Sadie Goodwin July 30, 2019 No Comments

Racing Ahead

Whether it’s cycling or building her practice, Tara Unverzagt pushes her limits.

Charles Keenan

This article originally appeared in Morningstar.

 

Financial planner Tara Unverzagt knows something about grit. Around 15 years ago, she was looking into enrolling her son for training at the local velodrome, a track for bicycle racers. She found her own riding club offered training sessions for adults, and she soon was hooked. She trained on Friday nights at the velodrome and piled on training miles on the roads around Southern California, and then started to race.

All the riding led Unverzagt to the 2013 UCI Masters Track World championships in England, where she won four gold medals and a silver in her age class of 50–54. Winning wasn’t just about training, though, but being able to go inside what cyclists call the “pain cave.”

“If you want to be good at track racing, you are going to be diving into the pain cave, and staying there,” Unverzagt says. “You get to a place where your body just sort of shuts off, and you don’t feel the pain anymore, and you can just go for a while.”

Good Financial Habits

Unverzagt has also pushed herself to build her practice, South Bay Financial Partners, based in Torrance, Calif. In 2017 she onboarded 65 clients as part of a succession plan with her mother, also a financial planner. Her book of business now totals about $150 million of assets under management, but she still sees work to be done. For one, she believes many people haven’t developed the skills necessary to build wealth. “My generation and below have been brainwashed into thinking credit cards and debt are great,” she says. “Financial literacy has gone completely away.”

To combat the issue—and recruit future wealth clients—Unverzagt has introduced three levels of coaching in her practice, geared toward people aged 20 to 35. “I’m interested in giving them a good foundation,” she says. “These are probably people who have little to no net worth.”

She teaches habits that will help accumulate wealth, such as budgeting, saving, and creating an emergency fund. She has started working with the children and grandchildren of her clients, charging a flat fee of $125 to $200 a month, depending on the level of service, and will open up the service to others in early 2019 if space is available. “The goal is to get them from the financial coaching and into the financial planning side, where you actually have assets,” she says.

For that side of the business, where clients have as much as $10 million in assets, Unverzagt also sets herself apart by charging flat fees, rather than the industry standard of 1% of assets. Annual fees range from $4,000 to $16,000 per year, depending on the complexity of the service. “It just doesn’t equate to me that I would charge you more for doing the same job just because you have more money,” she says.

Healthy Money Discussions

Unverzagt, 55, learned those strong values about money at an early age. She grew up in a house where money was talked about. “It was transparent,” she says. “We had a very healthy money conversation in our family.”

Her mother was a financial planner in the 1970s, when the field was nascent. She would tell Unverzagt and her siblings each night how much dinner cost per person. They were taught responsibility with money, and were given $10,000 by their parents to attend college. The amount was enough in the early 1980s to fully pay for Unverzagt’s tuition at Purdue University in her home state of Indiana. Yet Unverzagt never spent the $10,000. She studied computer science and worked in the summers to pay off the next year’s tuition as a Kelly Girl temp, a computer consultant, and a programmer. She saved by eating Subway sandwiches and low-priced meals at happy hours.

After graduating, she worked at Xerox and Locus Computing, rising to the level of group director at the latter and getting an MBA at Pepperdine University. She left Locus in the early 1990s to become a financial planner, giving her more flexibility to raise a family. She worked as a consultant for her mom while studying for the exam to become a Certified Financial Planner. Her husband brought their 3-month-old son down to breastfeed during breaks of the exam in 1994. “I wanted to be home with my kids like my mom was, while being able to continue working,” she says.

Taking Over

Unverzagt assumed the majority of her mother’s clients in 2017, and now her mom works for her, helping review financial plans. Those plans, of course, include equity exposure, which Unverzagt prefers investing in individual stocks, with about 75 to 100 core holdings. She believes mutual funds lack transparency and exchange-traded funds come with disadvantages such as requiring investors to own laggards. She also worries that ETFs’ losses in a crash could exceed those of the underlying stocks. “It’s an unknown, and I don’t want to buy into that unknown,” she says.

At heart, she’s a value investor with a focus on income. These days, she likes sectors such as utilities, consumer cyclicals, and consumer durables. She’s selective with technology, a sector that’s hot but warrants caution. “Tech is the future, so you have to be there, but you need to be careful and strategic about what you invest in,” she says.

For fixed income, Unverzagt uses bond ladders going out 10 years. She likes five-year Treasury bonds, given the flatness of the yield curve recently. “It’s a sweet spot: You get almost as much yield with a five-year bond as with a 30-year bond, and you don’t have the long-term risk,” she says.

Unverzagt subscribes to Morningstar Office to stay up to date with client accounts. She uses Morningstar’s Back Office Services to download client data from Charles Schwab and TD Ameritrade, the two platforms she uses for trading. She also taps Morningstar ByAllAccounts to download data from held-away accounts. Morningstar Office allows her to do a complete analysis of client portfolios, including running reports on asset allocation, industry diversification, and bond ladders.

“I can slice and dice people’s portfolios any way I want with a click of a button,” she says.

Unverzagt doesn’t have time to train for another world championship with all her new clients, but she still manages to race on her bike now and then. It’s fitting that “Unverzagt,” her married name, means “undaunted” in German.

“Life-enhancing experiences always happen when I’m outside my comfort zone,” she says. “I try to do things that are not in my wheelhouse. It pushes me ahead of everyone that is trying to find their comfort zone.”

Charles Keenan is a freelance financial journalist.