Distinguishing Factors

Distinguishing Factors
You might not be familiar with some of the terms I use. They are important not just to us at Paula Hogan but also as features that distinguish our practice:

“Fee-only” used to be shorthand for being compensated by fees, not commission. It is now a term that describes someone who has minimized conflicts of interest and works only for the client. We’ve been fee-only from the start of our practice in 1992, when being fee-only was a very different way to be.

A few decades ago, the brokerage community laughed out loud about the idea that individuals would ever pay for advice. The reality, of course, is that almost everyone wants objective, straight up, reliable advice, untainted with sales pressure or sizzle. And many are willing to pay to get it.

Perhaps because this was my own inclination, I realized this early on, and I was fortunate to be in a variety of leadership positions where I was able to help this become the standard. While I served on the national board for fee-only advisors, for example, we proclaimed that true advisors are not, and never should be, salespeople.

The fee-only business model was the first definitive step in our industry towards advisors having a legally binding loyalty to the client and only to the client. In recent decades, the fee-only advisory community has grown into a significant segment of the whole industry. And today, the most differentiating question you can ask a financial professional is how are you regulated?

How an advisor answers that question illuminates who is a fiduciary (legally obligated to work only for you) and who, under the law, is a salesperson, obligated only to meet a sales suitability standard. 

To learn more, I invite you to read:
Your Needs: Fee-Only Information


Comprehensive Planning:
“Comprehensive” is a financial advisory term meaning that an advisor looks at the client’s entire picture in order to best determine what to do. From the start, we have offered, and preferred to do, comprehensive planning.

We really know our clients. One of the things that makes me love my job is that, in our office, there isn’t any topic that is off the table. If it impacts a client’s financial life or peace of mind in any way, it’s a top of mind agenda item for us.

This comprehensive planning approach is different from what pure money managers and brokers do; we have the implicit belief that by understanding the full scope of a client’s life, we are so much better positioned to be able to tailor the financial portfolio appropriately.

To learn more, I invite you to read:
The Details on Our Services Document


Asset Class Investing:
“Asset class investing” is a term that signifies investing via “index” mutual funds (or funds that represent an entire “asset class”).

In the old days, people assumed that market timing and stock picking were effective investment strategies. For most of us, that idea went out the window in the 1990s when individual investors first began getting access to asset class (or “index”) mutual funds.

Index mutual funds mirror the whole market or whole market segments for a very low cost. They deliver the risk and return of a whole asset class instead of relying on someone to guess which investments will be the next high performers.

Long before this was a popular position, the entire concept just made intuitive sense to me, and I opened my business with that investment strategy as a cornerstone.

At the time, this was a very unusual position, and I spent a lot of time early on repeatedly making the case for index fund investing in our industry. Few things give me greater satisfaction than seeing this mode of investing become typical in top advisory firms throughout the country.

To learn more, I invite you to read: 

NAPFA Advisor: Index Funds Will Let You Sleep Better

The decline of defined-benefit pension plans means that the average citizen is now responsible for building a personal portfolio, managing that portfolio, and then, in retirement, deftly withdrawing from that portfolio just the right amount of cash each year for living expenses   

A Peek Behind the Curtain of Professional Money Management
By Paula H. Hogan
Quarterly Note, Second Quarter 2008

When thinking about their investments, most investors skip right to the question of what investments to purchase. But professional money managers frame the issue differently. They see investment management as a design issue, not just an exercise in security selection.

The Cordon Bleu School of Portfolio Design
By Paula H. Hogan
Quarterly Note, First Quarter 2001

Ever watch a master chef at work in the kitchen? You won’t see a lot of recipes or any packaged mixes. Instead just a bunch of raw ingredients and a chef rapidly chopping, stirring, simmering, and boiling, seemingly with a plan in mind but with no plan apparent to the uninitiated observer. If you interrupt to ask what’s going on, the answer will often be, “Oh, just whipping up something for dinner.

Are Alternative Investments Good Alternatives?
By Paula H. Hogan
Quarterly Note, Third Quarter 2003

Recent press reports and advertisements in the financial industry suggest that alternative investments should be a part of every sophisticated investor’s portfolio.

Life Cycle Theory of Savings & Investing: This theory refers to a body of knowledge in economics that shows individuals how to think effectively about their finances. It represents a refreshing change from the more traditional paradigm that depends on good performance in the stock market for a favorable outcome.

The theory suggests that people care a lot more about how much they can safely spend than they care about the size of their portfolio. The theory also highlights that it is what you do in the world -- not your portfolio strategy -- that is more likely to be the major determinant of your standard of living. 

What this means for individual investors is: a) focus first on optimizing your earning power and then tailor portfolio policy to the risk and return of your earnings capacity, and b) when investing, think more about securing lifetime inflation-protected income than just building the biggest portfolio you can imagine.

Though the Life Cycle Theory again seems like common sense, it is only in the last few years that it really has gotten traction. I am currently helping lead the charge to bring this highly relevant economic theory of life cycle saving and investing to our field.

Much of my volunteer work in professional societies has been in a collaborative effort with economist Zvi Bodie (click here to see more) to bring the life cycle point of view to the attention of other planners. 

Our firm has been using a form of life cycle theory for years.  We take pride that our investment strategy reflects the best of modern finance. 

The life-cycle approach has also extended our view and our partnerships. We’re paying a lot more attention to helping clients manage and coordinate both human capital (what you do in the world) and their financial capital (what your money does in the world) and we have begun to collaborate with leaders from other industries to develop fair markets for life cycle planning products for individual investors.

For example, we are finding multiple instances where collaboration with the client’s career counselor has been highly beneficial to clients.

We’re also one of the few planning firms in the country able to offer institutionally priced, inflation-indexed pension substitutes. We can do so because of an alliance I helped create between NAPFA, the national organization of fee-only advisors , and Income Solutions, Inc®, a new web platform that for the first time brings competitive and transparent pricing to the retail market for immediate annuities. 

The life-cycle point of view is an industry trend that is only now emerging, and I am doing my best to talk it up. I view it as a way of bringing increased value to our clients and to our industry.  Once again, if it is right for clients, it’s right for us.

To learn more, I invite you to read:

Journal of Financial Planning: Life-Cycle Investing Is Rolling Our Way

Drawing on 1950s models, the financial planning community uses mainly precautionary savings and diversification strategies to manage personal wealth. But financial economists and many others in the financial services industry have moved on to a new paradigm known as life-cycle investing.

The Future of Life-Cycle Savings and Investing
The second of three academic conferences on Life Cycle Investing resulted in this monograph from the CFA institute.

The Future of Life-Cycle Savings and Investing: The Retirement Phase
In April 2011, Boston University was the setting for the third in a series of gathering in which a small interdisciplinary group of top academics, practitioners, and policy wonks hone in on emerging best practices in personal finance and in this case The Future of Life Cycle Saving and Investing: The Retirement Phase. . Here is the CFA Institute Monograph summarizing the proceedings.

AdvisorOne: Advisor Calls for Paradigm Shift in Financial Advice
By Paula H. Hogan
June 7, 2012

Paula Hogan says economics-based model puts clients, not their portfolios, at center of planning process.

By Paula H. Hogan
June 6, 2012

This article describes the economic theory behind goals-based investing paired with a robust life planning process. The result is a paradigm shift in the definition and delivery of personal financial advice.

The Scientific Approach to Personal Wealth Management
By Paula H. Hogan
Quarterly Note, Third Quarter 2011

From popular culture, one might think that personal wealth management is a question of personal taste and that all you really need to do is figure out your risk tolerance, build a portfolio that reflects that risk tolerance, and then hang on, expecting the best. Sometimes that works.

The Role of Inflation-Indexed Annuities
By Paula H. Hogan
March 2011

The decline of defined-benefit pension plans means that the average citizen is now responsible for building a personal portfolio, managing that portfolio, and then, in retirement, deftly withdrawing from that portfolio just the right amount of cash each year for living expenses.

Structured Products: What, Why, And How?
By Paula H. Hogan
Quarterly Note, Second Quarter 2010

There is an unannounced revolution going on in personal finance which will benefit you. Instead of trying to manage portfolio returns, the focus has shifted to integrated risk management. The central idea is that we have some control over risk and no control over returns, and that especially in a world where extreme returns in the markets are apparently much more likely than previously assumed, attention to risk management is key.

Get Your Flooring! The Role of Inflation-Indexed Immediate Annuities InYour Portfolio
By Paula H. Hogan
Quarterly Note, Fourth Quarter 2009

The decline of defined benefit pension plans means that the average citizen is now responsible for building a personal portfolio, managing that portfolio, and then, in retirement, deftly withdrawing from that portfolio just the right amount of cash each year for living expenses. Adding salt to the wound, with increasing longevity, we can all expect to live potentially several decades after leaving the workforce. These two facts put a lot of pressure on individual investment performance, turning retirement planning into a high-stakes game.

Checking Up On Your Career
By Paula H. Hogan
Quarterly Note, Second Quarter 2009

Several conditions are setting the stage for putting the management of your career front and center. In most employment settings, competitive standards are increasingly set globally, not locally. Emphasis on cost control is leading all of us to figure out how to do more with less. Advances in technology are picking up speed. Many of us will at some point hold jobs that did not exist at the beginning of our careers. It is even more likely that our children will be in jobs that do not yet exist.
Consumers face very different challenges today in planning for lifetime financial security from what previous generations did. One might think that different challenges would lead to different solutions. Yet, the wealth management industry today is still referencing an outdated theoretical model, and so, not surprisingly, it is proposing outdated strategies and solutions.
AAII Journal: Human Capital and the Theory of Life-Cycle Investing

Human capital is something we all have, and it’s becoming a front of mind issue in the press and in the field of financial planning. What’s up with that?

Income Solutions

Thinking of retirement? This website is targeted for transitioning investors who have questions about their quality of life past their working years.

NAPFA to Offer Platform for Low-Cost Annuities
In 2007 Paula was instrumental in building an alliance between NAPFA and Income Solutions, Inc. Through this alliance, clients of fee-only advisers gained access to immediate annuities bought on a competitive web platform. This article explains the game changing nature of this alliance for the annuity industry.

WSJ Practice Management Linking Up with A Career Counselor
This 2009 Wall St Journal feature story describes how Hogan Financial Management has collaborated with career counselors on behalf of their mutual clients.

Four Misconceptions About Financial Advice from a Veteran Advisor

Research Magazine: Investing for a Lifetime with Life-Cycle Investing





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Life Transitions
Life Transitions
Growing up, getting married, having children, planning a child's wedding, planning your own retirement... we call these moments life transitions, and each has its own special financial needs.
Paula's Recommended Reading List
Paula's Recommended Reading List
Over the years, I have found useful information and insight in a variety of investment and history books as well as in great literature, biographies, and fun novels. I wanted to share some of them with you.
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