Financial planning, at essence, is “helping people make smart financial decisions,” according to Marc Schindler, a founding partner of Pivot Point Advisors in Bellaire, Texas. His firm helps clients by following a quantitative approach that uses computer modeling and takes the long-view on investments.

“Our clients are predominantly higher net worth people that are probably between the ages of 55 and 75,” he said. These are people who are “too busy to manage their own portfolios that need good solid advice and transparency.”

This levelheaded approach has been key during bad times in the stock markets, Schindler noted. “We don’t pay attention to what the analysts or the talking heads are saying ... We ignore all of the background noise.”

“When the stock market started to decline, we proactively called all of the retirement clients and suggested they raise capital,” he said, by going to cash and taking profits, and, depending on their risk tolerance and needs, suggested they “raise as much as three years of capital so they could weather to storm.”

“We also do things like call major asset categories a bubble,” he said. For example, the firm told clients in June of 2007 that there was a bubble in the real estate market and “suggested that our clients sell their vacation properties and their income properties” and even consider downsizing their primary home or renting. The firm provided clients with a rent vs. buy calculator so they could plug in the numbers and see what made the most sense.

“It’s generally 30 to 60 percent cheaper to rent than it is to buy,” Schindler said. Based on his own firm’s analysis, he himself sold most of his real estate holdings and has been renting himself for half price ever since.  “Everything we recommend to clients is tested,” he said, to the point of principals in the firm taking their own advice.

Schindler said that his firm has even recommended that people sell energy stocks when oil hit $130 a barrel, even though they are based right outside Houston where many of the clients they work with have close ties to the oil and gas industry. Some oil industry executives may not be happy being told to sell oil stocks, but “we’re not trying to win a popularity contest,” he said.

Overall, Schindler said, “I think that the volatility has been a lot higher over the past few years than it has been historically. That’s one thing that people need to learn to deal with, the volatility,” he said.  “People that have any money in the stock market should have a minimum of a five-year time horizon, so they don’t buy high and sell low.” He noted that many investors who try to time the stock market can end up getting out at the near-term bottom, but never get back in, which is a mistake.

He said that people that need to keep up with inflation should have exposure to the stock market, but the level of volatility they can tolerate will vary. “Their asset allocation is really a direct result of some simple functions,” he said, taking into account cash flow needs, risk tolerance, and the client’s time horizon. The firm then can create “a road map for what they need to have in the various asset categories.”

Right now, Schindler said, his firm sees a potential bubble in the bond market, with interest rates low and bond prices high. “People who left equities to go to bonds are going to get slammed with double-digit losses as interest rates climb,” he said. Because of that, the firm’s fixed income portfolio is short in duration, and based outside the U.S.

The firm currently has about $25 million in assets under management but is hoping to grow that number to attract newer, institutional clients such as pension funds and insurance companies, now that it has more than a five-year track record. Most institutional clients require at least $50 million or more in assets, and that a firm be Global Investment Performance Standard compliant, as well as having at least a five-year track record.

“We take our job very seriously,” Schindler said. “Our measure of success is whether the client is happy and we’re adding value.”


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