Curtis Cloke has not only been a successful advisor for about 30 years, but he has been delighted to give away all his secrets to anyone who wants to be a better professional.
That drive has taken him on the speaking circuit and inspired him to record videos to promote the concepts that made him a go-to professional for clients and other advisors. Being out front has also put him in the lead for important shifts in our business. For example, as he grew his practice beyond his home state of Iowa to cover the nation, he and his colleagues figured out how to go virtual long before the COVID-19 lockdown forced everyone to work with clients remotely.
Cloke started in the business at a young age, when an advisor noticed that he was an industrious, financially disciplined man who would himself make a good advisor. In the mid-1980s, he started working for Prudential Financial and then struck out on his own. Since then, he grew a national practice and amassed many licenses and credentials.
He is an unusual cross between advisor and actuary — he’s a sales guy who loves math. And he loves showing the proof behind the promise. He does that as a speaker and adjunct professor at The American College of Financial Services.
His constant drive to improve positioned his agency to be ready when the COVID-19 lockdowns started clanging across the country. His agency has been able to thrive as a result. In this interview with Publisher Paul Feldman, Cloke reveals how other advisors and agencies can do well in this crisis as well as be ahead of the next one.
FELDMAN: In expanding your company and territory, you were actually ahead of the game for the COVID-19 shutdown. Would you tell us about your company and how you were ready?
CLOKE: We have a multistate financial firm that’s represented on the East Coast, West Coast and here in the Midwest. Our office started here in the Midwest, and we have an office in Oregon. And we have an office over in Princeton, N.J.
We represent clients in all 50 states. Today, a little more than 50% of our clients are outside of the region of the original home office. And a little less than 50% are here in the tri-state area of Iowa, Missouri and Illinois.
Consequently, we had to learn how to go virtual a long time ago. We were very lucky that we were so well prepared for what was going to happen.
FELDMAN: So, what does that look like? How were and are you prospecting, and how do you close virtually?
CLOKE: Quite a few years ago, when I started public speaking and then started working as an adjunct professor for The American College, I was invited to be on lots of different podcasts, in a lot of different studios around the country.
I originally did 28 video sessions in the studio of The American College, and I’ve been back three times since then to update the materials. I’ve also spoken on thousands of platforms over the 15 years I’ve been speaking. And as a result, that’s just gotten me a lot of footage on the internet. I’ve spoken in a lot of internet studios that are TV programs for retirement planning. Just internet based.
Most of all, the content that we’ve developed over the 15 years, including our work for my course called Thrive University, is on the ‘net.
It was all designed for advisors, but we didn’t realize that consumers would locate those and watch them. And most of the clients or direct consumers that watch them are what we’d call high net worth, including doctors and lawyers. These are people who really don’t trust traditional planning, and they want to go out of the box. So they start digging around, and they find us.
FELDMAN: How did you change your operation to work with those new prospects?
CLOKE: We started out with GoToMeeting, which we used until two years ago. Then we started to see some of the Zoom calls and some of the unique features for video recording and a variety of things. So, we flipped to Zoom and we did the corporate account, which means that our whole staff is tied to each other all day, every day.
Then rather than get up and go from one office to the next while we were working in the same office, we simply would Zoom each other. And it was very efficient. Or we could bring in another person without having them leave their desk for questions with the client we were speaking with. Zoom is on my phone. It’s also on my office computer and my home computer.
We’ve been doing this for two years, and it was natural for us to be able to send everybody home. We were able to operate exactly as we had been, but remotely, although we’d never really tested it that way. But it worked beautifully.
FELDMAN: You’re also getting a lot of value from the videos that you put on the internet. As the advisors’ teacher, you’re going to have more credibility. What about a person who is just starting to create some videos? What kind of topics should they be looking at?
CLOKE: I think there are really three low-hanging-fruit topics that we all need to be talking about right now for clients.
In our case, we’ve got investments, or allocations, in many products. Obviously, all of these particular items have compliance associated with them. So, if I could just put a little disclaimer in here that says we must be sure that anything and everything we do meets all compliance regulations, and whoever it is that oversees that says, “Make sure you don’t go out and just do all that on your own.” We certainly do not.
But once you know and have confidence that you’re compliant, then the first item is going to be taxes.
We have all kinds of unique tax changes that happened in December of last year that would’ve been applicable with or without COVID-19. A lot of folks don’t know about those changes.
Now we have specific laws that are changed for 2020 only. For example, we have clients with IRAs and they’re automating their RMDs on a particular day and a month. They don’t have to take them this year if that will cause them additional tax for cash they do not need. We must tell every client with qualified assets that in 2020 they don’t have to take an RMD, and if they already have in fact taken their RMD, there’s a provision to put it back.
There are also loan provisions, and excess provisions to our qualified accounts that allow us the ability to spread taxes over a three-year time frame if we need to because of COVID-19.
There’s a lot of low-hanging fruit with taxes. The third thing about taxes is, you don’t think with those trillions of dollars to bail our economy out that we aren’t going to have some tax changes? Of course we are.
We’re going to have tax changes regardless of who the president is. We do have an election this year. So, I think that one of the things that we ought to be discussing in these three-, five-, six-minute vignettes is those tax law changes. These are the things to talk about.
One of the things that create a lot of interest are some of our higher net worth clients realizing that they might want to take advantage of these years where they don’t have to take RMDs out and maybe it brings them down into a different tax bracket, and they want to use that bracket capacity to Roth convert.
And second is, once they hit 70 years of age, they can distribute their qualified dollars to the charitable annual giving that they’re doing as a direct transfer to the charity from the IRA. And it’s twofold. No. 1, it meets the RMD requirements in the years that it’s required to be taken. And then it reduces those dollars in the qualified account over time, lowering RMDs each year thereafter.
So, even if we’re doing a lot of Roth conversions, we’re always leaving some qualified assets in there for the direct charitable giving that we still want to use tax efficiently.
Now that law could change. It’s been on the books awhile, and still there’s a whole bunch to talk about with regard to tax.
FELDMAN: What are some other subjects?
CLOKE: The second item that we discuss in our vignettes is the market. And again, keeping in sync with the compliance issues, I think that there’s a whole lot that could be happening. I always like to say that the earthquake occurred earlier this year and the tsunami has not yet shown up, in terms of the economic outcome.
Even before COVID-19, we had a year and a half of the longest run of the bull market that we’ve ever had, and we’re certainly due for a correction.
We’ve been warning clients about it for a couple of years. And then we saw this 30%, 35% decline, and then an immediate recovery, and everybody’s kind of shaking their head and going, “Wow, how can that be?” And with all the news, is that real? Well, probably not.
I don’t want to get to the place where I’m giving advice in your magazine. But I will say that we need to be talking about the “what is.” We need to be seeking out all of our clients who have money in securities. And we need to be retesting, reasking the allocations risk tolerance question: “Before we go into this phase, are we allocated appropriately? Would you change your mind based on your age from the last time we did it?”
There’s a whole bunch that we could do around asset allocation and market volatility that may or may not occur in the future. That’s an easy low-hanging fruit.
And then the third one is we’ve helped advisors understand for a long time that we shouldn’t be talking to our clients a month before they retire, six months before they retire, even a year before they retire.
We have an entire process that gets people in that conversation 10 years before they retire. And if they’re really astute clients, we can get them as early as 15 years before retirement. But you can start talking about retirement to clients at a much younger age than you think. And those are all topics for vignettes that you can discuss.
Then finally, what about those clients who are retiring in 2020 and in ’21? There are specific things they need to be doing with their portfolio in regard to risk tolerance. That’s very low-hanging fruit. So, there’s a whole bunch here that we can talk about and create these very small vignettes on topics.
Post them on social media, get some attention, obviously, if you’ve got a website, a Facebook page. We have a Facebook page. I’m not real active on it. We have a marketing person on our team who tries to manage that to some degree.
But you can do a whole bunch with these short video vignettes and some social media presence. And then you reutilize that. So, if you’re on LinkedIn, you repost something you put on your Facebook page to LinkedIn. Maybe repost it in a tweet.
And maybe it’s getting a little coaching from folks who are really experts on how they do social media, and the space to those to help with websites. But if you’ve been one of those who stuck their head in the sand and haven’t addressed this, now’s the time to put a little revenue toward that and spend a little effort on that, and it will pay big dividends.
FELDMAN: I don’t know why more people aren’t getting their securities license at this point. Besides being able to provide full service to clients, getting the other licenses also makes sense from a compliance standpoint. But that does not mean that commission-based products don’t have their place, right?
CLOKE: Yes, and obviously there are a few advisors out there who like to promote themselves as the fee-only folks. But you know, we’re also dealing with insurance products, and we’re dealing with it in the retirement world.
What we realized is there are some commission products out there that generate a greater value to the client versus a netted fee, a netted commission product.
I’ll give you a real example of this. I do retirement planning for a highly noted colleague of ours --- if I gave you his name you would know him very well. And this particular individual had a sum of money and wanted us to buy zero-commission income for them.
It just so happens our firm has both the zero-commission income annuity products and the street commission income annuity products. And the reason for that is this: We never know which one gives the best fiduciary option for our clients.
In this particular example that I’m giving you, we went out and we priced the income that we could get based on a start date for a joint lifetime with cash refund. That was for street comp that was probably 3.5%. That is 3.5% a life for service and no ongoing revenue.
Then we went out and we got the no-commission product with the same deposit.
What we found, surprisingly, is that we had to add $34,000 to the initial deposit to get the exact same income as the 3.5% commission street product.
At first, I couldn’t believe it. It was the first time I’d experienced that, which is what made me convinced I needed to test both every time.
What I found out is that for street products, the carriers are broad. There are many of them and they’re competing. This netted commission, the no-fee products, exist with very few companies, and there’s almost no competition.
And those companies know why most advisors are using that, because they are promoting themselves as fee-only advisors. If the thing I have to do to be labeled as a fee-only advisor is to charge them $34,000 more for the deposit, versus $34,000 less, how do you think my client might feel about that decision?
Sometimes the netted commission wins, and I’m going to charge a fee for the advice. And sometimes the commission wins, and I never know. So, how can I be fiduciarily upright and do the best thing for my client if I’m just picking one side of the fence or the other?
That’s the reason we built the software to compare. Because there seems to be such a fight out there about the way you’re paid.
Is it fees or commissions? Is it insurance or is it traditional investment? We need to embrace all of them without bias. And we need to understand how to put them together and do the analytics to verify what’s absolutely the best for the client from a mathematical perspective.
And you can’t do that without dynamic tax calculations, dynamic inflation and understanding the effective fee drag. You can test all those things, in any way together, and you can have a finite answer that if you assume this, this is the best; if you assume that, that is the best. And when you contrast the two, tell me what you like. That’s what we do in analytics.
Once we do that, we find if we ignore one or the other, we miss the more efficient one more than 70% of the time.
Imagine for a minute that you bought a Cadillac from the Cadillac dealership, and they promised they had the best mechanics in the region. So, two years later, you’ve got a squeaky right front wheel, and you drive it to the Cadillac dealership.
The mechanic takes it back to the bay and immediately grabs five tools out of his workbench, and then he runs into the vestibule where you’re drinking coffee and eating a doughnut, and he starts bragging about the five tools that he always uses to fix every repair.
Now that’s silly. Mechanics don’t do that. You wouldn’t do that. Why? He’s got a thousand tools in that box. He never knows what tools he’s going to use until he puts the car on the hoist and takes the tire off.
Imagine for a minute that he goes to the vestibule, not with these five tools, but he calls the owner of the car back to his bay, and he says, “I’ve figured out what the problem is.”
He says, “You see that? That a bearing right there on the shaft. We have to take that bearing off and we have to press it back on. We can’t just hammer it off. We’ll damage the shaft and then there’ll be a bigger cost to repair than just fixing the bearing, but we have a problem.”
He says, “You see that toolbox up there? You know, it’s wall to wall. I have over a thousand tools in there and I’m really proud of that toolbox. But guess what, there’s one tool I do not like. I hate it. You know what it is? It’s a bearing puller. I hate bearing pullers.”
How the heck is he going to fix your car if the one tool he needs on that day, which is rarely used, he doesn’t like? He can’t not like it. He’s got to have the tool in his box.
So, we cannot eliminate tools in our war chest. We need to know what they do and how to bring them together, and we need to know how to do analytics.
That is what’s going to be required in the new advisor world with all of these regulations and compliance.