Interview With Mark Chandik

Mark Chandik is a Registered Representative offering investments through Jefferson Pilot Securities Corporation and advisory services through Allied Professional Advisors, a registered investment advisor. If there is one constant we can anticipate in the coming years, it is change. Change can greatly enhance your future or destroy it. It can make you a millionaire or a pauper, delight or disappoint you. How you cope with change can determine whether your golden years are truly golden. Financial independence during your retirement years can be yours if you have an average ability to learn, a little discipline to save and invest, and you appy correct information. To help you learn more about retiring successfully, we interviewed Mark A. Chandik of Financial Diligence Partners in Orange County, California. Mr. Chandik was selected for this interview because of his extensive knowledge on the subject of retirement planning. This interview covers a spectrum of topics affecting a successful retirement today. It contains tips and insights that can be of great value in helping one plan a more successful, fulfilling and financially rewarding retirement.

Mark, what's this I hear about your being a "financial conscience?"

As the owner of a financial services company, I assist people in areas like transferring businesses between generations, preserving the value of estates, and planning for retirement. But the thing I like most is helping people define their goals and keeping them accountable - that's what I mean by "financial conscience." At first, sometimes, I take my clients' goals more seriously than they do, until they realize how important it is for them to accomplish their goals. The term "financial conscience" means I don't do business the old way. I like to build relationships and make myself available. That makes me an advisor and not a salesman.

Take a minute and share with us who the typical clients are you do business with and some of the typical financial issues they face.

My clients tend to be movers and shakers: Anyone with demonstrated life accomplishments. Those on their way up - and those who have arrived - who recognize the need for someone looking out after their best financial interests; people with a burning desire to make great decisions, but who often lack the necessary time and expertise; those desiring to maximize their return and to protect their assets for their families. Examples of typical financial issues include:

* Structure of and proceeds from the sale of a business,

* Appropriate disposition of newly-inherited money,

* Implications of a big promotion and related financial circumstances,

* Ways of increasing levels of asset accumulation and protection,

* Concerns and financial needs of growing families.

Let's talk about a topic that is the number one objective of investors today: retirement planning. How do you assist your clients in that area?

Yes, retirement planning is probably the hottest topic today because it affects everyone. Years ago, people did not have to worry about planning for retirment because they did not live much past retirement. Now it is just the opposite. Today the big problem is that people outlive the money they did accumulate. So, I let clients know it is very important they make a commitment to paying themselves first, using a systematic approach with reasonable expectations. I don't believe in high-risk, high-return philosophies. I let clients know the crucial thing they must do is develop a plan, implement that plan, then trust it and let it work. Time and compound earnings can have an almost magical effect. However, procrastination is a major roadblock to successful retirement planning. That is where I can help. I give clients the information they need to make an informed decision and then help them implement the plan that fits their needs.

What investment strategy do you usually follow in making recommendations to clients?

Any sound investment plan must, obviously, be tailored to the specific needs and objectives of each client. However, there are some general principles I follow. A wealth-building strategy must encompass asset allocation and investment diversification. A successful wealth-building plan provides peace of mind. I am very conservative when it comes to client investments, and I encourage clients to develop reasonable expectations rather than chasing high returns with high risks. I emphasize a basic, understandable approach to investing for long-term goals, such as retirement. It must be a priority having a retirement plan that provides a significant foundation for one's investment strategy. There are many pitfalls in setting up any qualified plan. Doing it incorrectly can be expensive. In general, I focus on asset allocation, static rebalancing and risk tolerance.

A topic that is certainly on the minds of parents today is planning for the escalating costs of sending a child to college. You specialize in that area also, don't you?

Right. It goes hand in hand with retirement planning. You just have to take a little time to plan ahead instead of waiting 15 years when your child is already in high school. You must start preparing when the child is very young. People make a lot of excuses why today isn't a good time to start saving, but the bottom line is, when children are 18 years old and ready to go to college, there is not an excuse in the world that will sound valid to them for not having any money to send them to college. So, I help my clients establish a common-sense approach to saving money systematically to provide for their children's education.

Your firm is obviously dedicated to helping solve your clients' financial concerns. How are you compensated?

We are compensated in two ways: 1) We charge a flat fee to prepare a financial plan. This is based on the amount of time we anticipate we will need to spend on a client's situation. 2) We can potentially be compensated if a client chooses to utilize us to implement a product or service through our firm. However, there is no pressure to do so.

The investing public hears more and more about asset allocation. How important is asset allocation and how do you help your clients with it?

I think it is critical to the risk/return equation. There have been numerous studies done to determine the optimum allocation of stocks, bonds and cash. The idea is to find the level at which you achieve the highest return with the least risk. Over the past 100 years, according to Ibbotson and Associates, the optimum asset allocation has been 62% stocks, 33% bonds and 5% cash. I help clients with asset allocation by determining the appropriate asset mix based on capital needs and risk profile. I then construct and manage their portfolio to maximize their return while minimizing risk. The wonderful thing about asset allocation is that it helps you make investment decisions. Let me give you an example. Let's suppose I determine that a portfolio should be 60% in stocks, 40% in bonds. The stock market rises dramatically, so much that the portfolio is now 72% stocks. We will sell enough stocks to lower the allocation back to 60%. While not a certainty, many times after we've made adjustments, the market has dropped.

I understand that you provide retirement projections based on what clients have, how long they work and their retirement plan benefits. Could you explain what you do?

One of the questions I am asked most frequently goes something like this: "I'm 40 years old. I'd like to send our two children to college, move to a larger house and be able to retire in 15 years. Is that possible?" My first task is to gather all necessary financial information from the client. I then run a computer-generated projection that conducts all financial transactions just as the client would do in real life. The projection invests excess cash flow if available, draws down on assets or retirement accounts as needed, and even borrows money when appropriate. I can use different interest rates, inflation rates and appreciation rates for every asset, income source and item of expenses. The outcome of the projection, which may span the client's next 35 or 40 years, provides a very clear picture of where a client stands in terms of meeting all his or her objectives. If the client is fortunate enough to be able readily to achieve all his or her goals, then I let the person know to what extent he or she might be able to accelerate the time table or hasten a retirement date. But if the client's objectives turn out to be unrealistic, then I provide specific suggestions as to which combinations of postponed retirement dates, enhanced investment results, or reduced expectations will allow his or her goals to become achieveable.

Everyone has different styles. How do you work with your clients and what can they expect from you?

That's a good question and the reason I offer an initial no-cost, no-obligation consultation - which gives me the opportunity to get to know the prospective client and find out what his needs are. I then explain the various ways I might work with him or her and how I can tailor our services to best fit his or her needs.

You hold several professional designations. How important is that in the industry?

Chartered Financial Consultant and Chartered Life Underwriter are designations earned through experience and achievement in this industry. Exposure to many experiences provides me with a wealth of information - which becomes very important in everyday problem solving. Those designations also mean I must be ethical, consistently well-read, and thorough.

Give me an idea what a person can expect after becoming a client of yours.

I try to make my clients feel like they are special because, obviously, they can do business with anyone they want. I try to go the extra mile to make them really comfortable in doing business with me. I like to see my clients on a face-to-face basis at least twice a year. I send them a bimonthly newsletter that is full of information about changes in the tax laws, retirement strategies, and new ways to meet their financial goals. My clients know this is what I do for a living. It is not a sideline or a second job. This is my lifelong career. All those things combined give my clients service and personal attention that are absolutely second to none.

I understand you help your clients with planning. But do you also help clients implement the plan?

Absolutely. I am registered to sell investments and licensed to sell insurance products. The benefit of obtaining these financial products through me is that I am not tied to any one company. I have the ability to select among a number of investment and insurance companies to obtain the best choices for my clients. In addition, I constantly monitor the plans, to make sure they are up-to-date and still meeting the client's objectives.

Most people have attorneys and accountants that counsel them in the areas you have discussed. Why should these people need your services if they already have these professionals?

That's a good question. I do not replace the attorney or the accountant. Rather, I work in conjunction with these professionals on behalf of the client using the team approach. I position myself as the quarterback of the team and for good reason. I get the client to take action and then the plan is implemented. I feel what separates me from my competitors, as well as most attorneys and accountants, is my ability to find out what my clients really want and need.

It is my understanding that you do quite a bit of work with owners of closely held businesses. Briefly, what are some of the unique problems that business owners face, and what has been your approach in addressing these problems?

Without a doubt, one of the most complicated and difficult problems is business continuation. What happens to the business at the death or retirement of the owner? Although each situation is unique, I have found that the first and most important step is to get all the parties communicating, so we can understand everyone's goals and concerns. We begin by understanding the client's total situation. By utilizing the financial planning process, we are better able to help structure a business continuation plan, working in conjunction with the other advisors. Another problem that business owners often have is that they have concentrated so much of their effort and attention toward the success of the business, that they have failed to diversify adequately. Therefore, if the business has a problem, they do not have adequate outside resources to achieve financial independence. We encourage our business owner clients to establish two estates, the business estate, and an estate based on outside investments. Generally, the best way to accomplish this is to set up an automatic program, such as a tax-deductible qualified plan or a private pension plan.

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