Mary Dean is proud to say that she became interested in “Fee-Only” investment advice long before the term turned into a household word. “It seemed like a win-win combination—a proconsumer livelihood of unbiased investment advice,” says Dean, owner of Dean Consulting & Associates in San Diego.
That was back in the early 1970s, another era when investment scandals ran rampant and consumers needed help getting their finances and retirement plans in order. “Providing such help gave me a tremendous sense of accomplishment, but getting started was the problem,” says Dean. “Although my professor was supportive, I was a young college student in the early 70s [at UCLA] and inexperienced.”
Rather than be a pioneer, Dean opted to work as a financial analyst and then as a tax accountant at a CPA firm. At the latter, the importance of planning—not just investments—became obvious to her. “The partners were hesitant about billing for planning, so clients, upon my request, called with their approval,” says Dean, who started her own Fee-Only firm in the mid-1980s.
“CPAs were interested in meeting me, and they slowly referred clients,” says Dean. Meanwhile, she built up her expertise by passing the CFP exam in 1986 and the PFS exam in 1987.
Two years later she was contacted by another planner about starting a Fee-Only financial planning partnership. The alliance lasted only a few years, but gave Dean the confidence and contacts (including NAPFA) that she needed to switch 100 percent to Fee-Only financial planning. “NAPFA was so small that I had dinner with most of the board at my second NAPFA convention,” she remarks.
Dean’s turning point came in 1993, when a NAPFA referral resulted in many other referrals, causing her practice to grow. One CPA in particular began referring a large number of clients her way.
Around the same time, Dean started a newsletter for other Fee-Only planners called Dean’s Insurance Alert. “The objective was to compare insurance products and find solutions that might not be mentioned by an insurance agent,” says Dean. How to exit an annuity, for example, and how long-term care products compared.
The work put into the effort was intensive and lasted several years. “Almost none of this was public information, so I had to call agents and insurance companies,” says Dean. “As my practice grew, I could no longer devote the time required. Also, most of my burning questions had been answered.”
Building a Midsized Firm
Over time, Dean built her practice to “midsized” status and today has a staff of six. Her firm is large enough that she can spread around the clerical tasks and some of the planning, while giving staff a chance to hone expertise in particular areas.
For example, the company has separated business accounting from Portfolio Center. Trading is separated from any accounting tasks, most of which is being handled by part-time traders. Checking administrative work remains time-consuming, but Dean considers it one of the most important services offered to clients. “Our part-time planners perform that task,” says Dean. “The latter often requires financial planning and tax knowledge, so a second experienced planner check is needed. I still do a final review to determine if the concepts were understood.”
Dean Consulting & Associates manages over $100 million in assets, and its clients are primarily individuals who came to the firm with an infusion of wealth, an inheritance, a retirement rollover, or stock options in hand. “We also had some transfer from other planners (primarily brokers) during the 2000 to 2002 market plunge,” says Dean. The average client is 65 to 67 years old, although some are in their 30s and one is in his 90s.
The firm uses a customized, in-house spreadsheet program for retirement projections and uses it to calculate yearly taxes—which helps clients manage both their short-term and long-term plans.
The firm invests based on its clients’ volatility tolerances identified through a forced-choice, brief questionnaire. Taxadjusted cash flow is an important factor, says Dean, as is diversification, the latter of which is typically tweaked for valuations and economic cycles. Favorite funds include T. Rowe Price Capital Appreciation (PRWCX), Dodge & Cox Stock (DODGX), Janus Mid Cap Value (JMCVX) and the Vanguard sector funds (e.g. Vanguard Energy (VGENX)).
Dean Consulting & Associates also offers advice on some non-SEC assets, such as real estate, but doesn’t manage such assets. Instead, the firm recommends equity mutual funds and individual bonds and CDs. “My clients have a tendency to be conservative,” says Dean, “so alternative investment vehicles would only be considered for diversification.”
Technology plays a key role at Dean Consulting & Associates, where it has helped reduce the number of person-hours required to complete tasks. “Technology has given me the time to grow my business,” says Dean, who adds that while computer glitches can be “labor intensive,” the administrative personnel, in conjunction with a talented computer consultant, generally handle such challenges without interruption.
“I don’t have time to implement new software, which can take months and even years to be fully operational,” says Dean. “Fortunately, my part-time experienced planner enjoys and succeeds in such challenges, but whether the efficiency gained offsets the man-hours to implement is still an unanswered question for some programs.”
Rather than chasing every new software product, Dean relies on well-regarded standbys, such as Portfolio Center, Morningstar Principia, and the BNA tax projection program.
Going forward, Dean says her goals include setting up a succession plan, adding qualified employees, and maximizing her firm’s client recruitment strategies. She says she’d like to bring on a partner who can replicate her duties, thus cultivating a practice that is less dependent on her. “That way, I can spend more time with my adopted daughter,” says Dean, who is a single mom.
“A partner would be beneficial for growth,” says Dean, who has had to turn away clients occasionally in order to focus on larger accounts. “Over the next year my goal is to grow my firm in terms of revenue rather than number of clients, while at the same time remaining loyal to my original, smaller clients and trying to find someone who can serve them well.”
Bridget McCrea has been writing Practice Profiles for NAPFA for a decade. She is a business journalist who is based in Clearwater, Fla.