LuxeSF regularly profiles members of The Luxury Marketing Council. On this occasion, we chat with Bruce Stuart, Vice President & Financial Advisor at Morgan Stanley Wealth Management. In addition to his reputation as an investment guru, Stuart possesses a rare Renaissance man’s background, as this informative conversation clearly reveals.
LuxeSF: Let’s start with the background on Bruce Stuart.
STUART: I went to Cornell Undergraduate. I did my Honors thesis on the psychology of physical attractiveness and cognition of looks. In thesis development, I met with beauty editors from a number of magazines in New York including Vogue, Gentlemen’s Quarterly, Harper’s Bazaar, Mademoiselle, Seventeen and Esquire. I also went to Albany Law School where I was an associate editor of Law Review. I have written or co-authored five books, including a book on retirement, and they were all published by mainstream publishers including Simon & Schuster, Macmillan, and more recently Dearborn. I have been a financial advisor since 1998, commencing with Prudential Securities, which became Wachovia Securities, which then became Wells Fargo Advisors. Three years eight months ago, I switched to Morgan Stanley Management.
LuxeSF: And Morgan Stanley’s Wealth Management operations in San Francisco – give me some dimension.
STUART: We have currently two main branches: one at 101 California Street and one at 555 California Street, with approximately 200 advisors across both offices.
LuxeSF: What’s the profile of the client that you personally deal with?
STUART: That’s tied to my professional background. I am a Certified Financial Planner; a Retirement Plan Specialist; a Charter Retirement Plan Counselor; an accredited Domestic Partnership Advisor; and a Corporate Retirement Director. I work with Ultra High Networks individuals as well as retirement plans for corporations.
LuxeSF: What’s the most satisfying element of your role as a financial advisor?
STUART: I like making sure that individuals, couples and families are getting to where they need to be in terms of their financial goals; creating plans that are living documents that they can use throughout their lives, as opposed to being never-referenced documents or binders that sit on a bookshelf. I want an open conversation in terms of how their lives are changing and how their finances need to be addressed. As everything else is changing in their lives, so too should their financial plans and strategies be changing as well.
LuxeSF: You want it to be a living, breathing document?
LuxeSF: What’s the thing you hate most dislike about the job?
STUART: Because of the way it is set up, I don’t take as many vacations as I probably could or should. I feel responsible because there are so many people relying on me. I’m always checking emails, even when I am on vacation. I feel a very strong affinity for my clients, as do most successful professionals in this field
LuxeSF: What’s the biggest challenge in wealth planning to you?
STUART: Since we are in such a low interest rate environment, many investors – particularly those approaching or in retirement – want an income stream without the risk of losing capital. So it’s the balancing act between how much risk is it suitable for the client to take, versus trying to derive an income stream that is suitable or desirable. It’s the effective marrying of these two goals, which is very challenging in a low interest rate environment.
LuxeSF: Is there a common solution to that challenge?
STUART: There really isn’t. I don’t believe in cookie-cutter solutions. It’s a matter of using those selective investments that are better tailored for the risk challenges of the specific client. For example, many advisors will recommend annuities as an investment option, which has some positive application, but also carries the disadvantage that the investment is not as liquid as the client may want or need. I have to be aware of what the liquidity needs are for the client as well as what their desired outcome is for income steam creation. Bonds may be a solution. They can be very interest rate sensitive, so with interest rates at such a low point right now, it’s also important to be aware of how bonds may perform if interest rates were to go back up.
LuxeSF: What impact did the recent recession have on your clients?
STUART: Because most of my clients were well diversified, they weathered the storm and they’ve done well since then. The Great Recession was a situation where the markets were coming down at a very fast rate, and many investors were concerned with, “Should I be bowing out and not coming back into the market?” My philosophy was that, dependent upon the individual risk tolerance of the client, if the client had immediate needs for cash, then the accounts were in investments which were more liquid. If they were on a longer term time horizon, they may have had some part of their investment in equities and then we would wait it out until the market rebounded. Again, the question remains “What is the risk tolerance and time requirement for the individual client?”
LuxeSF: But there was a palpable sense of fear out there I assume?
STUART: There was definitely a lot of fear, and that is one of the reasons why wealth managers and financial advisors exist. We are here to make sure that when our clients are panicked or when the market seems too volatile, that we’re assessing whether or not they’re staying within the risk tolerance that they initially established, or if their risk tolerance has changed and they are no longer comfortable with current market conditions. It goes back to what I originally said. When you have a plan, it’s a living document. That means that all components of the client’s investment strategy are to be taken into consideration and updated constantly, including risk tolerance, and reaction to current market conditions.
LuxeSF: Let’s address retirement. Boomers, born 1946 through 1964, are retiring in great numbers now. Is that a looming issue for wealth management?
STUART: Definitely. We’re seeing record numbers who are retiring now, but we are also seeing one area that’s being overlooked when addressing retirement and that is the issue of multiple time horizons. For example, a lot of individuals ask me, as far as their retirement accounts, e.g., 401 (k), are concerned, “What is the correct risk tolerance in terms of when it is rolled over?” When a person takes money and puts it into a roll-over IRA or if they have a 401(k), generally speaking, they’re taking out partial distributions over a period of time. So you have to be aware of the fact that while money is coming out because of immediate liquidity needs, you may have remaining funds that are not going to be used for awhile. If you have a $300,000 401(k), the likelihood is that you’re not going to take the whole thing out in one shot, which will trigger a tax liability that applies to the whole amount.
LuxeSF: Is it fair to say that, across the broad spectrum of Boomer retirees, most have not well planned for their retirement?
STUART: I would say that there’s a substantial number who have not put proper thought into planning what their retirement is going to be.
LuxeSF: Let’s go to wealth managers, as a profession. Why are some clients wary of wealth managers?
STUART: If a financial consumer is wary of a wealth manager, it’s likely that they don’t totally understand the wealth manager’s process, philosophy and role. Investors do not want a wealth manager who is just going to place them in products or do what is termed in the industry, “product placement,” meaning that every single product that they invest in on behalf of the client is marketed or packaged by the firm where the advisor works, with complete disregard for what is in the best interest of the financial consumer. One of the reasons I became a Certified Financial Planner is that as a CFP I subscribe to a tenet of ethics and, on a continuing basis, I am being scrutinized in terms of whether or not I am doing the right thing for my clients. Part of the canon is to put the interests of my clients ahead of mine at all times – no matter what the commission structure is. I always put the interests of my clients ahead of my own.
LuxeSF: Why should a client use a wealth manager? More importantly, how do you manage that relationship? How do you monitor your partnership with the wealth manager? How do you maintain a strong operating relationship with a wealth manager?
STUART: You should have a financial advisor if you have sufficient assets that demand a plan of action for managing them for maximum protection and return. You need a financial advisor if you are looking for someone else who is a more objective party in terms of being able to keep up with the markets, who can do the market analysis and research on all the investments, at the same time, who can tailor a plan specific to your individual set of financial needs and goals. Again, I can’t emphasize enough that managing financial assets is not a cookie cutter solution that a program or an algorithm can accomplish
To answer your second question about how to maintain a positive relationship, the key word is “communication”. In any relationship, not just financial advisory, you have to have really strong communication. I communicate with my clients on an almost extreme, frequent basis. I want to make sure that they are totally comfortable with what is going on with their portfolios, at all times. I monitor overall performance as well as all the individual investments contained within their portfolios, and insure that we are progressing in the right direction for all of those investments. At the same time, I monitor to see if there have been any life changes, such changing jobs, health problems or sudden change of life goals (e.g., taking more frequent vacations or acquiring a retirement home).
LuxeSF: With your average relationship, how frequently are you in contact with your clients?
STUART: In the early stages of our relationship, I try to have very high contact rate– once a week in the early stages. For the average relationship, it’s between once a week and every two weeks. That doesn’t mean that we’re doing trades every time we talk. Most times, it’s just a matter of keeping up and making sure that they are comfortable with the portfolio and that I’m kept aware of what’s going on in their lives and their financial condition so that I can fulfill their needs.
LuxeSF: Tomorrow I decide hire a wealth manager. How do I go about that search?
STUART: Look for a Certified Financial Planner because you know that individual would have to put your interest ahead of his/hers. I’d interview a minimum of three candidates, at least one who is independent and a couple from full serve brokerage firms. It’s definitely important to definitely interview more than one individual. Also ask for referrals from friends and associates.
LuxeSF: As I’m going through that interview process, what are the warning signals that tell me that this is not going to be a good relationship?
STUART: There is no communication; there is no chemistry; you don’t feel comfortable with this individual; this individual doesn’t “get you;” they don’t understand what it is that is the most important to you; and they don’t seem to be listening to you. If they’re not listening, that’s going to make it very difficult going forward, because everything in financial advising is about listening and making sure that you as a financial advisor are tailoring everything very specifically to what that client needs.
Visit him online at morganstanleyfa.com/brucestuart/