profit from purchasing put-options if there was going to be a large, unannounced dividend, so I purchased options. Eventually I realized that since the textbook was published, everything had changed! In 2004 Microsoft announced the largest dividend payment in American history. This meant there was a new rule and you could no longer profit from what I did. I quickly sold my options position at about break-even.

I learned you always need to keep educating yourself. The world is always changing, and you need to constantly stay on top of things. This is especially true with taxes and estate planning.

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

My focus is on super-diversification, which can lower risk for clients. Most advisors don’t want to manage money — they’re better at focusing on planning. When I show advisors what I do with super-diversification they tell me how they’d like to have that power. I just launched my second company, DataDriven Advisor. It’s for financial advisors, and they can use my model portfolios and research for their work, including my DataDriven Process. I’m greatly expanding the number of end-clients my work impacts, changing more lives than I ever could on my own.

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?

I created my own Monte Carlo forecaster, which runs thousands of scenarios to determine what percent of the time the client will have success. For a client in good shape, the forecaster may show 85% chance of survival. For a 65 year old with $2,000,000, 85% odds are pretty good. But I realized by the time that client was 100, he’d have between zero and seven million dollars. That’s an uncomfortably wide range of outcomes.

I started researching Nobel Prize-winning economic theories on portfolio construction and found that most of the financial industry succumbs to what is called “home bias”, placing the majority of your assets in your home country. That type of portfolio takes on a higher level of risk without a corresponding level of expected returns. Long before I came around, people knew a globally diversified portfolio has less risk than one with home bias. Less risk leads to a narrower range of outcomes. That’s what clients really want: a narrower and more predictive range of future outcomes.

Understanding risk and range of outcomes, and having the ability to show this to clients and prospects, really changed everything for my business and put me on a course of rapid growth.

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. Understand the power of advice. Too many advisors believe they can sign up a client, place their assets in a generic portfolio, and never do anything else. But providing value through advice is a game changer. The more effective advice you provide, the more value you create, and you create a tight bond. The tighter the bond you create with your clients, the more referrals you get.

2. You have to constantly be learning and pushing the ball forward. The industry always evolves, and laws are always changing. Advisors really need to spend time on continuing education. Go to as many conferences as you can, and participate. Read as many books as you can. The more educated you are, the more good advice you can provide. If you are not engaged in some form of continuous education, you are falling behind.

3. You need to love what you do to the point you constantly think about it. Yes, this might not make me the most well-rounded person, because I only read books about finance and being an advisor. But this is my passion. I constantly think about how I can push the envelope. If your work isn’t stimulating, you might be in the wrong profession. When you truly love what you do, it resonates, and people pick up on that. People want to work with professionals who love their job.

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?

1. Does the advisor provide value at the first meeting? The advisor should overflow with valuable actionable advice. This discussion should be 80% about you, not about how great the advisor is. There is no room for “I can only give you advice if you pay me first.” People like that never have advice.

2. Does the advisor mention risk at all? Most advisors focus their pitch on their past returns. But they cannot guarantee they’ll repeat their results. People facing retirement are more concerned about losing money than making a lot more money. If the advisor doesn’t center the conversation around risk, they probably don’t understand it.

3. Does the advisor ask you to sign on the dotted line? The first meeting should be all about demonstrating expertise and measuring personal fit. You should never be asked to sign up on day one.

4. Does their educational and career background make sense? Every doctor you visit has been to medical school. Every lawyer you have seen has been to law school. Where does your financial advisor come from? Many advisors have a limited educational background and experience. The only litmus test for the industry is a test or two, but those tests don’t mean someone can dispense good advice or manage a person’s life savings.

5. Does the advisor bring up fees? Do they make sure you know their fees? This business is all about transparency and trust. If the advisor is not bringing up how much they charge, then stay away.

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?

All my clients who have ‘made it’ saved as much as they could for decades. Until your 50’s the priority is to save as much as possible. You don’t need much in the way of ongoing financial planning. But someone near or in retirement needs a ton of advice. There are questions about what type of mortgage is best, which accounts to pull money from and when, when to start drawing from social security, how to structure an estate, and there is no room for guesswork. It’s more about the stage of life you’re in than assets you have. People in or near retirement should not be guessing. They should find the best advisor they can get.

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?

Michael Mauboussin was one of my professors at business school. He taught me the power of process, and to focus on the process with the best odds of success. The results can be unpredictable, but following a process is the best way to make complicated decisions. When I ask, “What should the first interaction with a prospect be?” or “How should we think about mortgage debt?” I consider the best process for this situation. Once you can create a repeatable process, your advice is much more valuable.

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. :-).

I’m creating a movement towards super-diversified portfolios. Most people succumb to home-bias, and a home-biased portfolio increases risk without increasing expected return. More risk for the same amount of return is a horrible idea! With all the evidence we have, it is both astonishing and a clear breach of fiduciary duty for an advisor to provide home-biased portfolios, yet they’re everywhere. While global diversification gets more popular every day, we are still far from the huge movement it should be. I want my work to help push super-diversification for all.

How can our readers follow you on social media?

https://www.linkedin.com/in/mrdiversification/

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