Trading Jacks for Aces: Income Specialists Andrew Costa and Grant Conness Meet New Challenges with a New Wealth Management Structure

In a 2011 Phoenix Market International survey of affluent retired investors, 31 percent listed maintaining their lifestyles in retirement as their most important goal, followed by 19 percent wanting to ensure funding for their children’s college educations, and 14 percent whose goal was to protect their current amount of money. Other goals were to leave an estate for their heirs, charitable giving, minimize income and capital gains taxes, improve cash flow, and to better manage market risk. In other words, the retirement goals of high net worth retirees aren’t any different from anyone else’s. Ultimately, this economy has affected all of us.

However, while some factors are constant no matter how much money is involved, there are variables that make hiring a specialist in wealth management a very good buy indeed. Grant Conness and Andrew Costa, the Co-Managing Directors of Global Wealth Management in Fort Lauderdale, Florida, say that while the amount of money their clients have doesn’t make a difference when it comes to their concerns, motivations, and obstacles, more specific knowledge in a range of areas is required to preserve their wealth upon retirement.

Conness and Costa specialize in advising high net worth retirees, though Costa says, “We have some clients where we manage $300,000, others where we manage $5-10 million. It’s all relative. They all have a certain lifestyle, and it’s our duty and our job to ensure they can maintain that.” Between estate planning, setting up legacies, and protecting income and estates from excessive taxation, Conness says it pays to assemble a crack team of experts, which is exactly what he and Andrew Costa have done.

Most financial planning firms and stock brokers try to be Jacks-of-all-Trades. Conness and Costa say many of their clients come to them from wire houses where they shared their stock brokers with a hundred other clients. Costa says “Brokers try to do everything and be everything to everybody, but you can’t do that very well. When the market’s fine, it doesn’t matter, but when the market goes the other way, the client with the most money gets all the broker’s attention.” Their solution was to assemble a committee of investment experts made up of top analysts and investment managers who specialize in different aspects of money management, which ensures that every client gets the benefit of multiple expert perspectives. It’s effectively trading your Jack for a handful of Aces.

The team of specialists comes in particularly useful when planning how to balance the benefits of investments with their effects on clients’ taxes. “Taxes and asset protection is a biggie,” says Costa, who works with CPAs and attorneys to set up trusts, move risks to insurance companies, and ultimately, to make sure his clients are both protected from taxes and liability, and shielded from  major market fluctuations. There often isn’t a perfect answer, but having access to a team with multiple experiences and expertise ensures the best possible outcome.

In fact, drawing on outside, highly specialized advice is practically company policy, and one their investors deeply appreciate. “We like to work with a client’s current accountant or CPA to minimize their taxes. There are certain investments that are tax free, or offer tax deferred income – like annuities, where appropriate. There are different things you can do to structure the investment portfolio to be more tax efficient,” says Conness. Whether working with their team of experts or their clients’ favorite CPAs or attorneys, “the goal is for us all to be on the same page. If we recommend something, we want to make sure our client isn’t crushed by taxes in doing so. It’s always good to have that relationship,” says Costa.

Conness and Costa have carefully selected their team, including one of the top money managers in the country. The proof of the team’s expertise lies in the success of Conness and Costa’s clients’ portfolios, “the most popular choice for our clients is to create a conservative income portfolio, and not a lot of other firms have our track record for that type of account” says Conness.

Part of the reason for Global Wealth Management’s superior track record is that when big firms see big money, their brokers frequently focus on investing that money in ways that win the highest commissions for themselves, which usually means taking risks on the market.  “We offer the client a more transparent investment platform,” says Costa, explaining that as fee-based advisors, they are legally required to take actions that are in their clients’ best interest. “A stock broker, on the other hand, is held to the suitability standard, which means he can sell a product that may not be in the client’s best interest as long as it meets other criteria,” he says.

While they compete with large corporate services, Global Wealth Management isn’t trying to be one of them.  They take on only 12 to 15 new, full-service clients per year, which Costa says allows them to give a higher level of personalized service at a better price. Not only have Conness and Costa re-evaluated the structure of traditional money management firms, they’ve ensured that their company will continue to adjust to support the changing needs of their clients. They do this by asking their clients for feedback. “We meet with an advisory board of our clients twice a year to hear from them how we can better run our business to meet their needs,” says Conness. Part of meeting those needs is to address the needs of the next generation, and make sure everyone who is, or will be, handling the finances is involved.

Working with not just the primary wealth holders, but their heirs and family members as well, is part of the Family Office Model that Global Wealth Management embraces. It’s part of their multidisciplinary approach that brings together experts in the four pillars of financial planning – banking, insurance, investments, and trusts. Together, they create an all-encompassing strategy specifically crafted for each family, serving every generation. It’s a practice that has trickled down from the Family Offices of the Oprah-echelon of wealth-holders, whose entire staffs and services are devoted to a single person or family’s interests. Of course, very few families can afford to employ a company solely responsible for their financial welfare. But for those who fall somewhere in the middle, smaller firms, like Global Wealth Management, offer that boutique level of service.

The clients who come to Global Wealth Management tend to want to preserve their wealth, rather than gamble with it. They’re money-conscious, which fits well with what Costa and Conness offer – a lower cost overall. “We don’t add on mutual funds and extra high cost investments. We’re a conservative firm, and we cater to people who are conservative, so we set up our managed portfolios to do well for that type of person,” says Conness.

What do those conservative portfolios look like? Costa and Conness say their investment committee models them on “two and ten,” meaning that if the market is down by 10 percent, their portfolios do not drop by more than 2 percent. “Our firm was one of only a few that was actually up in 2008, which is a mark of how conservative we really are,” says Costa. Typically, half of any client’s portfolio is held outside the market in a combination of fixed investments, which are determined by what types are paying the best rates at the time. The other half is on the market, but in extremely conservative types of investments. Conness says, “Fifty percent of your money is sheltered from the market, the other half is in the market working for you in a conservative manner with liquidity provisions and inflation hedges in place. That’s how we came out ahead in 2008.”

Global Wealth Management’s clients’ investment goals range from conserving income, to focusing on inflation protection, to global investments. Costa and Conness also handle estate planning concerns, setting up legacies for multiple generations. Whatever the clients’ goals, their approach begins with investing their time to gain insight into their clients’ values, and forming that all-important relationship. But it’s not all deep discussions about family values and retirement dreams – the real selling point of their firm is their ability to cut costs and limit risks.

“Statistics show that on average people enter into the wealth management process five times, but generally do nothing. We feel this is attributed to advisor bias, and lack of clarity,” says the Global Wealth Management company website. Costa and Conness believe the reason for so much dissatisfaction in the investment market is due to lack of direction, and lack of transparency, resulting in portfolios that clients don’t even understand. “Just because the guy works for a big name firm, you think he knows what he’s doing, but people come to us with portfolios that are an absolute mess. The client doesn’t even know what they own,” says Conness.

The first thing Costa and Conness do when they sit down with new clients is to analyze their current costs and risks. “The reason that’s first is that we know how many people are sitting with investments they think are really inexpensive, but the true costs are a lot more than they realize,” says Costa. They share an intense frustration with how most old-school trading companies hide fees and expenses from their clients. “My personal problem with it is the expense,” says Costa, asking “how can you make good money with that kind of cost taken out?” Conness adds “We’ve modeled our firm completely differently. We entered into the industry on that side, and we don’t want anything to do with it. Too many people are completely blind to it.”

Corporate trading companies often operate much like luxury car lots. The financial advisors are licensed to broker products that their firms have already packaged up, leaving clients with expensive – and unreliable – vehicles. “It’s expensive. Risky. All kinds of problems,” says Conness, who remembers hearing about thousands of retirees losing 30 to 40 percent of their funds in 2008, “and that’s because they were lead to invest like a young person.” Costa and Conness teamed up to create Global Wealth Management in a new image – a much less expensive image “which has even better service, because you’re not stuck with all these products that are being pushed,” says Costa. “We want our clients to be aligned on their risk. We sit down with retirees, and soon-to-be retirees, who need to switch into a more conservative mode, and they come to us with tons of exposure to the market. Their risk is off the charts sometimes,” says Conness.

It’s a bad year to take risks, no matter what your age or income level. Tax laws are scheduled to re-set, income taxes are expected to rise, and retirees are staring down the “fiscal cliff.” Global Wealth Management’s clients are among the few investors who have actually made money during what’s been called the “lost decade.” “It’s the same for everybody. No one is where they thought they’d be in their investments at this point,” says Costa. In times like these, it literally pays to be conservative. Conness admits “We don’t do much on the accumulation side. We’re income specialists. We help you generate income after you’ve retired. We operate on a low cost, fully transparent platform, and with Fidelity as our partner, we give our clients the ultimate service experience.” When it comes to giving more value for the dollar, Global Wealth Management has indeed come out ahead.