A return of 8% to 12% is what the company shoots for at a minimum, he says. "If we can just average the equity return for the last 70 years, we've done our job," he says.
Kanaly notes that asset protection takes a higher priority than asset growth at the trust company, and clients want it that way. The firm's average client is between 55 and 60 years old and, in many cases, living on investment returns. Kanaly keeps expectations conservative and tells clients to expect to invest $1 million for every $50,000 in after-tax annual income.
"We promise them, number one, that we will do our first responsibility, which is give them their money back," he says. "After that, the question is, 'How much risk do they want to take to improve their world?'"
Jeff Kanaly, who is a national board member of the Financial Planning Association, says his brother's dealings with clients serve him well as NAPFA chairman. "I think that's where his strength is-trying to get people to focus on what's important," he says. "He does it because he's genuine about it. It's not something he's doing because it's a business thing to do."
SideBar
NAPFA Chairman To Propose Changes In Association's Branding
Steve Kanaly puts a high value on independence. He comes from a family that started one of the first independent trust companies in the nation. Financial independence was stressed during his upbringing. He frowns upon the intermingling of retail and fiduciary interests and calls Charles Schwab's purchase of U.S. Trust Co. a "tragedy."
Yet despite these feelings, Kanaly says that when he sizes up NAPFA, the association of fee-only advisors of which he is chairman, he thinks too much independence may not be a good thing. "Our biggest strength and our biggest weakness is our independence," Kanaly says of NAPFA and its 750 members.
Six months into his term as chairman, NAPFA is going through a transition that's designed to freshen its image and increase its role in empowering members. A key to this, Kanaly says, is to get NAPFA's members to work together as an industry group and use their collective muscle for things such as buying groups.
But to borrow a phrase from Abraham Lincoln, it may be like shoveling fleas, given the independent streak within NAPFA. "One of my goals is to get our members to think together," Kanaly says. "We ought to be able to go to a Schwab or a Waterhouse and negotiate a better money market fund. But we're so busy doing our own thing with our own employees, we don't think about that."