Which of Your Varied Activities Do You Enjoy Most?
I believe, like most people, that making a positive impact on the lives of others can bring great joy, happiness, and a sense of fulfillment.
For my financial advisory clients, assisting them to navigate this increasingly complex financial world brings forth some clarity for them – in terms of their financial futures. Whether it is advice on establishing a budget for retirement spending, whether to undertake Roth IRA conversions, when to take Social Security retirement benefits, Medicare plan choices, where to live during retirement, and many other financial decisions. I seek to give my clients confidence to pursue their “bucket list” items, while reducing their financial stress. I also like to keep the “sharks” away from my clients – those who would take advantage of them. I approach my role with a paternalistic mindset, and my clients’ successes in achieving their own financial goals become my successes as well.
For my university students, I have a much shorter time – typically just four semesters – to contribute to their development. I push my students – intellectually, and in terms of development of their emotional intelligence. While the time frame is short, the transformations that often occur are quite large. To be able to impart upon the next generation of financial planners such key skills is very rewarding to me, personally.
In my advocacy and volunteer work in Washington, DC, being able to make an impact in the ongoing development of standards of conduct for personal financial advisors has been rewarding. With my unique perspective as an attorney, educator, investment adviser, and Certified Financial Planner™, I’ve been able to meaningful contribute insights that have led to the development of higher standards. There is much work to do in this area, of course.
I enjoy all three of these major activities, and hope to continue to do all of them for years to come.
How Do You Keep Your Fees So Low?
Because I possess a position as an Associate Professor of Finance and Program Director for Western Kentucky University’s Personal Financial Planning program, I can limit my practice to serving a select group of clients. I’ve intentionally designed my practice with a very low cost structure. I work from home, and this avoids the overhead associated with maintaining an office. My wife, Cathy, assists me greatly; hence I avoid the time and expense of administering staff. And I use my membership in a few national organizations to provide me with discounts on the software tools I need to provide services to my clients. When Cathy and I travel to visit clients, we often combine our travels with pleasurable side trips, as we both enjoy visiting unique locales and historical sites.
All my current individual clients have been engaged under our SF Wealth Advisory Program. The annual advisory fee is billed in quarterly installments and covers a wide range of financial planning as well as portfolio design and management. The annual fee is 0.5% on the first $2,000,000 of financial assets (excluding cash reserve accounts, checking accounts, etc.), and only 0.15% for assets above that.
Those clients receiving only investment advisory services, such as trustees of irrevocable trusts, are billed only 0.4% annually on the first $3 million, and 0.15% above that. I also do consulting work to other investment firms, typically for project-based fees.
Of course, Scholar Financial, LLC’s fees don’t include the fees and costs incurred in connection with mutual funds, exchange-traded funds (ETFs), separate account management, and transaction costs incurred with custodians (such as Schwab). But I work hard to select very-low-cost investments that can best implement the investment strategies I have selected for use by my clients.
Unlike many investment advisory firms, I don’t spend much on marketing or investing for rapid growth. I’m content to add a few new clients a year.
I would like to point out that my fees for financial planning and investment portfolio management, while well below industry averages, are not the lowest fees available in the marketplace today. But I believe we possess the right fee structure given the breadth and depth of the services I provide, and the expertise applied to my client’s situations.
How Many Clients Do You Now Serve, and What is Your Maximum?
Scholar Financial, LLC, currently serves (as of August 10, 2023) eighteen family groups and three irrevocable trusts. I am also undertaking consulting on one project for another registered investment advisory firm at present. In addition, I serve members of my family, for no fees.
I believe a limit for the number of paying clients I serve is around 30, which is up from 21 at present.
As of August 10, 2023, we have over $31 million of assets under management at Charles Schwab, which serves as custodian for our clients. More assets are still to transfer in, and assets under advisement (in “held-away” accounts, such as 401k accounts) are additional. Our (geometric) average client has about $1.5 million of financial assets that I provide advice upon.
What New Clients Are a Good Fit for Your Practice?
I like to find out a great deal of information about prospective clients, including having a video or in-person conference with them, to ensure they both need my services and that we are a “good fit” for each other.
I prefer working with individual clients who are either approaching or in retirement, or who are executives. These types of clients typically possess a great many inter-related financial planning needs. I enjoy the challenges present in serving their needs.
I also enjoy providing portfolio management services to trustees of irrevocable trusts, foundations, and endowments.
My goal currently is to find, over the next few years, another 9 clients or so, each possessing $1m or more in financial assets upon which I can provide advice. (I do accept those with lower amounts, such as relatives of current clients, and others with less than $1m, if it is a good fit.)
How Would You Describe Your Investment Philosophy?
It is best described as “evidence-based investing under the Prudent Investor Rule.”
I apply the Prudent Investor Rule applies to nearly all the portfolios I manage for clients, with only a few exceptions as directed by my clients. This is a tougher standard of care than that general duty of care applicable to investment advisers and brokers, which requires only a “reasonable basis” for investment decisions. The Prudent Investor Rule requires, in contrast, that the assets of the client not be wasted (by keeping fees and costs low), that broad diversification occur among both asset classes and securities to minimize idiosyncratic risk (i.e., specific company risk for equities, or default risk for fixed income investments), and the tax-efficient design and management of investment portfolios.
I define evidence-based investing as the process of reviewing, appraising and implementing academic research findings to seek to deliver optimum investment solutions to my clients. It is an investment philosophy based upon decades of academic research undertaken by professors and researchers around the globe. Assessing this research requires a great deal of time, but fortunately my role as a professor – teaching classes on investments and undertaking research on investment strategies and their implementation – dovetails nicely with this time commitment.
What Do You Like to Do When You are Not Working?
I confess I’m not much into pop culture, nor television. Instead, I enjoy reading and writing during my late evening hours. My hobbies include travel, sailing, kayaking, and going out to occasional movies.
Dr. Ron A. Rhoades serves as Associate Professor of Finance and Director of the Personal Financial Planning Program within the Gordon Ford College of Business at Western Kentucky University. He teaches and has taught courses in Retirement Planning, Applied Investments, Advanced Investments, Estate Planning, Financial Plan Development, Personal Finance, Money & Banking, Risk Management and Insurance, and Principles of Finance. He is regarded as a national expert in the application of fiduciary duties to the delivery of investment and financial planning advice. Ron’s forthcoming book, Mastering the Science and Art of Investing: Strategies for Maximizing Returns with Multi-Factor Portfolios, is anticipated to be published later in 2023.
To explore becoming a client of Scholar Financial, LLC, please explore the “For Prospective Clients” section of this web site. Thank you.