Former Navy officer and teacher Dave Carter thinks attitude-not income or inheritance-determines the resources clients have.

    For David L. Carter, the road to becoming a financial planner was a winding and adventurous route that took him from the plains of Texas to the Pacific high seas, to the halls of academia and then back again to his hometown of Abilene.
    Even then, it took some time before Carter-still in his early thirties-could speak to his retirement-age clients with the air of authority he possesses today. "It wasn't until I was about 35 that I began to notice people taking me seriously with regard to financial recommendations," he recalls. "They want you to have a credible amount of life experience and maybe a touch of gray around the temples."
    While the touch of gray may have helped, Carter's life experiences are what truly catch attention. At a time when the advisory profession is broadening its scope, and practitioners try to become more life advisor than glorified accountant, Carter may serve as a prime example of how advisors can benefit from a broad and varied background.
    Although in Carter's case, the extent of the variation is hard to fathom. Toting around a kaleidoscopic resume that could very well speak for three people, Carter has served as a Navy captain, a CPA, a college professor, a lecturer and businessman. Now, retired from the Navy and academia, he is devoting himself full-time to his financial planning and investment management firm, Carter Asset Management Inc. in Abilene.
    It's a background the 55-year-old Carter says has served him and his clients well. "I would tell you that in my heart of hearts I'm a very eclectic person," he says. "By that, I don't mean easily distracted or swayed. I really believe on drawing on a lot of disciplines and thought processes to develop something that works for my clients."
    It's a career path that surprisingly took Carter full circle. As the son of a minister and homemaker growing up in a lower-middle-class household in Abilene, Carter had early aspirations to travel to the coast and pursue a career in marine biology. After finishing college, however, Vietnam forced him to alter those plans, leading to his enlistment in the Navy.
    After six years of active duty, the latter four as a Navy officer, Carter joined the Navy Reserve and decided to pursue a career in financial services. He continued to love the Navy and the sea, but decided to move from San Diego back to Texas so he and his wife, Suzanne, could care for their elderly parents.
    A few years later, studying at Abilene Christian University, he was among a small group who were pursuing both a CPA and CFP simultaneously. He spent several years working for accounting firms when, in 1983, he began a career as an independent accountant and financial planner. He has been self-employed ever since.
    Carter's accounting firm remains a separate firm, but is co-located with Carter Asset Management and shares virtually the same client base.
    Shortly before he started his own firm, Carter also began an academic career at Abilene Christian, where he was an adjunct professor of finance from 1982 to 2000. Among his achievements during that time was starting the personal financial planning program as part of the school's master accountancy curriculum. "I always had a desire to come back to my original alma mater and be of some of some service to her," he says.
Cary Beard, a former student in Carter's financial planning for accountants course, recently joined Carter Asset Management as an advisor. He says the class was a major influence on his career.
    "He presented something I never thought about," he says. Specifically, Beard says, the class let him visualize for the first time what he wanted to do with his accounting degree. "He brings his teaching style into his work," he says. "He is able to relate to students and to clients in a fashion that they can understand without talking down to them."

Experience Put To Use
    Carter says all his experiences have been put to use as a financial planner and that, leading up to starting his own business, he consciously made decisions with the goal of financial planning in mind.
    In the Navy, where he spent close to 20 years as a logistics officer, Carter was schooled in the business, management and data processing of the Navy Supply Corps. Teaching, he says, sharpened his communication skills, enabling him to boil complex financial concepts down into layman terms. And the training as a CPA, he says, grounded his financial and investment management know-how.
    If there is a common thread running through his background-the motivation running through his years in the Navy, academia and business-Carter says it's public service.
    That, he says, is what drove him to continue his career in the Navy, which required him to travel to hot spots such as the Persian Gulf and Bosnia during his time in the reserves. It is also a driving force in his current firm, which serves a significant clientele of middle-income clients-the type normally shunned by advisory firms striving for a healthy growth curve.
    "I think I'm a creative guy and a good producer, but I think my primary need is to serve other people and provide service," he says. "When I look at my career, that's what I've always done."
    At Carter Asset Management, service can essentially be defined as helping clients form goals and then laying out a plan that allows them to achieve them. In the case of retirees, who make up the majority of his client base, that generally means establishing income needs, then building a portfolio that allows for a 4% to 5% withdrawal rate while minimizing the need for selling or trimming back assets. "What we try to do is get our client in the mindset of the investment portfolio as a permanent endowment," he says.
    In describing his work with clients, Carter often stresses "working on the relationship." He feels that much of an advisor's work is dealing with client expectations and attitudes, as much as it is working with assets.
    Early on in his career, while in the Navy and living in California, Carter says he came to the belief that attitude-and not income or inheritance-is what ultimately determines the resources people have at their disposal. "I was finally coming to the determination that it's not how much someone made, but it's what they did with what they made," he says.
    He cites as one example a husband and wife who, as clients of his, six years ago formulated a plan that would allow them to leave their high-stress but high-paying jobs as attorneys by the age of 36. "They want to change their careers into something more altruistic," Carter says.
The attitude of this couple is one of determination. They have cut corners on their budget, and "live in a house that is well below what their contemporaries would be living in in a metropolitan area," Carter says.
    They diligently check how their plan is progressing on an annual basis, and make adjustments when needed. Thus far, they are eight years ahead of schedule in their career plan, Carter says.
    "It's a matter of the balance between tomorrow and today's gratification," he says. "I have families who say they can't live on less than $100,000 a year and can't put anything away, and families that make $100,000 and live on $40,000."
    It's a theme that heavily influences his relationship with clients, and the heavy emphasis on planning and goal setting, as well as the subjects he deals with on the lecture circuit. A frequent speaker at various seminars, including church-sponsored events, Carter says he's been more mindful in recent years of the relationship between faith and finances-a topic he often addresses in his talks.
    "I don't meld religion into finance," he says. "God already did that. As I matured in my life it became very evident to me that financial attitudes and spiritual attitudes need to be in harmony."

Plain English Investing
    When it comes to investments, Carter looks for simplicity. If an investment is too complex for him to explain to his clients, Carter takes a pass-one of the reasons why he doesn't use hedge funds. "If I can't explain it to my client, I'm probably not going to do it," he says.
    Clients, in fact, are quick to cite Carter's ability to communicate investment plans. "He has a round table in his office and we sit around that table and he explains every move," says Chantrey Fritts, who first hired Carter 20 years ago to work on his taxes.
    Since that time he came to depend on Carter for his financial and retirement planning, which was put into action four years ago when he partially retired as an education professor at Abilene Christian. "He is highly regarded in Abilene," Fritts says, adding that he sometimes calls upon Carter to recommend books for vacation reading. "This is a man who's brilliant."
    Ed Enzor, another retired professor who has known Carter for 20 years, says he has gradually been shifting more of his assets over to Carter's firm. One of the reasons, he says, is dissatisfaction with the service he's getting from the national brokerage firm he also uses.
    "I had asked for quarterly reports and I received two in two years," Enzor says of his broker.
Enzor says he has been a client of Carter's ever since sitting in on one of his financial planning classes at Abilene Christian. "He is enormously committed to his profession," he says. "He is also very disciplined and I think he prioritizes his life in the sense that he works very hard."
    On the lecture circuit-he has spoken regularly at weekend retreats, seminars and conferences since 1986-Carter says he spends a lot of time "debunking myths." Among them, he says, is the almost fanatical efforts people often make to eradicate debt. He's seen cases where couples have poured all their savings into paying off mortgages and cars, leaving themselves with no debt-but also no resources left for investing for the future. "There are a lot of folks who focus on debt to the exclusion of everything else," he says.
    For Carter, it goes back to the concept of how important the shaping of attitudes is when pursuing financial goals. "That's what makes the difference between the haves and the have-nots," he says.
Carter's eclectic nature also is reflected in his investment philosophy. Calling himself something of a maverick in the investment management field, Carter steers away from index funds, ETFs and hedge funds.
    It's not that he has anything against them, he says. It's just that they aren't a good fit for the focus of his investment objectives, which center on low-cost, rock-solid and high-yielding securities that will keep his portfolios humming through thick and thin.
    Carter says he's been able to achieve such harmony over the past ten years, with average returns on his varied client portfolios that he says are "reasonably" higher than the market averages. To achieve this stability, Carter relies on an investment toolbox that consists of a small pool of heavily researched funds and individual stocks.
    Carter says his research list consists of about 25 to 30 mutual funds and 25 stocks. "My firm spends a lot of time analyzing and researching preferred stocks, real estate investment trusts, mortgage trusts, oil and gas funds and utilities, and we are able to generate nice, stable cash flows for the large percentage of our client base that are retired," he says.
    He's hesitant to name specific funds, but he says the managers he most admires-managers he says are down to earth, have solid fundamentals and are not weighed down by ego or tradition-include Bill Fries of Thornburg Investment Management, Bill Nygren of Oakmark Funds and Chris Davis and Ken Feinberg of Selected American Shares.
    Carter describes himself as being in the "moderately active" school of investment, which translates into long-horizon investing with a focus on the one-third of managers who regularly beat the market. "I want to know who they are and stay on top of what they do," he says.
    Carter also likes to go off the beaten track when it comes to looking for solid investments. It's one of the reasons he was heavily into energy before it became a market hot area. He cites as one example Enerplus Resources Fund, an energy investment trust designed as a way to invest in energy assets without the exploration risk associated with traditional oil companies.
    Carter started buying shares of Enerplus in 2001 at between $19 and $39 per share. It's currently priced at more than $50 per share. Noting the fund's 8.3% annual yield, he says, "I try to find things that have some upside potential but also dependable cash flow."
    While fund performance will be what draws Carter to the fund in the first place, the data he looks at first is turnover and expense ratio. Domestic funds with an expense ratio over 1% give him cause for concern, as does a relatively high turnover of holdings. He also looks for funds in which managers have a substantive portion of their net worth invested.
    He notes that his fixed-income portfolios make little use of fixed-income mutual funds. "What we try to do is cut out that additional 40 to 75 basis points of management expenses," he says.
    The ultimate objective: allow clients their 5% withdrawal rate, and try to grow the portfolio 2% to 3% beyond that amount ever year. "Some years we don't do that," he says. "Other years we're way ahead of it."
    A son of a preacher, Carter also is staunchly fee-only, and feels that an advisor must be compensated only through fees if he is to keep his and his client's interests aligned. "A fee-only advisor puts himself on the same side of the table as the client," he says.
    In an era when many advisors are concerned about low returns from many classes of financial assets, Carter thinks their fears are excessive. In his office, he prominently displays a table of periodic investment returns produced by Callan Associates, the consulting firm, ranking the annual returns for eight different indexes and asset classes since 1986. The message to clients is clear-careful diversification can smooth out a portfolio's volatility despite what happens in any given asset class.
    Carter's firm has more than 200 clients, including many of modest means, and about $100 million under management, which includes portfolio advisor work he does for three accounting firms. Back in 2000, his firm had $17 million under management, revealing that his philosophy has played well in Abilene and elsewhere over the last five years. Carter charges asset-based fees on a sliding scale, ranging from 85 to 95 basis points, with a separate fee for financial planning and tax work.
    During the 2000 to 2004 period, Carter's firm saw a 450% increase in assets. In many cases, clients were walking through the door after leavin their retail brokers, with accounts shattered by the bursting of the Internet bubble.
    "I was inheriting everyone's garbage and having to rework it," he says. "It's probably been one of the most difficult things I've done over the last six years-having to inherit broken dreams and hearts."