A clan, a man, a money plan
The Pierponts sought an advisor they could grow with. After a few tries they found someone they could trust like a member of the family.
(Fortune) -- For Gary and Michelle Pierpont, the path to financial security began with an airline tragedy. They weren't passengers in a downed jet, luckily, merely shareholders in the now defunct ValuJet, whose shares plummeted in 1996 after one of its DC-9s crashed in the Everglades - just days after Gary bought $3,000 of the company's stock on a tip from a friend.
The ValuJet experience convinced Gary - a 39-year-old branch manager of a Maryland-based mortgage lender who makes $300,000 to $350,000 a year - that if he wanted to reach his financial goals (including retirement at age 50), he'd need some professional help. Getting his financial house in order would also free Gary to focus on the mortgage business, which has suffered a serious downturn over the past 18 months in the wake of the subprime lending crisis and an overall economic slowdown.
Gary and his wife, Michelle, 38, consider themselves financially savvy - both have an MBA - but Gary admits he was too caught up in his job to spend much time on long-term financial planning. Michelle, who had worked for a regional bank, was busy taking care of their kids, aged 10, 7, and 4. "It's impossible to lick this on your own," Gary says.
But where to go for help? There are nearly a quarter-million professionals nationwide who provide some sort of financial advice, all with different certifications, specialties, and biases. Some are paid on commission, others are fee-based, and still others take a percentage of the client's assets under management.
Above all, Gary wanted a planner "we could grow with," he says. That's a tall order: Only 3% of financial planners are under the age of 30, according to Boston-based research firm Cerulli Associates. Says Gary: "I know I'm sacrificing experience, but when I'm 50, I want him to still be with us."
More families, it seems, are seeking similar help. In 2006 the average revenue per financial advisory firm was $1.6 million, up from $632,000 in 2000, according to consulting firm Moss Adams. The Pierponts' experience shows how important it is to find the right fit. Like many couples, they relied on referrals and word of mouth to find a financial pro. But their first forays with money managers fell flat. A stockbroker friend of the family put them into some mutual funds, but their accounts were relatively small and they didn't get much attention from the broker. Gary blames himself as well: "I didn't have much of a game plan," he concedes.
A contact in the mortgage industry then referred Gary to a financial planner backed by a life insurance company, who had a one-word solution for the Pierponts: annuities. Gary, who worked briefly selling insurance after college, knew it wasn't that simple. "I wasn't satisfied with the answers I was getting," he says.
Nor did he like the fact that some financial advisors are paid to push their company's products and services, which made Gary wonder whether they truly had his best interests at heart. Meanwhile, his mortgage business was starting to take off (this was around 2003, when the real estate bubble had begun to bulge), so issues like estate planning and capital gains were weighing on his mind.
Around that time he got another referral from a woman who worked at a title company that did a lot of business with Gary's firm. She told Gary about Kim Anderson at Baltimore-Washington Financial Advisors (BWFA), a fee-only advisory firm where all the counselors are certified financial planners or in the process of getting CFP certification, which takes about two years to complete.
"I have nothing to sell behind this desk," Anderson said to Gary and Michelle at their first meeting. Says Gary: "All they sold was advice."
And Gary and Michelle needed advice in many areas. More than three-quarters of the Pierponts' investable assets at the time were tied up in real estate - too high a concentration, Anderson thought, despite the strong market back then. (These were residential and commercial holdings that Gary had acquired over the years, not the family's house in Dunkirk, Md., a suburb of Washington.) Also, the mutual funds in Gary's IRA and his company 401(k) plan overlapped, and his 401(k) was not diversified enough. Down the road, saving for college and avoiding a huge estate-tax hit were also concerns.
Above all, Gary wanted a plan that would allow him to stop working at age 50.