Judith Brown was an early pioneer in the then brave new world of fee-based financial advice when she founded her practice in 1979. Her son, Richard S. Brown, took charge 18 years later, and JNBA Financial Advisors in Minneapolis and Duluth, Minn., continues to flourish.
Beating the usual odds against family-owned financial planning firms, JNBA has grown from $90 million in client assets under management in 1997 to more than $375 million today, all despite the worst decade for financial markets since the Great Depression. In 2007 through 2009, while investors were panicking, the firm nearly doubled its new assets.
The advisor has built on his success to think about the future of the profession. "One of the biggest issues a financial advisory firm faces is hiring and retaining new employees," Brown says. Graduates of college financial planning programs now need three years of experience to earn a CFP credential and another two years before they are ready to see clients one-on-one.
Brown has spent a great deal of time looking for ways to speed up this process for the profession as a whole. The result? A unique learning lab for financial planning students at the University of Minnesota, Duluth (UMD). "At JNBA, we're looking for employees who are especially good at client service, and this is what they are teaching them at the University," he says.
Any new employee Brown hires has the good fortune of joining a firm remarkable for its devoted clientele. JNBA offers investment advice to approximately 550 families, remaining loyal to many retirees who have spent down their funds, often after more than 20 years with his firm.
New clients typically bring between $2 million and $3 million. And they stay:Since the firm began keeping track in 2001, its retention rate has been 96%. He attributes that success in part to the fact that each JNBA client receives the attention of a three-person team: a financial advisor, an investment specialist and a dedicated support staff person.
Currently the firm employs advisors, including Brown, two CFPs, a ChFC who is also a Chartered Advisor for Senior Living (CASL) and an advisor with a Master's degree in personal financial planning. Fourteen support staff round out the firm. Staff members often rotate time in both locations. Brown himself spends two days a week in the Duluth office, about a two-hour drive from Minneapolis.
JNBA's typical portfolio contains a core stock group of 30 individual stocks as well as ETFs and mutual funds, a core fixed-income allocation of bonds and CDs, and an alternative allocation that utilizes ETFs and mutual funds. Mutual funds and ETFs, in his opinion, can perform almost every conceivable kind of alternative investment strategy a client desires.
Brown's team has carved out a portion of most client portfolios for tactical allocation, using negatively correlated alternative asset classes for growth opportunities. "We don't buy puts or calls individually," Brown adds. Some favorite funds are Diamond Hill's long-short fund, Hussman Strategic Growth, IVA Worldwide, IVY Asset Strategies, Merk Hard Currency and the Permanent Portfolio fund.
TRAINING NEW PLANNERS
Two years ago, Brown was appointed a Senior Fellow in the Labovitz School of Business and Economics at UMD. He immediately set to work thinking of ways to smooth the path into the planning profession.
Lou Stanaslovich at Legend Financial Advisors in Pittsburgh had convinced him long ago that the best way to obtain good employees was to put them through a hands-on program like the internship at Legend. UMD had a financial market program that did not include comprehensive financial planning but did offer classes where students managed a live $400,000 portfolio with their professor, Joe Atrium.
Brown read a 2009 survey of 77 financial advisors, largely RIAs, on what financial planners wanted in young employees. The survey, a joint venture of the Schwab Foundation and Texas Tech's financial planning program, confirmed Brown's own hunches: The values of highest importance to employers were not technical expertise (other than time value of money and retirement needs analysis), but communication and organizational skills as well as critical thinking savvy.
Inspired by the study, Brown set out to build a real life learning lab at UMD that taught financial planning students what could not be taught in a book. TD Ameritrade agreed to make a "substantial" donation to support building and equipping a learning lab for business students working on a two-year minor in financial planning development at the university.
Within the TD Ameritrade Institutional Lab, located in Duluth's Tech Village on Superior Street, UMD students work through three phases that will give them experience with real-life software and case studies. The first phase takes place in a software learning lab, where students utilize different financial planning software tools such as iRebal, MoneyGuidePro and Morningstar Office. The software is donated by the respective companies along with the generous assistance of TD Ameritrade.
The second phase happens in the conference room, a smart room directly connected to JNBA's Minneapolis office. Financial planning students watch live or previously recorded financial or investment committee meetings at the JNBA office. The names of the clients are kept confidential, but everything else is real. "These are regular meetings with clients, not a show for students," Brown says.
The third phase is in an actual office setting with real client case studies, but actors filling in for the real clients. The case studies are ones Brown has acquired over his many years at JNBA. In this final phase, students interview clients, prepare a net worth statement and financial plan, and deliver the plan to the "clients."
Hands-on education provides a more efficient transition for students between school and the real world, which helps both sides. Students can command higher salaries, and it costs less to train them.
Brown has hired students from UMD's financial markets program for years. With the financial planning program in its second semester, he intends to start hiring these students soon as well. Their hands-on experience will increase their value as new employees, he believes.
Financial advisors who train interns see it as a wonderful chance to give back-both to the community and to the profession that nurtured them. Brown has a habit of giving back in other ways as well.
JNBA is the largest fundraiser in the Special Olympics Polar Plunge near Minneapolis. In addition, Brown travels the world for other philanthropic causes, most recently to the Dominican Republic, where he helped the Starkey Hearing Foundation distribute 1,500 hearing aids to the hearing impaired.
But Brown is most proud of the learning lab now up and running in his own backyard at UMD. "It's a great opportunity to form the next generation of financial planners," he says. As a second-generation planner, that's a cause that's close to his heart.
Jim Grote, CFP, writes regularly for Financial Planning.
Richard S. Brown
JNBA Financial Advisors
Assets under management:
$375 million (firm)
How I see it: "One of the biggest issues an advisory firm faces is hiring and retaining new employees. We have a great opportunity to form the next generation of financial planners."