Dean and Bud’s Beginnings: Forming Fiduciary-First Relationships
Key Points – Dean and Bud’s Beginnings: Forming Fiduciary-First Relationships
- Dean and Bud’s Beginnings: What They Were Taught and Why They Do Things the Way They Do
- Forming Fiduciary-First Relationships
- Unlearning Bad Habits
- The Importance of Proper Tax Planning
- Seeking Financial Independence
- 22 minute read | 38 minutes to listen
The most rewarding experience for Dean Barber and Bud Kasper is getting to educate people on financial planning. Get to know Dean and Bud on a more personal level, as they share about their start in the industry and how they approach the industry today.
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Dean and Bud’s Beginnings: Forming Fiduciary-First Relationships
Dean Barber: Thanks so much for joining us here on America’s Wealth Management Show. I’m your host, Dean Barber, along with Bud Kasper. Bud, how are you doing today?
Bud Kasper: Great, Dean. Fall is here.
Dean Barber: Yes. So, we thought we’d do something a little bit different today by sharing our story about how we got our start in this industry, why we are the firm that we are today, why we are the advisors that we are today, and what helped shape that.
Forming Fiduciary-First Relationships
Let’s start by talking about where we are today—a firm of $1.72 billion in assets, more than 50 employees, and three locations in Kansas City and an affiliate in Detroit, We’ve got CERTIFIED FINANCIAL PLANNER™ Professionals, CPAs, estate planning attorneys, Medicare specialists, people that focus on property casually. We also believe in forming fiduciary-first relationships, which means that we always put our client’s interests ahead of our own.
Bud Kasper: Legally.
Dean Barber: All our advisors are paid salaries, so there is no commission business ever done. We also believe we should never discuss investments with someone until we’ve first taken them through a complete financial planning process.
Bud Kasper: Exactly right, Dean.
Dean Barber: That’s not the way we started, though.
A Memorable Black Monday
Bud Kasper: No, it wasn’t. You started with the Waddell & Reed.
Dean Barber: October 19, 1987. Black Monday.
Bud Kasper: That is unbelievable that you came in on that day because it was horrifying. The market dropped considerably, and I can remember grown men looking at this saying, “This can’t be happening.” What a day for your inauguration into the business.
Dean Barber: It was the largest percentage drop in the market in a single day. I remember that day vividly. A lot of people don’t understand that when you enter our industry that you must get licensed. You need to pass a series of exams to show you understand what we’re doing.
Bud Kasper: And have the intelligence to get through it.
“You’ll Figure It Out”
Dean Barber: Right. So that day when I got the news, there wasn’t instant computer kind of where I learned about it immediately. I remember my license hit and I got the notification around noon that day. The company, Waddell & Reed, didn’t provide office space and didn’t pay a salary. Everything you made was going to be commissions from selling Waddell & Reed products.
I called my manager that day and said, “Hey, I’m licensed.” He says, “I don’t have time to talk right now. The market’s crashing.” I go, “I know; I see it. What do I do?” He tells me, “Just pick up the phone and start calling people.” I’m like, “Who?” He asks me, “Don’t you know anybody?” I tell him, “No. I’ve literally been in Kansas City for six months.” He goes, “You’ll figure it out,” and hung up.
Bud Kasper: He had a little more on his mind there. What a great confidence builder.
Getting the Green Light
Dean Barber: Where’d you get your start?
Bud Kasper: I started with Paine Webber. I was working at the time for the Gillette Corporation after getting a job there right out of college. It was a dream of mine to be in the brokerage and planning business, and I had told a buddy of mine about that. Sure enough, he got in. Once he did, he called me and said it was my opportunity, so I was there.
The first thing they gave me was an aptitude test. That was followed by a sales test. They didn’t call them that, but they were very simple. You either got a red or green light. What they were trying to see is whether you had the personality and ability to think through a situation and sell somebody a product that was created by the firm or outside of the firm but licensed into the firm. When you got the green light, they said, “OK. Here you go.”
Dean Barber: Did they have a nice salary for you when you started?
Bud Kasper: There was a stipend that was associated with that. It wasn’t very much, and it wasn’t very long because you had to go out and do it on your own. Every night, I had to hit the road running because I had three boys at the time. This sounds silly and people probably won’t believe this, but I spent night after night in a phone book, calling people and about municipal bond opportunities. Back then, interest rates on the tax frees were attractive. Thank goodness.
Dean Barber: Well, that was 1982.
Bud Kasper: At that time, it was. Anyway, that’s how I got started. There were a lot of hours associated with it.
Going for the Right Feel
Dean Barber: We’ve come a long way since then, but I want to tell you something. The reason why we are the way we are is because the industry shaped us into what we are today. A lot of it was you and I looking at the industry and thinking that it was broken. I didn’t like that. It didn’t feel right.
One thing that happened early in my career that started to shape the way that I thought about our industry was first in my training class. They called this the fast start school. In the training class, the divisional manager stood up in front of a class of 27 people that were all starting at the same time. The first thing he said was, “I want everybody to look around the room. Within a year, there’s only going to be two of you left.” Two out of 27. And he was right. I was silly enough to look around the room and wonder who the other person was going to be.
The Cold Call Cowboy
Bud Kasper: Well, it was probably confidence and that’s why you got hired in the first place. Of course, Paine Webber doesn’t exist anymore, but I remember this guy that was doing so well. He had an acronym that was the Cold Call Cowboy. Paine Webber put him in front of us and told us that was how to do it since he was doing well and making a lot of money.
He was doing a lot of commission-based products at that time. I don’t even remember the last time I had a commission-based product because we went fee-based back in 1994. We went totally independent, left the brokerage scene, and took a huge cut in salary.
Unlearning Bad Habits
Dean Barber: Bud, we started doing radio together back in 2007. I began on the radio in 2002, and I think you had a separate show on Hot Talk 1510 at the time.
Bud Kasper: I don’t know where they got the word hot unless it was the batteries that we were overextending the boards at that time. That’s a funny story right there, Dean, because we didn’t even know each other, yet we both had radio shows in that little station. It evolved several years later and the next thing we know, we’re doing a show together.
Dean Barber: Yeah. I want to go back to talking about the early days in our careers. There were a couple of things that happened early in my career that started shaping me into the advisor that I became and led me to go independent like you did.
Thinking About More Than the Money
I was probably two years in the business, so I was still very young and formative as a 23-year-old. I was talking to an advisor in his late 50s who was successful and had been there for a long time. He said something to me that really hit me the wrong way: “Dean, this is the greatest business in the world because you can make so much money so fast.”
I stepped back and thought, “That doesn’t make sense to me.” I thought about it for a few days and I went back into his office and told him that his statement bothered me. He was looking at this business a lot different than I was. I believed that if I did the right thing for people 100% of the time that eventually I would have a great business and a lot of happy clients. My attention was focused on doing the right thing for the advisors or the client. He didn’t know what to say to that.
It’s Not All About You
Bud Kasper: I get that so much. I was older than you were when I entered in the business; I think I was 28. There was a guy that worked at Paine Webber when I was there who told me he had a system of building positions different stocks. I asked him what he meant, and he said, “I’ve got one on IBM over here, Ford listed here, and TWA.” I asked him what the point was of doing that. He believed those stocks could go north, making some money in everything, and said, “I got to remember it’s about me.”
What he would do every day is have a listing of all these positions that he had shares of for clients that he represented. He said he wouldn’t leave his desk until he generated $1,000 worth of commissions every day. It was 6:30 p.m. and he was still talking to clients, moving one stock to another stock and vice versa. The obvious question is what was the point of that? Was that for the benefit of the client? Obviously, it was not, but that’s the way he conducted his business.
Dean Barber: Those two things that happened early in our careers started to shape us and started allowing us to look at things a little bit differently. You got to a point where you were tired of Paine Webber telling you what you needed to sell that day or that week, and you started thinking that there’s a better way. You decided you were going to go completely independent, so you left Paine Webber, hung up your own shingle, and rented your own office space. What was that like when you originally did that?
Bud Kasper: Scary. I gave up a decent income over there, but it wasn’t right. We weren’t on the same side of the client. I know others will disagree with that, but I never felt the firm was either. They kept putting together products for us to sell that were highly profitable to the company, but not necessarily beneficial to the client. I refuse to do those. You know how it was back then. If you didn’t do it, then you were no longer the fair-haired boy. You’re not going to get the clients, walk-ins, or call-ins back at that time. It just wasn’t right.
Huge Tax Benefits from Limited Partnerships
I was totally uncomfortable with it because back then, I was doing more mutual funds than I was stocks. Quite frankly, I didn’t feel I was qualified to tell a person whether a stock was going to do well or not. I said, “Let’s go find a person that only does this that does a stock portfolio, bond portfolio, and try to find the best one and move on from there.” You got paid a nice commission for doing that around 4 to 4.5% back then. You remembered one that was 8.5%, which is ridiculous.
Think about that. If you just paid that commission, that’s how much you’re down. You’ve got to make that back up just to get the client back to even associated with it. The worst thing was when Paine Webber started coming out with limited partnerships. When that happened, that was truly product building inside of the investment scheme, if you will. I don’t mean that negatively of owning real estate or oils or whatever the case may be.
Dean Barber: Waddell & Reed did the same thing. Prior to the Tax Reform Act of 1986, there were huge tax benefits for limited partnerships. The benefits were so great that people could lose their entire investment and the amount of tax savings.
They still wound up with a good rate of return and depending on the tax bracket that they were in. The Tax Reform Act 1986 wiped all that out. But remember, the incentive was so big that they had what they called ghost buildings. Those were buildings that you could see through in major metropolitan areas because people were just building them for the tax breaks. There were no tenants in them.
Beating Uncle Sam
Bud Kasper: That’s what happens when you have a bad tax policy in the country. You do these outrageous things that, quite frankly, are not morally correct. They were doing it for the purposes of beating Uncle Sam out of tax. By the way, I don’t want to pay any taxes more than anything else. If I have something that’s legal and would help me mitigate some of those taxes, why wouldn’t I look at it?
Dean Barber: I agree. You and I started studying with Ed Slott more than 15 years ago. I think it was 2005 or 2006 when we met Ed.
Bud Kasper: ’05 I think it was.
Proper Tax Planning Is Paramount
Dean Barber: As we got to drill into the tax code, that was a great education for us—so much so that we marinade in that stuff today. We spend a lot of hours with Ed, his experts, and other people we’ve met around the country who have also decided that that tax code is a super important part of what we do. We believe that good tax planning is just as important, and in some cases, even more important than the underlying investments that a person has in their portfolio.
I don’t want to take anything away from the underlying investments, but there is a mountain of money that people can keep in their pockets by doing long-term forward-looking tax planning. If you didn’t do it right, Uncle Sam could take away a lot of those returns.
Bud Kasper: That’s exactly right. The other thing from my evolution into the business occurred when I went independent. I had already started studying for the CFP® to become a CERTIFIED FINANCIAL PLANNER™. I thought that was necessary due to the simple fact that people were coming to me with questions I couldn’t answer only because they’ve never been exposed to the material.
Dean Barber: Do you remember, Bud? You were trained to sell product.
Bud Kasper: That’s right.
Dean Barber: Our industry still does this today. That’s what sickens me.
Appreciation for the Holistic Approach
Bud Kasper: It’s still out there. It’s not as pervasive as it was at that time. Just look at EF Hutton. Where did that company go and some of the other big names associated with that? As we went through the CFP® process, we were working from a more holistic viewpoint to understand that there were a lot of things within financial planning that impacted something else inside a plan and then guiding that into the right direction.
Dean Barber: It is enormous. We produced a piece titled, Retiring with $1 Million, that discusses proper tax allocation and Social Security claiming strategy. What difference does it make if we leave the investments out of it? Let’s take a 60/40 portfolio and make sure that’s the same across all the different scenarios that we run. Look at the impact of proper tax allocation and proper Social Security planning.
You will be absolutely blown away at what these two financial planning techniques can bring to you. This is something that Bud and I formed over my almost 35 years in the industry. For Bud, it’s almost 40 years in the industry, so it’s all from an educational perspective.
Bud Kasper: That’s going down memory lane.
Dean Barber: This is memory lane, but this is important, Bud. I think we’re the longest running financial education radio program in Kansas City.
Bud Kasper: I’m sure we are.
Dean Barber: How did we get there and why did we start the show? It’ll be 20 years next year. I want to talk a little bit about that.
You and I both talked earlier about how the financial services industry was really geared to train a team of what I’ll call world-class salespeople. Some of the best salespeople in the world live in the financial services industry. I’m going to tell you why I started radio, and then, I want you to tell me why you started radio.
Here’s what happened. I’d gone independent already. My focus was on financial planning and doing the right thing for people all the time. People were referred to me from existing clients. I put together a whole bunch of lunch and learn programs for Southwestern Bell, AT&T, Sprint, and Lucid Technologies, if you remember that name.
I got a chance to meet a lot of people in these lunch and learn programs. What I would do is go in, do educational programs, give people my business card, and tell people to call me if they wanted to talk. People would talk to me, so I’d begin the financial planning process with them. I started to see things that I didn’t understand. People put money into these annuities that were so complicated. They were called equity index annuities, which had surrender charges on them that would last for 10, 15, sometimes 20 years. They were annuities that were giving people bonuses to put money in.
The Dreaded Dinner Seminars
I tried to understand what it was. I asked the question one day of, “Where did you find this thing? How did you get talked into putting your money into it?” They would say, “I went to a dinner seminar and that’s what they were selling—these annuities.”
Bud Kasper: And the guarantees.
Dean Barber: Oh my gosh. I had to crash some of these dinner seminars to find out what was going on. I went a few of these dinner seminars and they were the biggest sales pitch that you could ever imagine about why these annuities were going to save everything. It reminded me of what I learned early in the business—that whole life insurance was going to save everything. It was the answer to all the ills.
Beginning the Education Process
My thought was figuring out how to educate these people so that they don’t fall into the trap that the people that I’ve met have already fallen into. The only way how to do it was to have a louder voice than the people doing the dinner seminar. So, I said I would start a radio show that would be all about education in the financial services industry. If I could make people a little bit smarter, I could help them protect themselves from what I termed the financial salespeople. That’s why I started radio, Bud.
Bud Kasper: I’m not too far different from that. The funny part of that is that Dean had his show and I had mine. Mine was called, Your Financial Security, because the firm at that time was called Financial Security Investment Advisors. I was learning more and more about the planning process, the integration of tax into the process, and understanding the importance of having wills, trusts, and things like that. Those silly seminars were going on as well. It’s sad because I don’t think a lot of the people that are unfamiliar with the processes that are built into annuities and the cost associated with that know whether they’re winners or losers based upon that. And, of course, with insurance, it always works when there’s a death. That isn’t what we should be planning for in this case.
Dean Barber: So, you got your start in that. And why did you start the show?
Bud Kasper: For the simple reason that I needed to get the word out. Who in the world is Bud Kasper and why in the world should I listen to him?
Dean Barber: There you go. The education process began.
Integrating Forward-Looking Tax Planning
You and I met each other in 2005 at Ed Slott’s conference. You’ll find Ed on my podcast called, The Guided Retirement Show™. He’s been on there a lot. We met Ed, and then you and I started learning what forward-looking tax planning was all about.
At that time, we had what I’ll call them quasi-loose relationships with different CPAs around the city. As we dug deeper into the financial planning process, and we started telling these individuals CPAs to do some long-term forward-looking tax planning. We got the biggest deer-in-the-headlights look from these CPAs.
They prepared taxes and didn’t know anything about financial planning, long-term forward-looking tax plans. We made the decision to bring somebody in house. We hired our first CPA, then our second, third, fourth. Now, we’re looking for five and six because we’re integrating that long-term, forward-looking tax planning, and it’s a lot of work.
Bud Kasper: It’s a lot of work, but it brings such additional clarity to the planning process. I was president of the Institute of Certified Financial Planners for the Heart of America and the president and chairman of the Financial Planning Association of Kansas City. These are all educational venues that people in our business go to who are looking to achieve the CFP®, or already are a CFP®. They need the educational credits because you are required to get so many hours per year to hold on to that.
Having a Full Set of Tools
This is all good for investors because you want to be working with people that are never static with it. Don’t come at me with just one product, which you were alluding to with the annuity situation. That’s like a guy with a hammer and that’s the only tool. Everything looks like a nail, right?
Dean Barber: I could tell a lot of stories about that. I don’t want to go into it. There’s a lot of those out there. Just things make me want to puke.
Bud Kasper: I hope what our audience has received over the years is an awakening. Understand that there’s a process to this that is the best way to serve your best interest.
Dean Barber: Bud, I want to talk about how you and I conjoined. We met in Tampa, Florida, at the inaugural Ed Slott conference. I ran into a client of yours maybe five or six months before that.
My financial planning process then is very similar to what we do today. We’ve enhanced it a lot because we have the tools to do so. As I was going through that process, your client gave me the statement and you were the manager on it. I looked at it and everything that they were doing and simply said, “I don’t know who this guy is, but I wouldn’t change a thing. He’s doing a fantastic job.” When I met you at the Ed Slott conference, I came up and told you that.
Bud Kasper: You did. That was a fantastic and highly complementary story.
Dean Barber: When that happened, I suggested getting together to talk about how we can work more closely together. The way that we viewed the industry at that time was very similar. That’s how we started doing radio together.
Bud Kasper: That helped me with the creation of another company called LSA Portfolio Analytics. That was a separate entity that was built around research and analysis of how to build portfolios.
“When Are You Going to Retire?” … “Never.”
Dean Barber: All fun stuff. It’s interesting because if you were to ask me why I do what I do today, the reason would be because of the reward I get from it. It’s not the financial reward, but the reward of seeing the impact that we make on people’s lives every day. That is why I continue to do what I do. I will probably never retire.
I don’t have to kill myself every day. We have a wonderful team of great CERTIFIED FINANCIAL PLANNER™ Professionals, CPAs, risk management experts, and estate planning attorneys. We’ve built an organization that doesn’t require us to kill ourselves every day. I love the time we are here and the things we do. I truly do enjoy it.
Bud Kasper: I’m the same way. I recently had a person meet with me who had come in three years ago. I gave him some advice at that time, but now he’s about ready to retire. My son, Matt, who’s a CFP® as well, and I we’re sitting down with him and going through his plan. He says, “This is unbelievable. That man helped me three years ago to get to where we are today.”
We went through the plan in total detail. It was about a two-and-a-half hour meeting, but there was a lot to cover. In the process, he asks, “When are you going to retire?” I cracked a smile and said, “Never.”
That sounds silly, but I believe that because I don’t have a lot that I want to do that I haven’t already done. Having a purpose is meaningful to me. I enjoy sharing what we’ve accumulated regarding our intelligence of financial planning and helping people stay and grow on the right path.
It’s All About Financial Independence
Dean Barber: When you think about retirement, we should reiterate that the way that you and I think about it is financial independence. The definition of financial independence really means that you get to do what you want to do every day, for reasons that are important to you, and it’s no longer about money.
I’ve seen people that had plenty of money that could completely retire from their business, career, or whatever, but they’re like, “I’m getting fulfilled. I like what I’m doing, knowing that I don’t have to have the paycheck anymore to do everything I want to do for the rest of my life.” That’s great.
They built up a lot of vacation or may be a business owner that has hired a good CEO, president, or chief operations officer so they’re not required to be there all the time, but they like being a part of it. It doesn’t have to be that you retire. What we want to do is help people understand when they’ve reached that pinnacle of financial independence.
When they wake up every morning, they can say, “Am I doing what I’m doing today because it’s what I really want to do? Is this what’s fulfilling me?” We should spend a little bit of time talking about the things that are most important in our lives. Helping people is super important in our lives, but even more important than that is our spouse and children.
Putting Family First
Bud Kasper: Right. We’re both blessed with five children who are all growing up. I’ve got one in college, one about to go into college in two years, and the other ones are older and in the business. They’re thriving because they have the same vision that we have. They understand that they can help people and make a difference.
Dean Barber: My five kids are between 21 and 30. My 30-year-old is expecting her first, which is a baby girl. That will be Kim and I’s first grandchild, so we’re super excited about that.
Bud Kasper: And you should be. That’s exciting. People have asked me occasionally, “How’d you and Dean get together?” I tell them the story associated with it, but it was really a commitment we made to each other. We saw synergies between the two businesses that have evolved into a nice, large firm that serves our public well.
Dean Barber: It’s interesting because I lost sight of family in the early years that I went independent. There was a real wake up call for me back in 2006 or 2007. I was working at least 80 hours a week.
Bud Kasper: I know you were.
Dean Barber: It was burning the candle at both ends. I got to a point where I didn’t know my kids’ teachers’ names. I didn’t get to attend sporting activities and that type of stuff. So, I stepped back and said my priorities are messed up.
That’s when I took a month off one December and rethought about our business. I wanted to think about how I can continue to have the impact on our clients’ lives that gives me such joy, and at the same time spend good time with my kids.
“The Best Decision I Ever Made”
I had to revamp the way that I thought about my practice. Allowing myself to be out of the office and off work when the kids were out of school on holidays, Christmas break, Thanksgiving break—all those things—was important. I took significant time during the summer months when they were out of school and spend that with them. I had to let go of some things and hire and train people to do those things. It was the best decision I ever made.
Bud Kasper: No doubt. Look at the firm today. Over 50 employees.
Dean Barber: Nine CERTIFIED FINANCIAL PLANNER™ Professionals.
Bud Kasper: It’s been a wonderful evolution and something that I’m very proud of. You are as well because we’re helping people do the right thing for themselves. It’s highly rewarding.
Dean Barber: If there is one thing that is maybe a tiny bit frustrating, it’s that I can’t meet every person that walks in the door anymore. I try to get to know people once they become a client, but I don’t get that deep, personal relationship. However, we’ve got a great team that develops that deep, personal relationship.
The Difference Between Financial Planners and Salespeople
Our firm is set up so that our financial advisors, our CERTIFIED FINANCIAL PLANNER™ Professionals, will never be salespeople. They don’t have to be. They can come out of college, work for us, get paid a salary, have a nice career path, and be financial planners. That’s opposed to trying to be a salesperson, marketer, or something else like that.
That’s the way we built the firm because we truly believe that financial planning is a necessity for millions of Americans. We’re trying to do our part and help as many people as we can.
Bud Kasper: We try to explain that so that you can understand the differences between what a firm like Modern Wealth Management does, as opposed to others that are out there. You’ve got choices to make. There are fine, quality people outside of our firm, but I invite you visit our firm so you can understand the difference that we’ve created for our clients. I’m proud of their success that they’re having so they can have their one best financial life.
Dean Barber: We hope that you enjoyed getting to know Bud and I a little bit better, and our stories about how we got to where we are today. Next week, we’ll be back with more education on America’s Wealth Management Show. Everybody stay healthy and safe.
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