Patrick: Welcome to the Business Spotlight. I’m your host, Patrick Dougher. You’re going to love today’s show because it will really hit home. You see, today my guest is Carl Kunhardt. He’s one of the principals with Quest Capital Management, Inc. He’s one of the advisors and partners in that organization. I know you’re going to enjoy what he has to say.
Carl, thanks so much for being on the show.
Carl: Patrick, thank you for having me today.
Patrick: I really want to get into your story. You guys have done so much. I know your background and where you’ve come from and what you’re doing all blends so well. So tell me story. How did you get started in this?
Carl: Okay. Well, like a lot of people, I’m in my second career. After 26 years in the Marine Corps, it was time to move on to something else. I found out that I wasn’t prepared for retirement, neither financially nor emotionally. Luckily, I had retained the services of a financial planner at the time, primarily for education planning with my first child, and it seemed like the perfect thing to go talk to a planner about. What do you do now that you have supposedly grown up?
Patrick: This is after how many years?
Carl: 26 years. I was a slow learner. It was just a lot of fun playing with the toys. I went and visited with Tom, and through his recommendation, I got a position with American Express Financial Advisors as a personal financial planner.
What I found was that I loved the work. I had an affinity to the analytical work. More importantly, to me, the interpersonal relations that you built with the families, which was not something that I really got involved with a lot in the Marine Corps, it was something that really called out to me and I really enjoyed.
The one thing I did find is that the entrepreneurial nature of the job was a little bit of a challenge, as I never had that experience even after all of that time, so I needed just a little different model, despite all the support and the great training that I got at American Express.
It was right about that time that I met a gentleman named Woody Young. Woody was the founding principal of Quest. If you know Woody, he’s quite a character. He has a passion for everything Marine Corps and everything financial planning. He served in Vietnam. He was a Marine, and he was one of the pioneering financial planners here in Dallas.
Throughout most of 1996 he became a mentor to me, and at the end of the year, I left American Express and went to work with Quest. I worked with Quest since that point. It became my home. I became a shareholder in 2002.
One of the things I found is we set very high standards. I needed to complete the Certified Financial Planner because that’s a requirement of all of the advisors at Quest. Education has always been a big thing for me, primarily because for those first 26 years, my life depended on my education and staying on top of it. Now my family’s future – not my direct family’s, but the families I was responsible for, their futures. They’re responsible on what I knew and how well I was able to implement that. That just let to one initial after the other. The Certified Investment Management Analyst, the Accredited Estate Planner. I’m working on the Enrolled Agent currently. I found it fed my passion for education.
2010 was great changes for quest. We were really excited. The other founding principal, Glenn [3:58 inaudible] retired back in 2002 from Quest and Woody decided that he was going to retire at the end of 2010. Obviously so very few businesses tend to transcend their founding principals – especially both of them – and we wanted to make sure that we were one of those few.
It’s been a great run. 2011 was better than any of the other previous years in Quest history. 2012 has been that much better than 2011, so we’ve been very blessed. We were able to transition to the second generation of owners, which was something that did not go unnoticed on our families who feel very comfortable by the fact that there is a transition plan in place, they know what the transition plan is, and they’ve seen it put in practice now twice. It works.
We’ve been very excited about the last 25 years and we’re looking forward to the next 25.
Patrick: So a big part of what you guys do is the whole transition whether it be a family or even with companies. You carry them through that process.
Carl: Financial planning is really helping navigate through all the changes that life throws at you. That’s one of the reasons I had such an affinity. When I was in the service, I was primarily in operations, so it was always finding a solution for a problem that was at hand in an operation that you were currently involved.
What I found through my first couple of years at American Express and through all the subsequent years was the financial planning was very much the same thing. It was, first of all, defining what it is you’re trying to achieve, where you are, and then finding a way to get from where you are to where you wanted to go.
Patrick: I have some history with it. I was actually in it for about 10 years. I know it’s really critical that you lead people and guide people to the best of anybody’s ability through the waters that are out there.
Folks, you’re going to learn a lot about not just financial planning. It’s really about the keys that Quest uses to help. This is the Business Spotlight. I’m Pat Dougher.
Patrick: Welcome back to the Business Spotlight. I’m Patrick Dougher. My guest today is Carl Kunhardt. He’s one of the principals – or partners, I should say – of Quest Capital Management, Inc. I want to get right into what you’re doing for your clients.
Carl: Our clients are, first and foremost, successful people. They’re busy people. They’re good at what they do and they like making smart choices in every endeavor that they go to. That’s why they come to us. They want to make better choices with their money, better choices with the things that require finances. Essentially our mission is to help them navigate through life’s challenges.
We do this through a process we call wealth management. It’s important to understand what wealth management is and what wealth management isn’t. Wealth management is trying to identify that picture on the top of the box. By that, I mean when you’re building a puzzle, oftentimes when you ask people what the most important piece is, they’ll always tell you one of the ends or the corners. Really, the picture on top of the box is understanding what that is. That’s what wealth management is.
It’s helping define what the goals are, helping define what the objectives are, which you often don’t know yourself and never really thought through. It’s helping you accumulate and preserve your wealth. It’s cash management. It’s tax planning. It’s estate planning. Investments planning.
But it’s also finding ways to make a difference afterwards. We do this through a process we calendar the Plan for Life process. In the Plan for Life process, through a series of meetings, we help the client understand and define their goals and objectives, and obviously we gather all the data and prepare the financial analysis – essentially painting the picture of where they are today. Once we know where we are today and we’ve already defined where they want to be through their goals and objectives, it’s a matter of then building the roadmap to get to that quest to where you want to be from where you are right now.
Hopefully when we get to the point of where you are right now, the question we’ll ask is, “Now what? How do you want to make a difference?” That came about in that we previously thought that our role was to get people to financial independence. What we have found out, oddly enough, by being told by our clients when we thought we were done is, “No, now is when we need you more than ever.”
It’s that time when you’ve reached that point. We don’t like to use the word “retirement”, but financial independence. Now they’re going to have to live off their assets. How are they going to do that efficiently? We don’t know when the end point is because none of us know when the good Lord is going to call us, and we have to be good shepherds to the wealth that He’s entrusted us with to get us all the way through what we jokingly call the back nine.
One of the things that we do within that process is provide a lot of education. Frankly, one of the things that society does not do well is prepare us to manage our finances. We view our role as advisors as providing the education because the only way that you’re going to make good choices about your money is if you have that knowledge. It’s not because you’re not intelligent. It’s simply you don’t have the knowledge base to be able to make those decisions.
We see as our role as advisors to provide you with that knowledge so you can make sound decisions. Then you have to be accountable. You have to say what you’re going to do, and then you have to do what you said you were going to do. You have to be transparent about it; you have to be accountable. You’ve got to deliver – and you have to deliver proactively, because as a professional, the client is looking at you to keep that financial plan moving forward. A financial plan is a journey – it’s not a destination.
Patrick: Do you work with families or do you work with companies – or both?
Carl: That’s a great question. We work primarily with families. We had an opportunity several years ago to work with a couple of institutional clients and foundations, and that would have changed the entire character of the firm. Woody, in hindsight, said, “No, we’re going to continue to do what our core competencies are and what we’re good at.” So we have stayed with families.
We do work with companies in that many of our families are small business owners.
Patrick: I would imagine.
Carl: When they have become so pleased with our services in the personal area, we’re often called to help them in succession planning and preparing their business for the sale in putting appropriate benefits for the employees, retirement plans. We don’t actively go after the businesses. We prefer to work with families. That’s where our passion is.
Patrick: As we head into the next segment, I hope we’ll talk a little bit about the new estate issues that this generation and the people you’re working with are going to be faces.
Carl: There are a lot of changes coming up here in just about five or six weeks. Unfortunately, there aren’t a lot of good answers.
Patrick: I understand. It is what it is. This is the Business Spotlight. My guest is Carl Kunhardt of Quest Capital Management, Inc. He’s one of the partners in the company. I know we’re getting some real keys – some real good ideas of things you need to be thinking about, especially the boomer group, which would be people who are my age or above predominantly. They need to be concentrating their questions for the future on what to do now and what to do in the future. This is Pat Dougher with the Business Spotlight. We’ve got more to come.
Patrick: Welcome back to the Business Spotlight. This is your host, Patrick Dougher. Today, my guest is Carl Kunhardt CFP and some other letters that go along with that. As a wealth advisor, he is a partner in Quest Capital Management, Inc. Carl, I want to get into your ideal client. Who do you want to work with?
Carl: That’s a great question. Often when that question it asked, it revolves around people want to know, “What are your minimums? What do you charge? How much do I have to make?” When we think of an ideal client, that’s not really what comes to mind for us. Obviously our firm has minimums and there has to be some wealth there if there’s going to be any sort of management.
But to us, the ideal client is one who’s serious about making good decisions. What we find is they lack the time, they lack the knowledge, or they lack the desire to be able to manage their finances the way they want to manage their finances. Rarely do clients want to just take a complete hands off approach, but they want to make smart choices and they don’t have the time, knowledge, or desire to do so.
A typical client is a busy professional – a doctor or dentist – who is simply very, very good at what he does and he got that way by focusing almost exclusively on what he does. He may have a negative net worth. I think we recognize that a doctor just finishing his residency probably owes more in cost for education than he probably owns. But anyone would admit that over a reasonable amount of time, they’re going to be a very, very good client.
Those who are financially independent. As I alluded to before, we initially thought that our job was to get clients to that point of retirement, to that point of financially independent where they’re working because they want to, not because they have to, and that we have done our job.
What we found over the years – and that’s either a benefit or a curse of longevity, that you find these lessons – is the second half where you’re having to live off your assets, not off your labors, is more intimidating to clients and they feel they need more help during that phase.
When Quest started, we had no retired families, no families in financial independence. 25 years later, about 40% of our families are in financial independence. Some of them are many, many years into financial independence.
Small business owners transitioning, as I mentioned before. Typically, a small business owners business is their largest asset outside of their home, and their financial independence is often predicated on that monetization of the business, getting the value that they’ve built over all those years out of the business.
Often we’ll be brought in by either their CPA or their CFO to help them plan. It may be something as simple as getting a realistic number of what they need for financial independence, because as you can imagine, if you go into negotiations for a business knowing how much you need, then you have a leg up. You have some leverage there in negotiations for the sale of your business.
It could be a corporate executive. A lot of times, it’s something very narrowly based, like they’ve been paid in options or restrictive stock for many, many years and now they have to have a strategy to begin to extricate themselves out of those options and restricted stocks. Other times it’s just the same issue as with a busy professional, because that’s what they are. Corporate environment/corporate America takes up so much time of these people’s lives that they need the help to manage their affairs efficiently.
Patrick: One of the things I keep hearing over and over again, Carl, is transition. You really help people who are in that part of their life where a transition is going on whether it’s wealth transfer, which you alluded to before and I’d love to get into that a little bit. But beyond that, it’s the divorce, the change of some sort. Would you agree with that?
Carl: Exactly. When you think about it, anytime you’re in transition, that is a part of life where there are the most questions, where there’s the most uncertainty, whether it’s the change of careers, whether it’s a divorce or the death of a loved one, whether it’s the sale of a business, there is uncertainty. How do I get through this? What comes next? That’s what planning helps you do.
Oftentimes people think CPAs and CFPs are one in the same or they do the same thing. They’re both complementary because one will focus on the numbers and how to maximize those numbers while the other one is focusing on the journey. How do we position these things so that we can meet those goals and objectives, assuming you know the goals and objectives, which quite often is the problem. You have never resided, you have never documented, you have never painted that picture of what it is you are trying to achieve.
Yes, very much so. Another segment that we work a lot with is we call them suddenly single ladies – ladies who have been married for many, many years and they’ve been divorced. Again, one of those transitions with a lot of uncertainty and they’re looking for some help, some benchmark. What should I be expecting? How can I best manage this process?
Patrick: Awesome. CFP – what are the other ones?
Carl: Certified Investment Management Analyst (CIMA), and Accredited Estate Planner (AEP).
Patrick: This is the Business Spotlight. I’m Pat Dougher. I have Carl Kunhardt with me. We’ll be right back.
Patrick: Welcome back to the Business Spotlight. This is Pat Dougher. My guest today is Carl Kunhardt of Quest Capital Management, Inc. I want to get right into how someone should connect to you. How do you want people to contact you? What’s the experience when they do?
Carl: Contacting is very easy. You can call. The best number to call is (214) 691-6090. That will take you to the front desk receptionist. We have a team member whose sole responsibility is that initial potential client family and getting them started in the process. It’s very transparent. It’s very easy. There’s a very short questionnaire that you will receive that we ask you return before the initial meeting, which is a little bit different from most others.
We feel if you’re going to invest an hour to an hour-and-a-half of your time talking to us, then we should make sure that you bring value to that visit. That’s with the questionnaire. It’s very top level. People are surprised it has very little to do with numbers and a lot to do with what’s important to you and what your mission statement is. That’s one of the questions on the questionnaire. What are the things that you’re uncertain going back to your previous questions? What are the points of concern? We want to make sure we address those in the initial consultation.
Should you decide to move forward in the process after that introductory meeting, the next meeting that we’ll schedule is a discovery or data gathering meeting. That’s really where the collection of data happens. It’s a dual meeting in that we’re not going to go page by page through all of your statements and all of your tax returns. That’s for us to do in the background over the coming weeks, but we’ll collect all of that data and organize that data. We make sure we understand what it is that you’re giving us, and we’re going to spend that meeting (that lasts about 2-3 hours) on understanding you, building on what we talked about the first meeting. A lot of goal setting, a lot of painting that picture in the box that I talked about previously.
The next meeting in the process, if you were to take it right out of a textbook for financial planning, would be the plan presentation. As I said, in the background, we’re going to be reading through your estate documents, reading through your tax returns – and not just the 1040, but all of the underlying schedules. That takes time. We’ve got to organize it, we’ve got to scan it, we’ve got to get it into the software.
Our philosophy is at those very early stages, going two to three weeks without having spoken to you is probably not the best idea, especially if you’re in one of these transitions and you’ve come to us.
As I mentioned before, we believe that one of our roles as advisors is to educate, so we interject a meeting in between there while we’re going through all of these things in the background that’s a purely educational meeting.
We start with the fundamentals of investments because it’s the one domino that touches on everything. So we will cover basics like the difference between savings and investments, the difference between stocks and bonds, what an asset allocation is and why it’s important, why an investment policy statement is important and really get down to the fundamentals that society should have taught us and didn’t.
We get to the plan presentation. It’s really a financial analysis. It covers everything. It is comprehensive, from cash management and tax planning all the way through estate planning and charitable gifting if you’re so inclined – and everything in between.
We’re going to put all of our observations – the things that we saw in the reports – in writing, which is a little bit different from others. Then we’re going to write our recommendations in writing.
To a large extent, that’s the same process that most financial planners will take you through. A change in our process is at that point forward, we’re going to be proactive with you over the course of the year in implementing those things, because as you well know, plans are great, but if you don’t implement it, they’re a waste of time and money.
Patrick: Absolutely. It’s a great idea, but so what?
Carl: If you don’t do anything with it, you’re not going to get anywhere with it. We [25:43 inaudible]. That’s really where we earn our money. We’re fee advisers. We work on a retainer basis. We find that our clients like that because they know that if I give them a call, I’m doing so because we need to do something to make the plan go forward, not because I’m trying to generate billable hours. Because it is a fixed fee, they know that I’m going to be working as efficiently as possible and my team is going to be working as efficiently as possible, because any excess cost really are coming out of our pocket – not the clients. They know what their costs are up front and it’s set.
As we approach the anniversary date, we’re going to update the analysis to all material changes that occurred over that year following an action plan, which is one of the ways that we keep the plan transparent and maintain accountability.
We will produce an annual review. It’s not a complete rewrite of the financial plan. It could be, because we update everything. It’s just not a necessity to put out another 80-page book. We’re going to focus on the things that have gone well over the course of the year, things that we’ve made progress on, things that have not gotten done. Because they need to carry over, we’ll need to re-prioritize them and give them what we’re going to do over the second year. Then we’ll build an action plan for the following year.
It’s at that point that our clients make a decision on whether they want to continue to work with us in subsequent years or not. Apparently we’re doing something right, because our retention rate hovers around 96-97% over 25 years.
Patrick: That’s a phenomenal number. It all starts with a phone call.
Carl: It all starts with a phone call: (214) 691-6090.
Patrick: Make a phone call. If you think you’re somebody you’d like to visit with – Quest Capital Management with Carl Kunhardt – you should. I encourage you to make a phone call.
This is the Business Spotlight. I’m Pat Dougher. Thanks again. This show is about having business owners tell their story to their community and at large. We’ll talk to you next time.