A new year is here and -- aside from deciding it's time to lose a few pounds or perhaps clean out the household clutter -- a few financial tips might be in order.
For Tyler Townsend, it boils down to basic actions. First, figure out how to spend less than you earn. Simple enough.
"But it's tough to actually do," said Townsend, 40, a certified financial planner and certified financial analyst with Townsend Wealth Management.
"The new year also is a good time to review your retirement plan," said Townsend, who also is a partner in the Columbus company started in 2001 on Mountainbrook Drive by his father, Ken Townsend, and Leigh Anne Thomas.
For many, that review includes examining your 401(k) plan to see if enough money is being taken out of your paycheck -- and investing the funds in the proper categories -- to meet future goals, foremost of which is a secure retirement.
Those already in retirement also need to understand the resources available to them -- Social Security, Medicare and retirement plan assets -- to make certain that cash flow will last the rest of their lives, said the Brookstone High and Georgia Tech graduate.
In a recent interview with the Ledger-Enquirer, Townsend discussed his job, how it changed through the Great Recession, and the big responsibility he has assisting local residents and businesses nail down their financial goals.
How did you land at your father's company?
He started the firm a little over 11 years ago. He retired from ExxonMobil and had worked his whole career in different business, management and finance-type positions. When he retired, he wanted a second career and thought about several different things, but this is what he settled on. So he started the company with Leigh Anne Thomas, our other partner. There's three of us.
I was at Manhattan Associates (in Atlanta) at that time and I really enjoyed the job. It was exciting. It was a fast-growing company. It was in the software industry and my role in professional services was a consulting role. I worked with businesses to help them figure out how to optimize their supply chain, how to get the most out of their resources. I was with them for eight years, until 2007 when I joined Townsend Wealth Management.
Why was the move a good one for you?
At Manhattan Associates, I was traveling so much, which is fun at first. But then I had two sons and it got more difficult to travel and I wanted to get off the road. At that company you're either a programmer or you travel to visit the client. And I'm not a programmer. So I started thinking about the things that I enjoy and what I thought I might be good at. The two things that rose to the top was that I enjoy working with clients and I enjoy the analytical spreadsheet work required to make recommendations to them.
You've got to love working with numbers?
Definitely. My background in engineering is kind of suited toward that. Industrial engineering is heavy in statistics and optimization. There's a lot of that in investments and finance.
Specifically, what does a financial planner do?
We have two practices. One is the financial planning. What we're trying to do there is help people make wise decisions about their money. The other is investment management. We're helping people get the most out of what they have through investing.
A common scenario would be somebody who is getting near retirement and they're trying to figure out whether they're ready to retire or whether they need to work a couple of more years. They may want to get a better feel for what their lifestyle can be like in retirement, how much money they'll be able to spend during retirement and make their money last for their lifetime. We enjoy starting out with that kind of discussion and helping people make those decisions.
Do too many people come to you later in their lives for advice rather than earlier?
In general, unfortunately, people tend to put it off. But we do get plenty of younger people who come in and it's kind of like a checkup. We can sit down with them in an hour and talk through some basic things that they can be doing. It's almost always contribute to your employer's retirement plan -- your 401(k), for example -- and figuring out the amount of contribution that will help them fund their retirement.
It's also talking about spending less than you earn. It's such an easy concept, but very difficult to implement. If you can create a lifestyle that allows you to save regularly for retirement and not take on credit card or other short-term debt, then chances are very good that you're going to position yourself for a very secure and comfortable retirement.
Has the profession and the needs of clients changed following the recession?
In the last few years we're hearing much more of: How can I protect my money while still getting a return that will beat inflation? That requires an analysis of the economy. So we're staying up to date on what's going on in the economy, how the markets react to changes in the economy, and then the different types of investments that do best in those markets.
Depending on the stage that you are in your career ... it's important to just continue putting money into your retirement and continue to have your money invested in a diversified, balanced way and not get caught up in the short-term drama.
Did folks' wealth suffer as a rule, rather than an exception, from the Great Recession?
It was a very difficult time. It was an emotional time. But we manage different strategies for different levels of risk. Some people are willing to take on more risk. Some people want to be more conservative. If they were in the right place, then they were able to get through the crisis without having to sell at a bad time. They didn't panic to the point where they said: I've got to sell everything and just hold on to my cash. The people who were able to do that, their accounts have rebounded and are back to where they were.
It sounds as if you have to be a bit of a psychologist and hand-holder to calm people down at times.
The real work starts at the very beginning. We spend a lot of time with our clients talking about the risk of investing and what the markets have done in bad times. We show them the losses that have occurred. We talk to them in terms of account size, asking if they have X number of dollars, how would they feel if it lost 20 percent.
We really get them to understand the markets and tell them, look, the U.S. economy historically has had a recession every seven years. So we can tell you there will be years that you lose money and it's a process and there are painful times. But if they get into that strategy that's right for them, then they'll be able to see those down markets through, remain invested, and benefit from the rebounds.
What's the mood among clients now with the uncertainty about the federal budget and deficit?
We've had people ask us should they invest their money now or should they sell everything and wait in cash for a couple of months.
What do you tell them?
We tell them that we can't predict what the market's going to do in the next week, the next month or the next year. When we invest, it's for the long term, 10 years or more. And we make our adjustments with a view of three to five years. So we don't recommend that people sell their stocks now and hold cash. We have shifted our portfolios to a conservative slant, so we've underweighted stocks and we've overweighted safer assets. But we're not completely out of the market.
You can make stock sales and trades?
Yeah. With our investment management service, our clients select their strategy and we're what's called discretionary investment managers. So when they select their strategy, we then implement it by buying and selling and we use mutual funds and ETFs (exchange-traded funds). The money is in an account in their name, so we're not allowed to put money in, we're not allowed to take money out. All we can do is place trades on their behalf.
What does your crystal ball expect for 2013?
(Laughs) We can't predict that any better than anyone else. There's just so many factors. Europe is such a huge factor in what 2013 is going to do. The Europeans have a lot of challenges working through their debt issues. That will just naturally affect the United States. That's assuming we can get our (national) fiscal cliff house in order.
What types of clients do you see, individuals and businesses?
We have both. The majority are individuals, but we do like business clients (normally smaller businesses with up to 50 employees). We have a 401(k) offering that we can give (with) a full-service website for the employees and so forth. We can also provide investment advice, helping the employees decide which funds to select. That's a little bit unique. Most 401(k) plans are not allowed to provide investment advice. But the way we're regulated and structured, we're permitted to do that.
Are there some individuals who come in and they're surprised to learn what it takes to reach their goals?
Absolutely. There's a lot of tough decisions that have to be made, and it's generally about what expenses do I cut, what luxuries do I not need. Those are the hard decisions.
With creating a budget, the math is real easy. You have a certain income and you have certain expenses, and it needs to result in a positive number ... But when you have a family -- when there's more than person -- you naturally have tradeoffs because there are some things that are more important to me than to my wife.
In a perfect world you would have people coming in at a younger age to start planning?
Absolutely. There's a neat analogy that we and a lot of advisers use. You can have a pair of twins and one guy starts saving at age 25 and he puts in $5,000 a year for 10 years and then stops and just lets it ride. Then his twin brother doesn't put anything in until age 35 and he puts in $5,000 a year -- not for 10 years, but for 30 years -- until age 65. If you look at the investment growth of those accounts, it's surprising, but the first guy ends up with more. We tell our clients to do both, start at age 25 and don't stop.
What's the most difficult aspect of your job?
I think the toughest part is when people aren't prepared, or if they've had an unexpected tragedy in their family, if there's some type of change that they're having to go through. We get to know our clients, so they kind of become your friends, and helping them deal with those things is tough. It's rewarding, of course, but some of it is difficult.
There often are tough decisions like having to go back to work when you thought you had retired. Or if you have a spouse that passed away early, who was a breadwinner, and having to go back to work. These are major life changes, so it's hard to go through that with them.
What's the most satisfying part of your work?
I enjoy working with the clients. I enjoy when they call up and have a question and I can figure out the answer and help them out. That's fun for me, doing the research and figuring out the implications of the questions they are asking and giving them a solution.