Mark Cortazzo isn’t one for platitudes. He tells you what he thinks (it’s a Jersey thing). In interviews, at industry conferences, or just batting around ideas, his refreshing candor might have once been thought abrasive. But after what we’ve been through, and his success in protecting and growing his clients’ retirement assets, this abrasiveness is now critical insight.
He’s tutored Wall Street Journal columnists on the need for comprehensive financial planning; Worth Magazinenamed him one of “The 250 Best Financial Advisers in America”; Reuters AdvicePoint named him a “Top Advisor for 2008”; He was accepted into the 2003 Hall of Fame by our sister publication Research Magazine; He was chosen as one of New Jersey’s “Top Forty Under 40” by NJ Biz Magazine and one of “America’s Top Financial Advisors” in 2008 by Fortune Magazine.
Anything we forgot? Quite a bit, but we only have so much room.
He did the requisite stint at a wirehouse early on, but big firm politics got the better of him. A stop at Sun Life’s broker/dealer followed before starting Macro Consulting Group in 1992. Today, the firm has $400 million in assets under management and he’s been an individual multimillion-dollar producer every year since 2000. In the variable annuity space, he’s done a little more than $100 million in production in 15 months. No wonder he’s No.1 at his broker/dealer, SII Investments.
“I love math and I love people,” he says, when asked about the reasons for his success. “Those are two skill sets that don’t normally go together. I was fortunate early on in my career to cross paths with an exceptional attorney who was able to explain complex strategies in plain English. As a young advisor, I was so anxious to tell everybody how much I knew. I impressed them, but they didn’t understand how it was going to help them. That was a really important turning point in my career. This will sound corny and it is very cliché, but I really think people don’t care how much you know until they know how much you care.”
For his dedication and no-holds barred approach to helping his clients realize a successful and affordable retirement, we’re proud to announce Mark Cortazzo as our 2010 Boomer Market Advisor of the Year. (Meet the other finalists now.)
Boomer Market Advisor: Let’s get right to it. Overall, how would you say you came through the market downturn?
Mark Cortazzo: 2008 was a terrific year for us.
BMA: How so?
MC: Our accounts had floors and guarantees built into them, so when our clients’ account values got hit, their paychecks didn’t. They didn’t get out in February and March of last year, when we saw one of the largest net equity redemptions in mutual fund history. We have emerging market portfolios and real estate portfolios that are up 90 percent to 100 percent in the past 12 months. The difference between me saying “don’t worry, the market should come back” versus “don’t worry, even if the market doesn’t come back, this is what your check will look like for the rest of your life” gave them the confidence to stick.
BMA: You’re known for taking on the consumer press and industry critics over their product misconceptions, no matter what the product might be? Are there any products that you’re biased against?
MC: No; not even indexed annuities, even though I’m not a fan of current designs. We try to look at everything with a fresh and objective eye. As markets change and rules change, programs that I looked at two years ago that weren’t attractive are now more attractive relative to the current environment. Just because we don’t like you now, doesn’t mean we won’t like you a year from now. It’s really all about looking at the best solution relative to all of the alternatives. We had accounts from 2002 to 2007 that tripled and almost quadrupled in value, and they had the guarantees.
BMA: So these guarantees were your strategy for managing downside risk?
MC: There are basically three things you can do to address risk: You can avoid it, you can manage it or you can transfer it. All three of them have their place. For your short-term money (you need money for a car or a wedding) you need to avoid risk with that because you don’t have time to recover if there is a one- or two- or three-year time horizon. Risk management, that’s managing the diversification, portfolio optimization, and that’s going to give you good relative performance. The market being down 50 percent and you being down 20 percent is good relative performance, but you still lost 20 percent of your portfolio. It did its job, but that doesn’t necessarily mean that you are going to succeed in your goals. So our clients had an absolute guarantee in an environment where pensions are disappearing and people’s predictable income streams are fewer and fewer, and that takes a lot of pressure off the rest of the management of the portfolio.
BMA: Your focus is on your clients’ retirement. But how does that specifically translate to your practice and how it’s structured?
MC: We have the advantage of proximity. By that I mean we’re niche focused on retirement, as you mentioned, and I’m in a marketplace where there are plenty of people who need our help. We’re the expert instead of being a great generalist. Some locales mean advisors don’t have that option. I talk to people in Oklahoma and they have to be generalists because there is not enough people to feed in their niche. Being in a concentrated area like we are, the great news is that there are plenty of people that fit your niche. The tough part is that we’re not alone, and our competition is much greater.
BMA: We don’t know of too many large financial services firms in your area that are niche.
MC: True. But when I worked the big firms, I had six inches of knowledge across an entire spectrum of strategies. Now we’ve got 10-feet-deep worth of knowledge across a much narrower band. It works better when I’m showing you visually. But we’ve recently added another partner and five staff to the firm, so we’re doing something right.
BMA: How is the office structured?
MC: In teams. Every client has a staff planner, a primary advisor and a relationship manager. The relationship manager takes care of the operations on the account; changing companies, getting distributions done and setting up the agendas so we know what issues are still outstanding from the last meeting. It’s a very process-driven approach. We do a plan for every client, we implement the plan, we maintain the plan and we do semi-annual reviews with each client. That might be with the primary advisor, it might be with the staff advisor. But it is very structured, very uniform and we have a pretty homogenous book of clients, so we do get some scale and some redundancy when we conduct research and find a program that really works.
BMA: That’s interesting that you say homogenous. What income and investible assets do you require before working with clients?
MC: We start at $500,000 and move upwards to the $10 million level.
BMA: How do you reconcile the need for customized plans with the homogeny you just mentioned?
MC: It’s interesting, because whether a client has $8 million or $800,000, if you look at their goals and “income needs” (I put income needs in quotes, because some of the numbers get humorous when they say they say how much they need in retirement) it’s very similar, plus or minus that extra zero. We had a client come in that said, “I need $500,000 a year of income during retirement.” We went through the numbers and discovered the property tax on just one of his houses was $100,000. That’s a fixed cost. Percentage-wise, what he was spending on entertainment and housing was similar to somebody with a million dollars, there’s just more of it.
BMA: How are you structuring your portfolios now given what’s just over the horizon? What do you see happening and how are you positioning yourself for it?
MC: Inflation protection is going to be critical. We have very low inflation and a very low interest rate environment. The next big bubble to pop is going to be long term government bonds. As interest rates rise, they’re going to get hurt. There are a lot of people who bought long term bond funds because they did well in 2008 and 2009. I think people don’t understand how significant a hit to their principal they can take if rates increase 1 percent. So we’re shortening maturities. We’re trying to move into positions that would benefit from a rising interest rate environment. We’re working with a few of the largest insurance companies in the world right now with their product development departments to bring to market a more consumer friendly longevity insurance product. Longevity protection, obviously, will be key moving forward. When my daughter was born, she had seven out of eight great grandparents still alive.
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