Professional clients in high-income, high-stress careers have an unusual set of planning concerns. As planners might expect, these are people who earn enough to retire early if they want (or need) to and still have almost anything they want.

But their high-pressure jobs can make them far too busy to focus on their long-term financial plan, says Steve Janachowski, chief executive of Brouwer & Janachowski in Tiburon, Calif. They may also be emotional and prone to impulsive moves.

The doctors, dentists and lawyers who make up about 35% of his firm’s practice have unique challenges when it comes to retirement, Janachowski says. Either because of stress or physical disability, many of them end up wanting to retire far earlier than scheduled.

Worse, assets that traditionally would have been tapped to gild the client’s golden years have turned tenuous in recent years.

Doctors and lawyers, for example, have traditionally counted on being able to sell the equity that they’ve built in their practices to finance retirement. (That’s a situation that may sound familiar to planners.)

But between law firm bankruptcies and changes in the health insurance landscape, an increasing number of these professionals find that their equity has evaporated — or, at minimum, isn’t worth anywhere near the amount they’d imagined.

Meanwhile, Janachowski says he’s learned that dentists are unusually prone to career-ending disabilities.
“They are bent over in these awkward positions all day and end up with wrist problems, elbow problems, shoulder or back problems,” he says. “They may not have planned to retire, but all of a sudden they realize that their bodies hurt.”

EXPECT THE UNEXPECTED

To brace for the unexpected, Janachowski creates plans that work through a host of different scenarios.
Naturally, he hopes a client’s life and plan runs smoothly, and he will project what will happen if it does. But Janachowski will also stress-test the plan to see what would happen if the client’s partnership equity were to become worthless, or his or her practice couldn’t be sold.

His firm also runs Monte Carlo simulations, asking what would happen if the client retired at precisely the worst time in the markets.

Stress-test results aren’t always pretty. But they can be inspiring, encouraging big spenders to save a bit more prodigiously — or warning partners to watch for the telltale signs that their partnerships may be running aground. These tests also help clients realize that they can survive almost any economic calamity, as long as they stick to the plan.

“People who make a lot of money often spend a lot of money,” Janachowski says. “We have to build a plan for the day they realize they’re not invincible.”

Janachowski says that he didn’t intend to specialize in helping professionals. He was just happy to have a client or two when he and partner Kurt Brouwer left a small regional brokerage in 1987 to head out on their own.

In those days, financial planners primarily made money by trading stocks and collecting commissions on insurance and load-fund sales, he said. Both Brouwer and Janachowski thought that business model was bad for both planner and client.

Janachowski says he and Brouwer tried to convince their former firm to change the way it did business, dropping commission sales in favor of an annual fee, but the board rejected the idea. For that matter, Janachowski admits, most of his clients didn’t understand the concept either.

But the planners were so enthusiastic about their alternative model that they launched their firm anyway, starting with just a handful of clients and borrowing against credit cards to pay their one assistant.

MISSIONARY ZEAL

“A lot of people think of RIAs as entrepreneurs. I think we’re missionaries,” Janachowski says. “No matter where you started” — in his case, it was retail broker Holt & Collins — “you didn’t like the way they did it and felt you could do it better.”

When the market crashed in 1987, they had just a few clients, one of whom called to find out what they were doing with his portfolio. Janachowski told him that they had been adding to his stock positions.

The client, a doctor, was delighted. “If I were doing it myself, I would have no idea whether to buy or sell,” Janachowski remembers him saying.

The gamble on stocks — and on the firm — worked out. One referral led to another. Now Brouwer & Janachowski has more than 500 clients, manages $1.3 billion in assets and boasts 19 employees.

The planning firm’s investment formula isn’t rocket science, Janachowski says. Most of their clients have between $1 million and $10 million to invest.

10 FUNDS, VARYING MIX

All the firm’s client portfolios invest in a mixture of 10 actively and passively managed mutual funds, all of which the Brouwer & Janachowski team has vetted and monitors regularly on their behalf.

“We know there are really smart investors out there. We’re not trying to outthink them. We’re just trying to find them,” Janachowski says.

“Do we customize portfolios? No,” he continues. “We customize strategies. If you like certain investments, why wouldn’t you give your best ideas to every client? The trick is finding the right combination for each person.”

The firm’s planning services are similar. Though they write up a comprehensive plan for their clients, they don’t provide the estate planning and accounting services of a family office. They do, however, vet other professionals to provide the appropriate referrals.

“Our clients may not have time to find their own CPA or estate planning attorney, so we spend the time to kick the tires and find people we can recommend,” Janachowski says.

SUCCESSION OPTIONS

It’s worth noting that the planning approach Janachowski advocates for his clients is the same one he’s taken for his firm.

In 2008, he and Brouwer decided that they needed to look at their own retirements and work backward. When would they retire and how would they cash out equity when that day came?

The result was that they sold a stake in the firm to Mark Hurley’s Fiduciary Network and set up a formal succession plan.

The firm now has a total of six equity partners and the backing to buy other firms when the opportunities arise.

“Planners should ask themselves where they want to be in five or 10 years,” Janachowski says. “If you stop and answer that question, you can work backward to find a strategy to get there.”

Kathy Kristof, a Financial Planning contributing writer in Los Angeles, contributes to Kiplinger’s and CBS MoneyWatch. Follow her on Twitter at @kathykristof.

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