If advisors have learned anything from the last market cycle, it's that they must be ready to stay with unpopular investment strategies and stick to their guns-even if it means losing clients, says certified financial planner Charles Hughes of Bay Shore, N.Y. That certainly was among the hard lessons he learned in the volatile market of the late 1990s.

The 60-year-old Hughes will be the first to tell you he's learned a lot during his years as a planner. He was practically present at the creation of the profession, after starting his own firm in 1981. He remains a sole practitioner today.

A former priest and teacher of classical languages, Hughes decided to become a planner in the late 1970s and served as president and executive director of the Institute of Certified Financial Planners (ICFP) in the 1980s. Over the years, he has taken part in many debates on the profession's standards and ethics.

In his ongoing journey as a planner, he's faced many of the same challenges confronting others in the business. In the late '90s, for example, he faced pressure from clients wanting quick investment returns. Hughes thought it was sensible to adopt a balanced approach to both small- and large-cap stocks at a time that large-growth stocks were booming. "The investment strategy we employed in 1999 was not a radical departure from what we had used before. However, it became dramatically out of favor. Clients became impatient and dissatisfied, and therefore we lost clients," he says.

By sticking to that formula, which Hughes believes was sensible, he alienated and lost about 5% of his clients. That was bad enough, but he doesn't fault himself. What he does blame himself for was his decision to give in to pressure from some clients who believed that an overweighted portfolio was what Hughes should have been doing all along. "In some cases, I must admit that we capitulated, meaning we moved into large-cap and telecommunications areas, and we lived to regret it," says Hughes.

These days Hughes, like many Americans, isn't nearly as optimistic as he was in the 1990s. He expects the current bull market to continue over the next year, but thinks that huge federal budget deficits will probably translate into mediocre markets in about a year. With new risks like the rising budget and trade deficits compounded by the ever-present threat of terrorism, he believes that advisors who hear demands from clients to do the popular thing and pick the investment du jour must be able to say no.

Amazingly, all it took was one positive year after a three-year bear market for clients to start carping, albeit softly, about earning only 15% to 20% in 2003.

Advisors from Bill Bengen in El Cajon, Calif., to Harold Evensky in Coral Gables, Fla., report a sudden outbreak of amnesia among clients who were running for cover only 18 months ago.

Investors understandably would prefer to look on the sunny side of the street. But if a client isn't concerned about signs of froth resurfacing, they may be too giddy to notice that the Nasdaq index has risen almost exactly twice as much as the Standard & Poor's 500 Index in the last year or so, without sufficient underlying fundamentals to justify it.

The last time the growth-stock bubble burst, the majority of Hughes clients were highly satisfied with his services through the bear market of 2000-2002. In that period, Hughes can't recall any client complaints. "We actually have been taking on more clients," he says.

Practice Management Issues

In 2004 Hughes is confronting some of the typical management problems of the successful one-person practice. As someone who cares deeply about the larger world and the public good, he is also challenged by a paradox common to many advisors: Those who need his services the most tend not to obtain it. And those who already have considerable assets and need the services the least are usually the ones who do.

Hughes acknowledges the paradox, but says it will take a while to correct itself. "The fact that more young people are interested in getting financial planning training is good. So they will more easily dialogue with their contemporaries about the problems of planning," Hughes says. He notes with delight that his teenage son, Charles, is considering pursuing a joint CFP/law degree. His daughter, Kelly, has no interest in planning, but expects to pursue a journalism career.

Like many solo practitioners, he's not hunting for prospective client these days. "We've come to the limits of our growth cycle. It would be difficult to take on more clients," he says.

Today, new clients come through referrals. He has about 75 who use comprehensive financial services, while about another two dozen use piecemeal services. Hughes has some $50 million in assets under management. His clients tend to be well off, although the practice was never set up to serve the affluent. Hughes' clients tend to be approaching retirement and often are considering buyout packages or need his advice on whether they can afford retirement.

Hughes, who has been a fee-only planner since 1987, usually charges on an hourly basis for planning services and doesn't require income or asset minimums. However, for clients seeking soup-to-nuts planning and asset management, he stipulates that they must have a quarter of a million dollars in investable assets. For those with whom he has a long-term relationship, he charges a fee for assets under management.

Concerned that he might fail to keep up with all the changes in the profession, Hughes is actually thinking of adding another CFP licensee to his practice after 25 years of resisting it. His wife, Katie, who is not a CFP, runs the two-person office and, according to friends, organizes her husband's high-energy activities. Her friendly phone manner is usually the first voice one hears when one calls. "She has been so important because I can leave the office and go out of state on business and know that everything will be taken care of," Hughes says.

Hughes And Planning's Big Picture

Larry Carroll, a long-time CFP licensee who heads his own firm in Charlotte, N.C., says he always found Hughes to be "a high-integrity guy." "He's not the first guy whose name comes to mind when you think about the start of this profession," Carroll continues, "but his quiet, effective leadership has made a big difference."

Hughes became an ICFP board member shortly after he started his advisory firm in 1981. He also served as president and later as executive director of the ICFP in the 1980s.

Hughes is happy about the progress his profession and business have made in the past three decades. That's because his practice is thriving at the same time that the profession today is finally recognized in the mainstream of the securities industry. "The public and media now recognize financial planning and the certified financial planner as part of a legitimate profession," says Hughes. He adds that the problems of the profession were more difficult than just the lack of public recognition.

"It used to be that the wirehouse officials wouldn't let you put a CFP on your business card. Today, they are pushing more and more of their people to get the CFP. They've given the people every incentive to do it," Hughes says with quiet satisfaction. He adds that he was "cynical about those people ten or 15 years ago because the CFP just didn't seem to fit in for them then."

When Hughes became the ICFP's executive director, he suddenly was point man in some very difficult negotiations. He was personally involved in both rounds of unsuccessful merger talks with the International Association for Financial Planning (IAFP). At times, the two rounds of on and off again merger talks-which began around 1984 and ended in 1988 as Hughes was leaving his executive posts at the ICF-were bitter.

"The time just was not right. The culture of the two organizations was very distinct," he says. Many IAFP members feared their group would be swallowed by the ICFP. They were also nonplussed, say parties to the talks, by the insistence that the CFP mark would have to be the most important designation.

"The problem," says Carroll, president of the IAFP in 1987, "was the leadership was ahead of the membership. Many of the non-practitioners just thought that they would be hurt by the merger and they just couldn't go along."

Brent Neiser, a former ICFP executive director and now the director of collaborative programs for the National Endowment for Financial Education, agrees that the time wasn't right in the late 1980s. "We needed time for the CFP designation to take root; to be recognized by the public, media and the members of this profession. We needed time for the CFP designation to breathe," says Neiser

Hughes' organization held that one had to be a CFP to be a member, while the other allowed just about anyone to be members. "Those talks did not end amicably. We didn't shake hands at the end of it and say maybe we'll try again," he says.

That's even though Hughes says he thought highly of Carroll. Nevertheless, Carroll says the aborted talks served a purpose. "They laid out the one or two issues that everyone knew had to be solved for a successful merger to take place," Carroll says.

Indeed, Hughes believes these talks laid the groundwork for the birth of the FPA several years later. Neiser credits Hughes and the CFP Board of Standards with taking steps that helped the merger succeed eventually. "Their work," says Neiser, "helped protect and improve the marks in the mind of the public and the media, and it eventually worked."

Hughes notes that the eventual evolution of the FPA wasn't far from what the ICFP of the 1980s wanted: The CFP designation as the dominant designation in the planning profession. "This is the entity that represents the profession, and we said that it would be a good idea if the professional planner and professional corporate activities were separated in this group," Hughes says.

Getting Started

Before becoming an advisor, Hughes already had several other careers, many of which had nothing to do with planning or investments. A father in more ways than one, Hughes was a priest for three years. He was also a teacher of classical languages. He entered the securities business in the early 1970s, and about a decade later started his planning firm.

Over the years, he served on a local hospital board and was mayor of Brightwaters, N.Y., an idyllic village on the south shore of Long Island, for two terms. Part of the town of Bay Shore in Suffolk County on the eastern end of the island, it is the place where Hughes spent most of his youth. At one point, he thought about running for Congress.

Eventually, his planning business kept him so busy that he withdrew from his association work and local politics. But today, even as he approaches the traditional retirement years, Hughes says that he has no intention of slowing down.

Sole practitioners don't face mandatory retirement, which suits Hughes just fine. "Retirement just isn't an option that I would ever consider. I enjoy this business. There is no reason to stop," says Hughes.

But before Hughes became a planner, not all was rosy. In fact, his first securities job was a bad experience that made him doubt that he wanted to be in the business. He worked as a registered rep for a small, now-defunct New York broker-dealer, Nova Equities. Hughes says it had too many IPOs and production quotas, and too little concern for the long-term needs of its clients.

On the advice of a friend from the seminary, Hughes departed for Oppenheimer & Co. after about nine months. "I just didn't like the whole selling idea," Hughes says.

At Oppenheimer & Co., Hughes began as a fund wholesaler. He sold variable annuities and real estate limited partnerships that were designed not as tax shelters, but to make money.

"The properties were fully disclosed," he says. Working the mid-Atlantic region, Hughes also started to sell one of the earliest versions of the wrap-account service. But although Hughes had success and felt more comfortable in his second job, he still had doubts about some aspects of the securities business.

The stock market crackup of the early 1970s-the period of stagflation-was disastrous for mutual funds. And by the mid-1970s, many of Hughes' products were suddenly difficult to sell. He could still make a living wholesaling funds, but the concept of planning started to draw him away.

"I found myself calling more on these so-called financial planners. I started to like the concept. I liked the personal relationship with the client through financial planning rather through product sales," says Hughes. But how could he translate this desire for a different kind of business?

First he obtained his CFP license, in 1979, and then Hughes started to look for firms that would let him develop long-term relationships. "I was often told, 'We understand that the financial planning relationship takes a while to develop, but, in the meantime, we still expect you to sell a 100 shares of IBM and meet production quotas.' I decided that wasn't for me," Hughes said. He began his own practice, C.G. Hughes Company, in 1981.

Despite his experience and contacts, Hughes says things were pretty tough. For example, many of his clients were in other states. He had to rely on seminars to find his first clients.

In fact, that's how he got his first client. He had helped an Oppenheimer rep run a seminar on funds and separately managed accounts at the University of North Carolina. The head of the nursing school at the university told Hughes that she was "really interested, but I really do need some financial planning before I can do anything." Hughes agreed and said that he would find someone in the area to help.

Two months later, Hughes called the woman back and offered his services. She took him up on the offer and introduced him several other Southerners, who became clients. "I had my first clients, but they were in Chapel Hill, North Carolina. Not a very cost-effective way to start a practice," Hughes laughs. He would make three or four trips a year there to take care of their planning needs.

He also started holding seminars closer to home. "They were very effective. They were always on a financial planning topic, never on selling a product," he recalls.

By the second year, Hughes was prospering. He was primarily working with older people, folks who were retired or close to retiring, widowed or divorced. "I'd say even today that we really don't have a younger client base," he notes.

Hughes is an optimist both about his practice and his profession, which he points out, is now becoming international in scope. As for its future, Hughes says the leaders of financial planning possibly need to consider issues such as ethics, education and specialization. The CFP licensee, he notes, has become the financial equivalent of the family physician.

"And when we look at medicine and law, we see specializations develop. Shouldn't there be educational opportunities for those who have CFPs to move further in their educational and professional development?" Hughes asks. He added that, given the status of a certified financial planner licensee as a fiduciary, "ethical behavior is going to have be a serious concern of this profession."

CFP licensees today study and memorize the code of ethics, notes Hughes, a former chairman of the Board of Professional Review for the CFP Board. But the presentation of the code is often "not effectively done," he says." There should be a greater effort to take our code and present it in the context of case studies. Let's analyze situations and how various planners acted," Hughes argues.

The ultimate goal of the planning profession, Hughes says, should be for the CFP mark to be seen as vital for most professionals involved with financial issues.

"Given all the problems with 401(k)s and mutual funds, why shouldn't the HR person at a corporation also be someone who has a CFP?" Hughes asks.

He also believes that wirehouses and other big national financial firms should be places where a CFP can practice. "But that can only happen," Hughes says, "when the culture of many of these institutions changes. But given the current scandals, I would think the culture is going to have to change if they are to survive."