Robo-advisers and retirement investment software are all the rage. But those with substantive holdings or complex financial situations usually prefer the human touch.
The difficulty: How to find a financial adviser who suits your needs, style and expectations? And how can you be sure that adviser isn’t a scammer?
That’s the problem Kevin Neal tackled when he founded Moenio in 2016. His company’s goal: Match investors with reputable, experienced financial advisers who will fit the investor’s specific needs. The client pays Moenio — not the investment firm — to avoid any conflicts of interest.
Q: Tell us about your background. What did you do before you started Moenio?
A: Before starting Moenio, I worked with one of the largest wealth management firms in the world. I began as a wealth management consultant helping hundreds of advisers work with high-net worth and ultra high-net worth clients. After eight years, I changed direction and became a private wealth adviser at the same firm. Out of 7,000 advisers, there are fewer than 350 invited to become PWA’s.
The process involved can be challenging and includes a written exam on wealth management and financial planning issues; an oral exam covering investment management, trust and estate issues; as well as lending and other planning areas. In my role as a private wealth adviser, I was the lead portfolio manager on more than $400,000,000 in assets.
I also sold a regional investment firm and am a chartered financial consultant, certified financial planner, chartered life underwriter, and trust and estate practitioner.
Q: What brought you to Miami, and what has made you stay?
A: Work brought me to Miami and, once in Miami, it is difficult to go anywhere else.
There are few places in the world with such an amazing outdoor lifestyle. The Keys are 45 minutes away, the Bahamas including Abacos and Exumas are a few hours away by boat, and Miami itself has amazing beaches and plenty of outdoor activities to engage in such as, running, biking and exercising year-round.
Q: When and why did you decide to launch Moenio?
A: On one day, I still remember vividly, I attended two client meetings with two different advisers. My role at the time was to help advisers keep or close business so I was privileged to see hundreds of advisers interact in client meetings. On this day, one client was a very successful Fortune 100 executive and the other was an entrepreneur who had built an amazing business. Both of these clients had substantial wealth and, in my mind, could pick and chose whomever they wished to work with as an adviser.
The challenge came when I sat in the meetings and realized, “How did this adviser get this client?” Or, more importantly, “How did this client pick this adviser?”
The advisers were nice and knowledgeable, but they weren’t the best. I knew the performance delivered and fees being charged by the advisers could compare these to hundreds of other advisers. I could not figure out how these clients’ ended up with these advisers.
I started doing research and realized there were more than 600,000 registered advisers in the United States, with South Florida having more than 15,000. How does one go about finding not just an adviser or broker, but actually a good or great one?
From this experience and working with hundreds of advisers in client meetings, I realized there was a unique business not being addressed for investors.
Q: Moenio is a matchmaker of sorts. How exactly does it work?
A: There is one question anyone should want answered about their adviser: “Are you working with one of the best?” Or, for South Florida, out of 15,000 advisers would yours be considered in the top 5 percent?
We answer this question for our clients by using a proprietary evaluation system called the “Client Adviser Asset Report” — CAAR. We found there are 16 areas of an adviser’s business that have a major impact on a client. Those include historical performance, benchmark comparisons to performance, fees being paid, investments being offered, background of adviser.
We evaluate an investor’s current adviser using the CAAR system but tailor it to our client’s needs. One client might wish to overweight historical performance while another could want fees and regulatory history to be a deciding factor.
In addition, we do provide one-off services such as performance reviews, adviser background checks, looking at the life insurance and annuities our clients own or are considering buying, and more.
Q: How much money and what kind of investments does someone need to have for a service like Moenio to be of value?
A: We’ve worked with clients having $500,000 to those having over $100,000,000. It all depends on the scope of our work.
Our focus is on the investable assets, but we do take into consideration other investments such as real estate, collectibles (wine and art), and more. We want to be certain the adviser is aware [of all investments] and manages accordingly.
Investors having active 401(k), 403(b), and other retirement accounts are not a good fit for our services as these are usually managed by the individual investor and not by an outside adviser or broker.
Q: When you look to match an investor with an adviser, how do YOU find those advisers?
A: When building out our model, we found two issues we needed to overcome when matching investors with advisers. One we call the “winner’s bias” and the other we call “professional bias.”
The “winner’s bias” deals with finding a few great advisers and by default giving them all the clients because they’re great. This is not in our client’s best interest and is also a concern at the firm level. They sometimes pick “their top advisers” who produce the most revenue but are not the best fit for our clients.
The “professional bias” typically applies to CPAs and lawyers but can include other professionals. They are asked for referrals but haven’t done a proper due diligence to evaluate performance, fees, background, etc. They are professionals and trusted, but the referral could be biased. Sometimes they are getting referrals in return, so there could be a conflict of interest.
To alleviate any “winner bias” and “professional bias,” we educate our clients about all the different types of firms: Registered Investment Advisery, wealth management, private banking, trust companies, etc. Once we educate our clients about the pluses and minuses of each firm, we leave it to them to say, “we would prefer this type of firm.”
At this point, we then go to the firms directly and ask them to provide the names of their best advisers based on what is important to our client in a “client snapshot.” That includes the client’s personal situation and needs, client’s temperament, investment experience and risk tolerances.
We leave it to the firms to provide their best options, based on our “client snapshot.” This avoids any bias on our part. Then we begin to evaluate the advisers provided.
Q: Does it matter whether an adviser is part of a big firm or whether they are a small, independent operation? What are the pros and cons?
A: The firm an adviser uses is a key area we evaluate. Out of the 16 areas we evaluate in the Client Adviser Asset Report, four are specific to the firm they utilize. Here are three common question we address:
▪ If the adviser makes a mistake, how does the firm handle the mistake? A trading mistake for a $5,000,000 can be $25,000. Who pays? Or, who makes certain the advisers or brokers are doing the right thing?
▪ A second scenario concerns the products being offered and recommended by the adviser. We do not like to see their own cooking — that is, choosing products from the same firm. We like to see a broad range of products, such as Exchange Traded Funds, bonds, stocks, mutual funds, etc.
▪ The third involves reporting and what is provided to our clients. We want our clients to have clear, concise data shared to them on a regular basis. This includes clear performance, performance against benchmarks, asset allocation, changes in allocation, fees and other relevant information. We look through the adviser to the firm and/or their reporting platform for clarity.
Q: What are the top questions someone should ask prospective investment advisers?
A: This is one of the more challenging questions posed by friends and clients, “What should I ask my adviser?” The challenge comes in getting back an answer. If you don’t know what to do with the information provided when you ask then the answer could work for or against you.
An example is a question we ask: What has been your historical return over the past three-year and five-year period? A historical return without reference to the benchmarks creates challenges.
We tell clients to ask the following:
▪ How do you work with your clients?
What we want to hear the adviser say is, “I use financial planning as a cornerstone.”
▪ How would you invest my money?
What we want to hear the adviser say is, “I use a model for all my clients and adjust the model accordingly to each client.”
▪ How are you different or better than other advisers?
We want to hear the truth: “There are some great advisers out there. We believe we offer outstanding service to our clients and manage investments well.”
Q: What kinds of fees are involved in using your services?
A: Each client is different based on the services and the level of engagement we provide. Some clients have two or three advisers managing their assets and we need to do a more comprehensive evaluation. Others have one adviser and wish for us to give feedback on the fees as well as negotiate the fees on their behalf.
We try to work out flat fees on an engagement so any excess time is absorbed by us, not our clients. For a full adviser evaluation, we spend a minimum of 15 hours. When finding an adviser, it goes up to a minimum of 20 hours of work on our part. Our hourly fee ranges from $150 to $450+ depending on who is doing the work and the scope.
Q: What is an acceptable range of fees to be paying an adviser these days?
A: Fees are about “fair compensation” and, just as importantly, “the work product being delivered.” We want to understand how much a client pays in total out-of-pocket fees over a defined time horizon and compare this to what our clients earned on their investments. We call this the fee-ratio.
This allows us to democratize the fee process and have a different conversation with the adviser. Once we run the fee-ratio we can ask, “Our client paid you $50,000 in fees over three years but the gross return over those three years was $150,000. Is paying you 33 percent in fees fair?”
Fees can range from 0.35 basis points to 1.5 basis points on the assets being managed. (A basis point is equal to 1/100th of 1 percent). Advisers offer a valuable service and should be compensated, but compensated fairly.
Q: Most advisers disclose fees, either percentages or flat rate. But are there hidden fees consumers should look for? How can a consumer identify those?
A: This is one area on which we spend considerable time when evaluating an adviser. Although fees are disclosed on the account opening paperwork clients sign, there are definitely ways to lower fees if you know where to look.
A few examples, without giving away all the secrets:
▪ Using a fee-based account where the fees are fully disclosed rather than a brokerage account where additional costs can be included. There are specific reasons to use a brokerage account but a brokerage account can have additional costs not disclosed.
▪ If the adviser uses mutual funds (we are not taking a position on mutual funds pro or con), making certain the adviser is using the “proper share class.’’ This lowers the mutual fund “manager’s fee.”
Q: There’s more to creating an effective relationship with an adviser than numerics. What are the top qualities someone should seek in an investment adviser?
A: We have three core “qualitative” measurements we use when interviewing investment advisers and they can be as important as the quantitative.
▪ Communication: The best advisers have open and patient interactions with their clients. Clients leave adviser meetings with increased clarity and confidence
▪ Proactiveness: The best advisers anticipate and address clients’ needs and concerns, saving clients time and money and reducing their stress.
▪ Consistency: The best advisers deliver consistent advice focused on meeting clients’ needs and goals.
Q: How can someone be sure that their investment adviser isn’t going to Madoff them? Are there warning signs?
A: I can’t help but be self-serving here and say, “we try to help build this into our evaluation of advisers.” But for the average investor it comes back to one thing: if it looks too good, it probably is too good to be true.
Both the Bernie Madoff and Allen Stanford situations involved offering outsized returns relative to the markets and/or investments being provided. This should create an immediate red flag and prompt a much deeper look into the adviser or firm, which we provide our clients.
Q: With Baby Boomers working longer, at least part-time, have the traditional guidelines for investing changed?
A: The guidelines have not changed for baby boomers — only the news cycle and information given to everyone. If investors and advisers would turn off the TV, radio and internet on the markets and refer back to the traditional investment style — invest and hold, with the occasional change based on major shifts — they would be better off.
Investors should use a financial planning approach on assets, liabilities and cash flows, then approach investing from this position. Regardless of client size, $100,000 to $100,000,000, financial planning done correctly can take into account tax situations, cash flows, corporate structures, investment outcomes and more.
Q: The market has been hot lately, but many have concerns about whether it will last. Do you have any advice for people in times of uncertainty?
A: Our biggest concern for clients right now is their adviser, or they might try to “outsmart” the markets. This typically ends badly for everyone involved.
The best advisers recognize they cannot outsmart the markets but at the same time they can be mindful of market cycles and fundamentals. They might begin to move away from growth managers to value managers. They might begin to buy bonds for their clients rather than use a mutual fund or ETF.
Positive, upward moving markets often happen quickly — within a few days or week, like the recent “November election rally.” By being out of the market or trying to outsmart it, advisers can underperform. We evaluate these “out of market” situations when evaluating advisers.
Job title: CEO and founder, Moenio
What the company does: Create certainty that someone is using the right person to invest for them and their family.
Years in the industry: 20+ years
Education and credentials: Bachelor’s degree in history; CFP, ChFC, CLU, TEP
Personal: Married, no children
Hobbies: Cooking, fishing, fitness, shooting
What keeps you up at night: As a business owner, it’s about making certain I do the right things for my business and my clients. Integrity and honesty are the only things that matter. If there is any doubt on advice given or a situation I need to address, the lights get turned off but I continue to work through it in my mind.