Show Me The Money?

Giving the almighty portfolio secondary status can be tricky business for a financial advisor. One knock is that life planning is nothing but a "touchy feely" gimmick that conveniently excuses miserable portfolio performance. Some advisors are afraid of unintentionally putting themselves in the position of pseudo-psychologists who will have to be caretakers of their clients' psyches as well as their money.

One study even suggested that advisors are fooling themselves if they think bottom-line performance isn't still a vital component in their relationships with clients. The survey, conducted by Fidelity Investments, found that half of affluent investors say portfolio performance is more important than the personal relationship they have with their advisors, compared with only 31% of advisors who felt that way. Even more telling, 69% of respondents say poor investment returns would make them consider switching to a new primary advisor.

Diliberto scoffs at such suggestions. Portfolio fixation, he asserts, is not something he sees with his 270 clients, some of whom have been with his firm, RTD Financial Advisors Inc. of Philadelphia, for the entire 20 years it's been in business.

In the late '90s, when the diversified portfolios of Diliberto's clients were underperforming the high-flying indexes, he asked his client advisory council what he should tell others about portfolios that were rising "only" 15% or 20% a year. They looked at his quarterly letters to clients and told him to "stop apologizing" and start focusing on the value his firm was delivering that couldn't be calculated in terms of portfolio appreciation.

When he gets a call from a grateful client, Diliberto says, it almost never has to do with portfolio results. On the contrary, he says, it usually has little to do with money at all. He relates one instance from several years ago, when a married couple came to him. The wife made $850,000 annually in software sales, and the husband struggled to make $30,000 a year in the same type of job.

Diliberto, as he does with all clients, spent hours asking the couple about their histories, goals, fears and overall attitudes about money. What he found, and what the couple themselves discovered, is that they were depriving themselves for the sake of the other. The husband actually hated his job, but kept it because he felt pressured to keep up with his wife's salary. An avid golfer, he denied himself a set of new golf clubs because of his low salary. The wife, who has a passion for horses, was mum on her desires to spend money on a new house or a new horse trailer to avoid showing up her husband.

From that point on, Diliberto says, it was only a matter of showing the couple what was financially possible in their lives, before even talking about asset allocation and portfolio strategy. Three days after meeting with Diliberto, the husband quit his job. Today, the husband has a new, higher-paying job as a computer programmer, which he loves, as well as a new set of golf clubs. The wife has a new horse trailer, and they recently moved into a custom-built $850,000 home.

"She called me one day and said something she said she'd never expected to tell a planner," Diliberto says. "She said, 'You changed our lives.'"

When George McCarthy first walked into Diliberto's office with his wife in 1989, he was a 58-year-old radiologist looking for someone who could untangle some tax issues having to do with his medical group pension plan. Yet he later found further value in the relationship, and credits Diliberto with getting him to think about his retirement years before he would have done so on his own.

As a result, he retired in 1996, a year earlier than he feels he would have without the planning provided by Diliberto. "I felt that Roy had saved my life because, with the stress I was under as a physician, if I had to work another year I would have died. Stress is a killer. I've seen it before."