Understanding exactly what a financial planner does and learning how to benefit from his or her services is a hot topic in the Foolish community. In this interview with Joel Kantor, a Certified Financial Planner in Tulsa, Oklahoma, Barbara Bayer explores the business of financial planning and how investors can use it to their advantage.

By Barbara Eisner Bayer (TMF Venus)
August 17, 2000

The most terrific aspect of the Internet has been the ability to make new friends who may otherwise never have entered your life. One such person I've met since becoming Foolish is Joel Kantor, a Certified Financial Planner with AmeriTrust Investment Advisors in Tulsa, Oklahoma.

Understanding exactly what a financial planner does and learning how to benefit from his or her services is a hot topic in the Foolish community. I recently spoke with Mr. Kantor about the business of financial planning and how individuals can use it to their advantage.

TMF Venus: What led you to choose financial planning as a career?

Joel Kantor: I studied business at the University of Oklahoma, where I majored in accounting. I probably should have studied psychology! While studying for the CPA exam, a tornado blew open the window, scattering my papers into the next county (actually all over the room). I took that as an omen for me to change careers, especially since I didn't enjoy accounting.

Then I became a stockbroker, working at various top brokerage houses. One day, I read an article about a postman successfully suing Charles Schwab for allowing him to trade his account for next to nothing. I knew then I had to make a change. If Schwab could lose a case for not giving advice, who knew what could happen to a broker who did!

My next stint was as the only fee-only portfolio manager in Shearson/Smith Barney's Texoma region. That worked well until I realized the type of client I wanted to build my career with needed: 1) an account in which they could consolidate their investments (stocks, bonds, cash, and mutual funds); and 2) an advisor who understood and could advise them on their financial needs, which include tax planning, cash flow management, retirement planning projections, and estate and insurance planning.

TMF Venus: Is that how you'd describe your work now as a Certified Financial Planner?

Joel Kantor: Yes. I currently work with a private trust company offering trust management, investment management, and "comprehensive" financial planning, all on a fee-only basis. I like putting myself on the same side of the financial fence as the client. That way, anything I do well for the client will be, in effect, good for me. This approach is a win-win way to do what I enjoy doing.

TMF Venus: Could you describe the steps to developing a comprehensive financial plan?

Joel Kantor: The College of Financial Planning suggests several specific steps to completing a financial plan, all of which we follow. They are:

1. Introduction -- Meeting the clients, listening to their needs, and assessing if we're the right "fit" for them, while they assess us.

2. Data Gathering -- Setting up a series of meetings between client and planner, and planner and professional service providers (CPA, insurance broker, attorneys, etc.) to set goals. Reports are gathered, such as investment and financial statements, tax forms, beneficiary designation forms, P&C insurance disclosure statements -- anything with a dollar sign close by.

   At this time, we send the client the balance sheet and cash flow worksheets, accompanied by the first 25% of billing. The client then sees the "accurate" net worth by which we determine the fee. At that juncture, they can say "no thanks" and pay for the consolidation of information.

3. Analysis and formulation of recommendations -- Preparing projections/analytical assessments and making recommendations based on client goals. We then help the client establish priorities, should all goals be initially unattainable.

4. Report preparation -- Meeting with the client and explaining the results of the analysis, and mapping out the priorities based on the discussions with the client.

5. Implementation -- Assisting the client in implementing the plan.

TMF Venus: What's the next step after accumulating all client data?

Joel Kantor: After we've established where the client stands financially, we begin making long-term financial independence projections. The best definition of being financially independent is the ability to work because you want to.

TMF Venus: That's the ideal.

Joel Kantor: Most of our clients want to plan for retirement. They want to know when they can retire, or how much they will have when they retire and how their current lifestyle affects their ability to achieve financial independence. I use conservative numbers and investment allocations -- 6% and 10% as my long-term return projections for bonds and stocks, respectively.

TMF Venus: Why such conservative figures?

Joel Kantor: I know stocks have done better, but I'd rather err on the side of financial survival. If we assumed a 20% return on equities and told the client s/he could retire in five years, and stocks perform at the long-term average of 11%, we've got a very unhappy client. We incorporate the current lifestyle with education costs, debt amortization schedules, pensions, Social Security, and the big'un -- retirement plan assets -- and add inflation of about 3.5%.

Our goal is arriving at the most conservative portfolio allocation the client can have, and still achieve and maintain financial independence. I want to know the least amount of risk (equities) a client needs to make the portfolio last until at least age 100.

TMF Venus: Once you develop a financial plan, is that etched in stone?

Joel Kantor: No way. We meet with clients and tell them everything they need to do; but it doesn't mean they're all planned up. Things change. Portfolio allocations have their own evolution as contributions are made, or tax rates change. We continue to monitor lifestyle and portfolio balances and allocations, managing all of this to maintain the client's financial independence goals, all the while balancing cash flow and income and estate taxes. We're always checking ourselves to make sure we're doing the right thing.

Next week, part 2: Life insurance, annuities, estate planning, and those darn fees!