Beyond Investments: Why Client Goals Always Come First with Steve Otten, CFP®, CRPC®

That's the exciting part of the job. Everybody's so different, their story's so different, their needs are very different. Every time it's something new, it's not static. And being able to be conscious of that, knowing that, hey, we gotta build a plan around them. Specifically, whether that's from wholesaling or from being an advisor, that's what clients are looking for, at least in our experience, and we've had success with. Welcome to the Active Advisor podcast brought to you by Harbor Capital. Join us as we learn from pros who have helped thousands of investors live better lives. I'm Brian Moore and I'll be chatting with some of the brightest minds in the financial advisory business, bringing you insights on practice management and investment research that works for advisors and their clients. Joining me today on this episode of the Active Advisor podcast is Steve Otten, Executive Vice President and financial advisor at 72 Capital Wealth Management. With over 15 years of experience, Steve takes a comprehensive approach to wealth management by incorporating alternative investments, tax efficiency and legacy planning in an effort to guide clients towards a predictable retirement income and well diversified portfolios. In his own words, it's the client's plan that dictates what investments look like, not the other way around. Beyond the world of finance, he's also an accomplished endurance athlete and a passionate philanthropist. Without further ado, welcome Steve, and thanks so much for joining us. Glad to be here. Thanks for having me. So let's jump right in. We typically like to get the conversation started by asking each of our guests, what's the first memory that you have related to money or investing? So as a undergrad at University of Maryland, there was a gentleman, a little bit before my time by the name of Sergey Brin, who ended up founding Google. So shortly after graduating from University of Maryland, my friends of mine that we would participate in events at the Dingman center for Entrepreneurship at the school, bought some Google stock. We didn't know what we were doing, but we had an attachment to the school and we would watch Jim Cramer, which I would not recommend these days, but at the time we would want to get all the updates because that's what we knew. Very limited information. There was an attachment to the school and Google was one of those positions that we invested in and still own to this day. So turned out to be an okay company. I think it did okay. Yeah. And you're right, Jim Cramer was, you say, a little bit more on the ball or a little bit kind of more cutting edge back then. Yeah, he's more of a running back over the age of 35, I think at this point. Close, very close. That's a very nice way of putting it. Let's fast forward just a little bit. In a previous conversation you mentioned you spent some time as a wholesaler. And like myself, that automatically always brings a softness to my heart. Would love to hear because it seems, I guess as reformed wholesalers, there was always either seminal moment or something that ultimately led us to leave that kind of position of carrying the bag, so to speak. And for you, you became an advisor and eventually joined 72 Capital? Yeah, I mean, the wholesaling was great. I think ultimately going back to my time at University of Maryland, I was originally hired by a government contractor to be a quote, unquote junior business consultant. And then speaking with some of my colleagues that were a little older than me, had mentioned some opportunities in this wholesaling realm where you essentially get out what you put in the practice or that business that you'd build is based on the merits of your effort and so forth. So that was more interesting to me than kind of being stuck in a cube farm for some future. So I started the wholesaling and I enjoyed it. I had a pretty fast start. I think the thing that resonated with me the most was establishing relationships. So how that dovetails into an advisor is a lot of the wholesaling, at least for me, was a bit more transactional. Every month is a clean slate and I lose some of that influence of those relationships. So switching over to an advisor, it's exclusively built on relationships, not just with the immediate client, but the next generation of their family, some of their peers, other people that they may be connected to. So ultimately wanted to seek something that was more of a long term relationship based practice. And that was what led me to transition away from wholesaling and into the role that I have now. Typically, when you're wholesaling, one of the nicest things that I really loved about the job is you get to talk to so many different people. You get to hear and you try to actually listen to them and kind of discern what problems they have, how you can help fix them. In your mind, you're thinking all this and you're trying to get as much information out of them as you can. And I would think that some of that actually also kind of has to relay and transition over to you becoming an advisor as well. Still trying to get your clients to open up to you, listen to them, trying to hear, obviously being sympathetic, but you're hearing, you're asking certain Questions, trying to take away bits and nuggets, information that you can use to help them with later. What advice, looking backward would you give a wholesaler who's looking to make that jump over to becoming an advisor? I think you have to look to what your strengths are. And for my tenure it was establishing good relationships and building out a network. And I think what you said is very accurate. You know, you could with clients today, they could live on the same street, their kids go to the same school, their worldview on what's next for them, whether it's from a financial planning perspective or just their personal plans, aspirations, those things could differ so wildly. So as a wholesaler, you could go from one town to the next. Difference might be a 15 mile commute, but their client base or the things that they're looking for might be very different. So it is always exciting and you have to learn to be somewhat flexible. And you also have to understand that building relationships with those types of people is really what is going to be a difference maker, at least for me as a wholesaler and then subsequently as an advisor, building up that long term relationship. But that's the exciting part of the job. Everybody's so different, their story's so different, their needs are very different. Every time it's something new, it's not static. And being able to be conscious of that, knowing that, hey, we got to build a plan around them. Specifically, whether that's from wholesaling or from being an advisor, that's what clients are looking for, at least in our experience. And we've had success with. Excellent. Is there anything specific that I could get you to mention? I know everybody's kind of got their own stuff that they figured out and they're like, I'm going to keep that information myself. But is there anything specific we could kind of work out of you as the spending, you know, from your time as a wholesaler that helps shape the approach you take now with clients you think is really kind of beneficial and differentiated. I think as a wholesaler, what the expectation was from us was a product. I guess the way that we would approach it is we would want to understand the client. So instead of coming in with some preconceived idea that we would want to share with them, we would want to know, okay, what is your client's current situation, their needs, their temperament, their background, whatever the case is, that would maybe better align them with the solution that I have to offer. And I think that resonates well as a wholesaler and then also as an Advisor. It's the same kind of experience if I was going to buy a new vehicle and I walked into the auto lot and someone just came and talked to my family about one specific vehicle that he thought was great. Without knowing what our specific needs are or what our family dynamic is or our budget, you really want to understand what the need is and what the background is so that you can best align the right solution, not a solution. Excellent point. Well said. Let's shift gears here for a second. I would love to hear a little bit more about 72 capital and the infrastructure that the firm's built up to support you and your other advisors, fellow advisors. But also how has that actually helped you, you feel better serve your clients? So I think the goal when 72 Capital was formed was to take all the benefits of being independent, meaning kind of completely on your own as a sole practitioner or with a few people, and then combining that with just some of the bigger infrastructure from a place like I came from at Merrill Lynch. It's coming from that backdrop, where I was at Merrill Lynch For 14 years, everything was relatively turnkey. They had a massive apparatus, tools that we could utilize, and it was never a concern to me about establishing firewalls, hardware, equipment, software training. All of that was kind of provided for us. So 72 capital gave us the opportunity to kind of have that infrastructure in place where we could do our job the way we had at Merrill, but also just be independent. Coming out of 2008, if you look at all the wirehouses, they're now absorbed by these big banks. And with that comes an agenda and some priorities that they want to seek or they want to pursue. And I completely understand that. I think for our practice, what was appropriate is we wanted to be independent from that. We just spent some time talking about. We want to understand the needs of the clients before we offer them a solution. And if I'm coming in with an agenda of things that are Big bank related, that may not be relevant. So I didn't want to set up a mainframe in computers and all of these things. So 72 Capital had the infrastructure for us to do that with Big bank backing so that we could have some of the same strategies or tools that we've used at Merrill Lynch. But the independence to say, hey, the client's running the show here, what they need or what they're looking for, that is what we are going to provide exclusively. We're not going to offer some other types of service that is not necessarily germane to their needs. And that just Allows us to solely focus on the needs of the clients. As a financial planner, my partner and I are both certified financial planner cfps. So we want to spend our time doing that and less time about saying, hey, get some lending out there. Unless it's brought up by the client or it's discovered as a need for the client, it's not something that we would look to pursue because it's not necessarily relevant to their planning. Excellent. And I think that really speaks back to what we kind of mentioned earlier, that it's the client's plan that dictates what the investments look like and not the other way around. Can you elaborate more on what that really means to you and how you go about implementing that investment philosophy? When we meet with families or even an organization, a nonprofit, whatever the case may be, it is not uncommon for them to start the discussion with investments or things that they already own. And what we've discovered through that process is oftentimes we find those clients, those organizations, those nonprofits, what have you feel beholden to those investments, Meaning those investments are kind of dictating what choices they make because it's what they own. You see a lot after a bad market, too. Well, it's like, I've owned this fund and I don't want to do anything until it recovers. We try to take a step back and just say, well, what are we looking to accomplish? What are the goals of the family? What's near term, such as college, planning for the kids? What's long term, such as, hey, we want to make sure that the assets of our family stays in our bloodline. We're looking for some sort of succession plan for our business. Those are the driving mechanisms for how we build an investment strategy, because they have to be aligned with the needs, the trajectory, the time frame, liquidity, preferences. All the different elements that would really build out an investment strategy have to be aligned with those types of goals. Whereas I have lots of good investment ideas, I think any advisor would have good ideas that they think are topical given this part of the market cycle. But is that relevant to what the client needs? So once we kind of put it that way, and we'll ask a question to a client at times with the positions you have now, what type of retirement lifestyle do you think that's going to provide for you, or what do you need? And oftentimes a client has no idea. So it's kind of a part education process with the client. But also it's important to that we're committing to them, that anything that we build around you is specific to where you want to go, whether that's a retirement plan, college, savings, whatever the need is, or the topic that kind of led us to that discussion. That's how we build it. And that's kind of been our approach to it. And I think it's helped achieve more meaningful relationships because you get to know the people rather than just being a conduit to investments. I completely agree with that. I think it's really one of those things that this is all about customer service and serving the clients and really helping them along this journey called life. I apologize if you don't want me to say this, but I'm going to mention it because you mentioned in the previous call we had that you have enough gray hair to sit in a seat, but not so much that you're going to retire alongside your clients. And that was one of those things. When you said it, I kind of wrote it down. I'm like, there's a bigger, deeper meaning to this than there kind of is just hearing the words on paper. And really in today's advisor environment where we've got nearly a hundred thousand over the age of 60 that are kind of could retire or sell their books at any moment, I have to believe that you might agree with me when I say that some of this feeds into the whole overall aggregation of kind of some of these firms just being able to buy books. But with that, you and your partner have been in the business long enough, you know what to expect. You've seen kind of this play, this story play out a number of times. I would love to hear from your point. What advantage do you think that gives you not only with your clients, but also kind of in the whole advisory landscape and how the changes may play out? And how do you see that landscape playing out for yourself and in general for the next decade? My partner was the one who came up with that line. So Don Deary is the one who usually leads in a client discussion. We have enough gray hair to kind of know what we're talking about, but not enough to be actually in the business soon. But I think that, you know, it'll be fun. Tell my children later in life that I started my career during the 2008 financial crisis. We've seen so many different market cycles go boom and bust, went through a couple Covid iterations, being stuck at home. All of those things is what's accumulated. Some of that gray hair, seen a lifetime worth of experiences, at least from a financial perspective, markets perspective, but most people, you Hear this all the time. It's my dentist just retired. The CPA I've been working with is leaving or their business got acquired. Like we've been talking about throughout the duration of this podcast is you build relationships and then it's something new and then it's now what they don't know me, how am I going to go about this? So I think that the thing that has worked as an advantage with our age now, now, granted, we're Both in our 40s, but young enough that we're not leaving anytime soon. So that when we have clients that are concerned about the next generation, their children, or just making sure that we're going to see them over the goal line, not just to the goal line, that becomes more of an asset, I think. I don't know if what the stat is now, but when we left Merrill Lynch, I think the average age of a financial advisor was 61 and a half. So that was a little over four years ago. So you have to assume that's gone up. So those relationships that clients have with their advisor, they're getting to a point where their advisor is thinking the same thing they are. So I think that's worth to an advantage for us is to say we can stick with you through retirement, through some of the chaos and uncertainty we've experienced in recent years, and will still be there on the other side while you're enjoying retirement. And that's got to be comforting. I would imagine you're this the feedback you get from your clients. Yeah, I think they like that. In particular those with children or those with an organization that's going to be existing long after they leave. So there's lots of different ways in which people look to that as a benefit, but it's worked out for us. But Don's not here to defend himself, but I think he's starting to get more gray hair than I am. So we'll tease him while he's not here. Well, hey, I'm not going to tease either one of you because I've got no hair. So keep whatever you got. It's all I'll say. Would love to hear if there is one. Hopefully there's not, but I would love to hear an example that might or something that may come to mind where you feel that your age is kind of work against you and one where you think it's been beneficial for you. I think early on age was more of a challenge. It could have been more of a challenge because we were sensitive to the fact that we were younger. I Remember when I first started, I happened to win a big relationship with biotech firm and Montgomery County. And I think when they saw me in person and saw that I was 25, there was some uncertainty there whether or not they made the right call. So I think it's probably just dependent on you. You have to have confidence in the training that you have and the expertise that you've learned as you start your career, you know, so that was one of the things that, at least when I first started, especially during 2008, where the world was kind of falling apart, at least from a financial perspective. And now we're in our 40s, we've been doing this for some time. We have a pedigree, we have accreditations, we have experience. I think one of the things that I would say, having done this for a little while now, is you learn to speak the language of the area you were talking about as a wholesaler, going to see people and some of the things that might be topical to them. So it's a small world around the D.C. market. So many people are interconnected. The things that they experience are relevant or close to a lot of those different folks. So being able to speak that language in a way that they would understand or seem familiar is a bit warm. If you're having an initial conversation, it's a bit of an icebreaker because you're just another person that isn't sharing the same neighborhood, schools and areas that they are. Yeah, the DMV definitely is somebody who was born in there, and I refer to it as there because it is its own distinct area, I think, in America, and it has its own kind of memes and kind of eccentricities. Would love to hear if you and your partner have done very well. And I think that's been a testament to not only your hard work and due diligence, but also the wherewithal that you all had and the mistakes and kind of things that you've learned along the way. We'd love to hear if you have any advice that you may look to kind of impart on younger advisors, five or 10 years younger than you, things that you kind of picked up along the way and something that kind of kept you going. I think I would use some advice my mother would give me when I became parent for the first time, is she would often tell me that the days are long, but the years are short. So what you do in between them and how you spend them is really what's going to matter later in life. It's the same thing as a Young fa. It's a very difficult job at the onset, but, you know, a lot of that heavy lifting is done then. So to get to where you want to have a practice working with the people that you resonate with or can help with the most is kind of predicated on understanding that that time, at least at the early part of your career, is really paramount to what the ultimate practice you intend to build, the community you want to serve, and the type of client you want to represent. So it's certainly true. As a parent in particular, the days are long, but the years are short. No question. Really appreciate that advice. One last question for you, and this is something that I ask of everybody would love to kind of hear. What gets you up in the morning? What keeps you hungry besides training for your endurance races? If it's not my. My three nature running into the room and waking me up out of a dead sleep? I would say, as relates to my profession, it's, you know, every day is going to be different, and then you have that backdrop of just uncertainty. So it's hard enough to navigate the different needs of clients and what they want to do and what they want to get out of their life, their professional life, their retirement life. And then you have that overlay of something that happened in politics, especially in D.C. or it's some sort of market move that it garnered some attention. There's always something that you don't see coming, but you have to plan for. So it always makes it interesting. We're not building the same house every day in the same neighborhood. We have something different every single time with different challenges. So it always keeps it interesting and exciting for us because it's something that is always going to be different. Excellent. Well, thank you. One final question. At harbor, we're firm believers in active management. Though it's important to acknowledge that every financial expert has their own unique perspective. From your experience, what is your take on active management, and where have you seen it making the most significant difference? I think that the conversation is like, we both have a role in the outcome of financial plan ourselves as advisors and as clients. Life, as we well know, does not work in a linear smooth line. So we have to be able to adjust. We can set up a great plan or build a foundation for someone, but markets are going to change. They may switch jobs, they may have grandkids, the tax code might change. So having an active role to adjust those variables is really what's going to dictate the success in our view. You know, we can build out a good framework of a plan. But we also have to understand that things change, conditions change, variables need attention. So having an active part in that, whether it's from their investments, making sure that they're not over concentrate in certain areas, that could create an unnecessary amount of risk, or if it's just something to say, hey, this happened, a promotion or some sort of other type of opportunity causes us to revise and get back into their plan and make sure that it's active enough to adjust when necessary. So it's definitely hugely critical that we have that nimble aspect because, look, we'd like to think it's just going to be, you know, we save and you put in our time and then you clock out. But life is a bit more chaotic than that at times. Definitely can be, without a doubt. Last but not least, how can people find you? You can go on 72capital.com to find us. If you search for my name on LinkedIn, you'll find me somewhere. I think a Google search for my name or Don Deary, my partner's name will bring up our profile pages. So those are some great ways to find us. Excellent. Well, thank you very much, Steve. We're going to move on now to my favorite part of the podcast, which is 60 Seconds with Steve Otten. Let me know when you're ready. Ready. Nickname. I get maximum effort a lot. Hidden talent, swimming. If you could instantly become an expert in anything, what would it be? Longevity. Best professional advice you've ever received. Keeping it simple, hard work. What never fails to make you laugh. I think in this day and age it could probably be a tweet from our president. What's one question you think all clients should ask their financial advisor? I don't know if there's a specific question, but what I would do is listen and observe. If I was going to the same example, like buying a new vehicle, there's already a solution walking to me at the front door rather than asking me questions about who I am and what I'm about or what is my family like? That's a red flag in our view. And we see that more often than not, clients do the heavy lifting of the savings and putting themselves in a position to want to plan for retirement. Most rewarding part of your job, going from one generation to the next. You meet these clients in the working life, then you see them over to retirement, then you meet their children and then they start to have a family. And that multi generational aspect of that is very rewarding, Whether you're a seasoned advisor or just getting started. The Active Advisor, brought to you by Harbor Capital offers professional insights for the financial Advisor community. Visit us@harborcapital.com to learn more. And don't forget to subscribe to the Active Advisor on Apple, Spotify, Google Podcasts or wherever you listen to podcasts to stay up to date on investment trends, tried and tested research methods, and what your industry peers are up to. From all of us at Harbor Capital, thanks for tuning in and now for important disclosures. 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