Craig DuVarney is proud to announce that he has been ranked #63 on Rep Magazine's list of the "Top Next Gen Independent Broker-Dealer (IBD) Advisors" for 2014.
Advisors on the Top Next Gen IBD Advisors list were ranked exclusively by assets under management. Advisors on the list were also required to be under the age of 40. Nominations were solicited by Rep magazine from the top 35 Independent Broker-Dealers by headcount. Also, Rep magazine and WealthManagement.com did not receive any compensation from financial advisors, participating firms and affiliates or the media in exchange for rankings.
Craig DuVarney, a CFP certificant, is clear on one thing: “Many solo practitioners are trying to add support staff or merge their practice to form an ensemble firm. They invest hundreds and thousands of hours working towards this goal. Once the new firm is formed, they invest even more time managing the office, adding and training staff, and meeting with their partners. Was their effort really worth it? What impact did this additional time spent at the office have on the advisor’s relationship with his/her spouse and children, not to mention the advisor’s health? While I have never seen a study done on the qualitative impact of this work, I can tell you that the financial planning model for an ensemble firm has never been something I’ve been interested in.” DuVarney works in his Concord, MA, firm with only his wife, Joanne. He runs the practice from his home but also has office space in Concord where he meets with clients. “My clients are all aware that I work from home, and this has had no impact on the growth of my practice.”
Staying small has its perks. “This arrangement has allowed me to balance the various aspect of my life, and therefore helps me achieve my definition of success. My morning commute is about 30 feet—from my master bedroom to my home office,” DuVarney quips. “By eliminating commuting time, I am able to get to my office earlier in the morning, and therefore get more work done in a day. In addition, most days I have lunch with my kids, and unless I have an evening appointment, I come down from my office at 5 p.m. sharp to have dinner.”
What kind of practice could this 33-year-old have developed with this philosophy? Doing various forms of planning for just over a decade, DuVarney is now on his own with 150 clients and $60 million under management. Like all of the advisors profiled in this article, DuVarney provides comprehensive financial planning and asset management to his clients. Providing award-winning service (he’s a five-time qualifying member of the *Million Dollar Round Table and a two-time member of the prestigious *MDRT “Court of the Table,” based on his outstanding product knowledge and client service).
DuVarney manages to take six to eight weeks off per year. “I literally run my practice with a laptop, Internet connection and phone,” he says.
How is this possible? To smaller advisors struggling to realize a modicum of efficiency and larger firms that hire more and more employees without a commensurate increase in revenues, DuVarney’s business model may seem a fluke. (It’s not, as we’ll demonstrate later in this article.) But what DuVarney does any advisor can do. He takes full advantage of technology.
With a Web-based CRM, a paperless office, form-filling software, aggregation tools and a unified communication system that channels all voice mails and faxes into his e-mail inbox, DuVarney is truly a one-man band.
“The lifestyle business model appealed to me because I always want to be in sole control of my practice; I don’t want the distraction of employees or a partner to oversee my decisions,” he explains. “And while multi-member firms may generate more revenue, they don’t necessarily generate more to the partners.”
DuVarney raises another issue that should weigh appropriately on the minds of advisors facing these business model decisions—namely, diversification. We guide our clients in diversifying their portfolios, yet we put most of our eggs in one basket called “the business.” Maybe advisors who keep things lean, extract generous income from their businesses, reinvest that income in a diversified portfolio and still have something to sell when they retire (albeit at lesser value than a firm that emphasized growth) know something the rest of us don’t.
And who’s to say the lifestyle practice can’t grow? Not only does technology make one able to handle more client households than industry averages would imply, but growth occurs in other ways too. “I’m handling 150 households now,” says DuVarney, “and I’ve transferred smaller clients to another advisor at Royal Alliance. I’ll keep doing this such that the number of households I serve won’t change, but the value of the assets I manage will continue to rise, as will the profitability of my client base.”
OK, you say, but how does a “lifestyle planner” take time off? “There is the perception in the industry that you must be constantly available for clients, that you can’t work from home, that you must have a big fancy office. None of it is true,” DuVarney argues. “I don’t interrupt time off with client calls. Because any emergencies in the form of voice mails come to my email inbox, I check in every morning for about an hour when I’m away, but I don’t carry a cell phone on vacation.”
DuVarney, in spite of his success, says his practice is by no means perfect. “I continue to look at how to outsource more tasks as my practice grows, and there are technology solutions I’m still evaluating. When I can buy a software program like LaserApp Enterprise that retails for $399 up front and $199 annually, and that program then saves me eight hours of time annually, that’s a no-brainer because when I am working at my highest and best use, I am worth more than $50 per hour.”
What’s important about technology, says DuVarney, “is the power it gives us as financial planners, husbands, wives and parents to be more efficient so that we can do other things, either work- or pleasure-related, with our lives. In my case, my technology and outsourcing solutions are helping me be a successful financial planner, father, husband, friend and family member. There is nothing more important to me than this.”
*Qualifying membership in the MDRT is based on minimum commission and gross business generated within a year and is not based upon performance or returns experienced by any client, or opinions of the advisor's clients or former clients. Each MDRT status designation is granted for one year only. All members must apply every year to continue their affiliation with the Million Dollar Round Table.
Adviser Craig DuVarney, who runs an eponymous firm, said that he expects taxes will increase for upper-income Americans. “The writing has been on the wall for the past four years that tax rates for the wealthy are going to increase,” he said. “Dealing with rising income tax rates is part of every annual review meeting that I'm conducting with clients.”
When faced with the prospect of rising taxes, moves such as converting traditional individual retirement accounts to Roth IRAs, which grow tax-free, become more attractive, Mr. DuVarney said. He has been encouraging such a step for years. Of course, the conversion requires clients to pay a tax bill this year on the gains earned in the traditional IRA, which some clients resist, Mr. DuVarney said. However, as the chatter about increasing the burden on the wealthy builds, clients are becoming easier to persuade, he said. “The definition of tax planning is to pay the least amount in all taxes over the rest of your life, not just paying the least you can this year,” Mr. DuVarney said.
In the discussions over making the wealthy pay more in taxes, “sometimes clients need to be reminded that they are in the cross hairs of that discussion,” Mr. DuVarney said.
Royal Alliance is “the first broker-dealer I've worked with in my career that gets it,” said Craig DuVarney, a Certified Financial Planner. “They know that freeing me up as much as possible from non-revenue-generating work allows me the time to take on more new clients.”
Mr. DuVarney — and several other advisers — said they are pleased with the way Vision 2020 integrates an e-forms library with a back-office document management system. No kidding, you can really go paperless.
The application behind the digital compliance-approved forms is Laser App Software, which fills in information on documents automatically, thanks to integration with Advisor Group's Client Central system. At the end of the trail is Docupace Technologies Inc., a third-party provider whose signature document management application has been embedded in the Vision 2020 platform and its work flow process. It lets advisers, administrators and compliance officers archive documents for compliance, and search and access files easily. Advisor Group has a pilot program under way to test digital and e-signature technologies, including one from Topaz Systems Inc.
Mr. DuVarney, who is among the pilot participants, said paperless operations rock. “I'm one of the first people to actually be completely on the system and routing documents straight through to the back office without having to lay my hands on a piece of paper. It is saving me time, postage — and no more faxing,” he said.
At least one adviser, while a proponent of outsourcing, thinks that sufficient technology guidance already is available. “The industry already has something like this in the form of Technology Tools for Today (virtualofficenews.com). Not only do they have the monthly newsletter, but they have listings of providers and vendors that they have evaluated and who they think are a good fit for those things — and it comes from two people respected in the industry,” said Craig DuVarney, a solo Certified Financial Planner who manages $56 million in assets. He was referring to the efforts of David Drucker and Joel Bruckenstein, who put out the T3 newsletter (formerly Virtual Office News) and host a conference.
For many advisory practices, the technology focus will be making do with smaller budgets — and doing more with existing technology. "Rather than seeing the opportunity that this market downturn presents, and increasing spending to increase efficiencies and take advantage of the current market, advisers will instead make technology the first thing they cut in their budget," said Craig DuVarney, an adviser in Concord, Mass., who echoed the sentiments of many advisers and industry experts.
Many financial advisers aren't that optimistic that the lessons will carry over once the doom and gloom lift: It is easier to be conservative when markets world-wide are sinking.
"A great investing strategy, like asset allocation, is about as exciting as watching grass grow," says Craig DuVarney a financial planner in Concord, Mass., who says his business has grown thanks to boomers seeking new strategies to cope with risk. "I hoped the impact of the last bear market would permanently change investor attitudes -- but they went back to taking unnecessary risks as soon as it was over. Now they are excessively fearful and they are being good, but I'm not convinced it's a complete conversion at heart."
Typically, one of the conversations that is most important between Mr. DuVarney and his boomer clients goes this way: "If the average annual return goes up a bit, and the average volatility goes up a lot, and you don't desperately need that extra return to meet your needs, you need to stop and ask yourself what you are doing."
“Your money might be better off elsewhere.”
That’s something to remember when you talk to a bank’s investment advisers: Many are paid a commission on investment products, says Certified Financial Planner Craig DuVarney. “They don’t have the harder discussion about estate planning, tax bracket and liquidity,” says DuVarney.
Craig DuVarney: "You'd be surprised at how much time you spend on administrative skills."
"The minute you start looking at your practice as a business, it really puts things in perspective. You'd be surprised at how much time you spend on administrative tasks," said Craig DuVarney, a sole-practitioner certified financial planner and RIA registered investment adviser in Concord, Mass., with $55 million in assets under management.
"You are spending all this time doing $10- to $15-dollar-an-hour work, versus just buying that work from someone else," he said, citing as an example the outsourcing of some functions such as scheduling which he used as an example.
Mr. DuVarney said he attributes a lot of his six-fold increase in revenue over the last six years to his efficient use of technology and outsourcing.
"I'm living proof that a one-man shop can work from home and be extremely profitable." Mr. DuVarney he said. While he maintains an office in Concord, he works much of the time from home, and the many Internet-enabled applications he uses that allow anytime, anywhere access are key to that.
While both Mr. DuVarney and Mr. Connell said they have gone to great pains in picking a mix of technology that works together, many respondents to the survey said that the integration of client account information and integration of their software were among their top three technology challenges.
You also have to draw a clear line between your personal and professional conversations. It's best not to mix them. In other words, at a family dinner, don't engage in shoptalk. If your client-uncle insists on addressing the subject, try to steer the conversation away to something else. “I only talk business at a meeting,” says Craig DuVarney, who runs his own firm in Concord, Mass., with about $50 million in assets. “If I'm at a barbeque, I don't bring it up.” In fact, if you feel you'll have a hard time sticking to this separation of roles, that might be a sign it's not a good relationship to pursue.
Craig DuVarney, a sole practitioner Certified Financial Planner in Concord, Mass., also hired Ms. Beckes. Under her guidance, his firm, which has $50 million in assets, instituted an investment minimum of $350,000 for new clients while transferring those with smaller portfolios to other advisers. It also hired technology consultant Joel Bruckenstein, who helped institute a new data system that keeps track of all appointments.
"The [coaching] process forces you to look at your practice like a business," said Mr. DuVarney. "The benefit for me is delving into my business and looking at all aspects of it."
Craig DuVarney has taken this kind of effort a step farther. DuVarney, who runs a firm in Concord, Mass., has concentrated his efforts on one estate-planning attorney, and has turned that relationship into a successful competitive weapon. After writing a financial plan for each new client, he invites the lawyer to his office to discuss estate-planning issues. The effort has allowed DuVarney to take his practice up a notch. “It helps me provide a more comprehensive level of service,” he says. His firm manages about $50 million in assets, and the majority of his 100 clients have $250,000 or more in assets, says DuVarney.
"Events like this are going to happen," said Craig DuVarney, a Certified Financial Planner in Concord. "It's part of investing in the stock market."
Still, the changes represent a great opportunity, says Craig DuVarney, CFP, who runs his own financial planning shop in Concord, Mass. Knowledgeable brokers can offer their skills to plan sponsors and potentially “pick up serious assets under management,” he says. That’s because most 403(b) sponsors have inadequate staff and resources to handle the new requirements, and will have to hire skilled third-party plan administrators before those rules go into effect. (That is expected to happen no earlier than January 2008, though some financial experts believe it may not be until 2009.)
DuVarney also believes that advisors may be able to persuade employers to switch their employees to mutual funds from annuity programs. “The opportunity will be for brokers to show employers the higher expenses that employees are paying in annuities,” he says.
"These rules will force every CFP practitioner working for a bank, insurance company or investment firm to reevaluate how they work with clients," said Craig DuVarney, a financial planner in Concord, Mass."
"My clients are built for the long run and are not so affected by what happens a single day in the market," said Craig DuVarney, a financial advisor in Concord, Mass.
For many planners, the most intriguing [provision of the Tax Increase Prevention & Reconciliation Act] is the potential for Roth conversions by the wealthy. Craig DuVarney, a financial planner in Concord, MA, says of the Roth provision, “I truly did not believe it until I saw it. It’s the greatest tax planning opportunity of the decade.”
“The traditional IRA artificially inflates the gross estate, and could cause you to pay more in estate taxes,” DuVarney says. DuVarney says that many bank reps are big proponents of tax-deferred vehicles, such as tax-deferred annuities, but he cautions that as the IRA example illustrates, deferring taxes can lead to estate tax problems. “Today, there’s often a one-dimensional that as the IRA example illustrates, deferring taxes can lead to estate tax problems. “Today, there’s often a one-dimensional approach to tax planning – reduce taxes today. But for me, the idea is to pay the least amount over your entire life.”
To prepare for the tax hit of converting to a Roth in 2010 – the law allows the taxes to be spread over 2011 and 2012 – DuVarney suggests taking advantage of another part of the new tax law: The extension of the historically low rate of long-term capital gains and dividends. Pay the 15% of the sale of stock, he says, and use the proceeds to pay the taxes for the IRA conversion.
DuVarney lauds the opportunity created by today’s capital gains tax rates. “The long-term capital gains rates are the lowest they’ve been since 1933,” he says, pointing out that the Senate Finance Committee itself estimates that the law will cost the government $20.6 billion over five years and $50.8 billion over 10 years. “If it’s costing them money, then somebody is benefiting.” And as far as DuVarney is concerned, he wants to make sure his clients are among those beneficiaries. For DuVarney’s wealthy clients with children in or near college, the lower capital gains rates may help offset one of the major negative surprises of TIPRA: The Kiddie Tax.
"Most financial services professionals don't have a comprehensive background on an estate plan," said Craig DuVarney, a certified financial planner in Concord, Mass.”
Many Americans aren't saving enough money for retirement, and they often don't know how much they'll need. At the same time, many people resist financial advisors' efforts to tweak their household budgets to free up cash for the future.
"It's a very uncomfortable conversation," said Craig DuVarney, a Certified Financial Planner in Concord, Mass. "You can talk to clients about spending money this way, not that way. But it's a personal decision and people get pretty defensive about that."