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Live a Balanced Life

Interested in their total well-being, Dr. Carolyn McClanahan strives to give clients more than financial advice.

Kate Stalter, 08/15/2012

This article originally appeared in the August/September 2012 issue of MorningstarAdvisor magazine. To subscribe, please call 1-800-384-4000. 

Medicine is one of the “helping professions.” Physician-turned-advisor Carolyn McClanahan also puts financial planning in that category.

When McClanahan formed her Jacksonville, Fla.-based fee-only firm, Life Planning Partners, in 2004, her goal was to provide the kind of services she and her husband sought when they approached planners as professionals.

“We did our own investing in the 1990s, and like everybody else, we thought we were brilliant,” she jokes. The couple did well enough that McClanahan’s husband considered quitting his engineering job to pursue lower-paying interests, such as photography. But when they discussed their desire to reduce their income with advisors, they got little help. Instead, advisors seemed more intent on selling them products and collecting commissions.

“When we interviewed these people, it was all about taking over our investments or selling us high-fee mutual funds,” she says. “It never really was about the planning. It was all about taking over our portfolio and never really answering the question of whether we would be OK if my husband didn’t go back to being an engineer.”

Catching the Bug
After that experience, McClanahan wanted to learn more about financial planning. Without having a career change in mind, she began taking classes in the Certified Financial Planner program at the University of North Florida. “I just fell in love with it. I saw a huge need and realized that people need advice. So, I changed careers,” she says.

Her ambitions were modest. She expected to do planning and manage money for a few of her doctor friends and have about $20 million to $30 million in assets under management. But she soon joined the National Association of Personal Financial Advisors, and referrals began coming in. The practice took off. The majority of her clients are still physicians, but that’s not the only group she markets to.

McClanahan emphasizes the planning aspects of her practice. Her professional background gives her special expertise in areas such as end-of-life needs, long-term care, and chronic illness issues. She took it upon herself to read the entire Health Care Reform Act to better inform clients, as well as other advisors, about its contents.

“When I entered financial planning, I realized there were a number of things I know from medicine that would help financial planners if they understood it,” she says.

She sees plenty of room for improvement when it comes to insurance planning, for example.

She says that many clients pay higher insurance rates than necessary or, in some cases, can’t get insurance at all because they don’t understand what is in their medical records. To address that problem, McClanahan speaks to groups of planners, offering ideas to improve client insurability and how to help get clients lower rates. She also speaks to advisors about other health-related planning issues.

Client “Triage”
Before the firm begins an investment plan for a new client, he or she must understand that comprehensive planning is the basis for everything that follows.

“We won’t take a client who only wants to do piecemeal stuff,” McClanahan says. At the initial meeting, there is typically no discussion of investment strategy or even the client’s finances. “We talk about their goals and dreams, what brought them to us, and what they’re looking for in a financial planner and investment advisor.”

The firm’s client engagement standards are on its website, and McClanahan insists that potential clients read them carefully and sign off on them. This document lays out the obligations of both the firm and the client, explains the firm’s services, and outlines the type of working relationship that clients should expect.

It also explains Life Planning Partners’ fee structure, which is based on the complexity of the work, rather than the more traditional approach of charging according to assets under management.

McClanahan borrows a medical term to describe the early stages of a client engagement. “It’s basically like a triage. In medicine, you take care of the emergency first. Everybody comes to a financial planner with some pain.

They come in because they’re worried about retirement, or maybe they haven’t done estate planning. So, we go through what we think their emergencies are, what they think their emergencies are, and we do the initial plan.” The investment policy happens in a separate series of meetings. Here, too, it’s crucial that clients are on board with the philosophy and what’s realistic to expect.

Three years ago, McClanahan hired Tim Utecht as chief investment officer. A Chartered Financial Analyst, Utecht formerly managed a large-cap value fund at Thrivent Financial in Wisconsin. Utecht was looking for an environment in which he could work directly with clients and understand their goals. He also wanted an advisory firm that made nurturing client relationships a priority over growing its assets under management. Life Planning Partners fit the bill. “We’re very upfront in how we approach things,” Utecht says. “We don’t make any promises. We can’t control the markets. A lot of the industry takes a ‘Wizard of Oz’ approach, promising things they can’t deliver, and that’s always bothered me. We can control costs and taxes. We’re very efficient, and those are areas where we have the best impact, along with the amount of risk you take in the portfolio.”

The firm uses a passive investment philosophy. On the equities side, Utecht uses mutual funds from Dimensional Fund Advisors and exchangetraded funds from Vanguard and iShares. On the fixed-income side, Utecht uses bond ladders in some of the larger client portfolios.

A Focus on Life
In addition to retirees who are drawing income from their investments, the firm’s client base includes a wide age range, even 30-somethings, who tend to be high-earning professionals. The average net worth of a client is around $3 million. McClanahan and Utecht are about halfway to their goal of having 100 clients.

McClanahan hopes to create an innovative planning practice that other advisors and planners can learn from and emulate. In addition to speaking before groups of planners, she writes a column on health-care planning issues for Forbes and is active on Twitter.

Her understanding of health care has also led McClanahan to focus on helping clients enjoy their lives more right now.

“The old days of retiring at 65 need to go away. We need to find balance and joy of life now, because you never know when you are going to die,” she says. “I don’t want to scare anybody away from my practice, but I hate making people save like crazy for age 65 and then they die at 66. We would rather help people find a career they enjoy, or maybe they can take a year off—whatever it is so they enjoy life now and have a healthier and happier future.”

How she caught our eye: She’s a doctor who changed careers to give clients comprehensive life-planning advice.

Career path: Graduated from the University of Mississippi School of Medicine. Did residency in pathology and family medicine at the Medical College of Virginia from 1990 to 1995. Entered private practice in emergency and family medicine in Richmond, Va. Joined the faculty at University of Florida in 1997. Went back to school at the University of North Florida in 2000 to learn about financial planning for fun. Worked part time in medicine and financial planning before founding Life
Planning Partners in 2004.

Personal: Married. Provides medical care to the working homeless every other Wednesday at the I.M. Sulzbacher Center for the Homeless in Jacksonville. Also serves on the NAPFA National Board of Directors and speaks at numerous FPA,  APFA, AICPA, and other venues about health-care reform, end-of-life planning, and insurability issues.

Favorite funds: DFA, Vanguard exchange-traded funds, iShares.

Guest Author

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