Our CEO, David Snider, sat down with Jim Hagedorn, Founder & Managing Partner at Chicago Partners Wealth Advisors, to learn more about their holistic approach to wealth management. Chicago Partners is a Wealth Management Firm on the Harness Wealth platform.
Why did you start Chicago Partners and what differentiates you from other advisors?
Starting in 2002, I lead the Midwest division of the investment management branch for PricewaterhouseCoopers (PwC) to better serve their partners and executives. Then in 2008, Sarbanes-Oxley was passed, which required auditors to be separate from their investment management firm. I approached PwC and purchased the business from them. Anthony Halpin, who was working in the tax division at the time, joined me and brought his experience and expertise in tax planning. We felt there was a great opportunity to leverage our experience into a combined service offering.
Chicago Partners is different because we offer a one-stop wealth management solution to our clients. Usually, when a prospect talks to us, they have their financial plan in one place, an investment portfolio somewhere else, and a CPA who manages their taxes. That’s a lot of moving pieces to keep track of, so we help clients simplify and optimize the management of their wealth by giving them a wealth management experience that covers each area of their finances. Our one-stop solution has really resonated with clients, and I think that’s what’s helped make us different.
We analyze all of our client portfolios from an investment, tax, and estate planning aspect through our holistic approach – this allows us to create comprehensive financial plans and determine what the best course of action is for a client given their specific situation.
Having previously been part of PWC wealth management, what insight did you gain from being a part of one of the largest CPA firms and how are you applying that to your current investment and wealth management strategies?
Our work at PwC led us to become very tax-focused. So naturally, that focus on tax has driven us to create extremely tax-efficient portfolios. We look very closely at the after-tax return because your after-tax return is your most important return. All of our clients’ portfolios are built around great investment vehicles and optimized towards the goals and objectives of our clients. There are small things that make a big difference, like whether securities are placed in a taxable or non-taxable account, and by optimizing those small decisions, we see a greater overall effect on the portfolio, in terms of tax efficiency.
You work with a number of clients that transition from high tax states to low tax states. Can you talk more about that decision and how you help advise those clients?
We analyze all of our client portfolios from an investment, tax, and estate planning aspect through our holistic approach – this allows us to create comprehensive financial plans and determine what the best course of action is for a client given their specific situation. For some of our clients, moving to a lower tax state is more about the lifestyle they would like to have in retirement and less about their portfolio, but in some cases, like clients in California, moving them to a lower tax state may make the difference of covering their living expense with their portfolio or falling short.
You work closely with CPAs and attorneys as part of your process. Can you talk about why that’s important for holistic wealth management?
We feel it is very important that our clients have a holistic, one-stop approach to the management of their wealth. We’ve seen that in order to truly maximize the after-tax return of their portfolio, and to make sure a clients’ goals are achieved, the investment advisor, CPA, and estate planner all need to execute as one singular group. If one of these three segments doesn’t communicate with the others, or they are out of the loop on an important decision, the holistic plan can fall apart, which reduces the plan’s effectiveness. The one-stop approach also makes it easier for the client because they don’t have to worry about the different moving pieces that come with keeping many disparate parties in the same loop.
What are your views over the next 12 months (related to financial markets)?
We believe that the market is strong fundamentally and is in a position to continue to grow over time. The Fed has already cut rates once this year, and given the current market environment, they are poised to cut rates more aggressively into the year-end. This will allow equity investors to further prosper as investors continue to shift from fixed income-based strategies towards equity in search of return and yield.
In my experience, the biggest risk investors face is the emotional risk. Some people are always trying to time the market based on what they feel or hear, and not only does this not work, it’s also stressful. Trying to time the market is not a viable long-term strategy.
What is the biggest financial risk that you believe is being under-reported?
In my experience, the biggest risk investors face is the emotional risk. Some people are always trying to time the market based on what they feel or hear, and not only does this not work, it’s also stressful. Trying to time the market is not a viable long-term strategy. We help our clients understand that we are here to help them build a portfolio that will achieve their goals, even in times of heightened volatility, over the long term. That’s why we try to minimize the effect emotional decision-making has on portfolio performance.
What is the best piece of advice you share with your clients when discussing their financial future?
Take a long-term approach to your finances. Developing an excellent long-term plan helps by building a roadmap towards whatever destination a client values most. Along the way, it’s easy to course-correct for expected or unexpected life events, and still stay on target. It becomes much more difficult without that long-term focus. Our clients’ plans are built around the long-term, and because they incorporate financial, tax, and investment management into one plan, they can have peace of mind knowing each aspect of their financial life is optimized and heading towards their destination.