Interview with Sam Mickey – Asset Allocation, Diversification and Rebalancing  

Sam Mickey

Sam Mickey, founder of Sam Mickey Consulting, provides customized tax-efficient financial, insurance, and estate planning strategies for individuals and their families.  Sam has worked as a research analyst and spent several years as a registered representative and advisor for one of the largest financial services companies in the world.

Sam is an MBA-educated financial service professional with a passion for efficiency. His international business background provides an understanding of global macroeconomic risk factors, and his experience in equity research allows for insights into the fundamental analysis. As a financial planner, he focuses on helping people figure out where they are, where they want to be, and the best course of action to get them there.

We had the opportunity to interview Sam Mickey and learn a little more about his approach to investing and client relationships, as well as some investing basics to better understand why asset allocation, diversification and rebalancing are key to investing success.

What is one habit of yours that makes you more productive?

Waking up early is a critical ingredient to success in a sales position.  I was able to increase productivity by around 20 percent by simply waking up an hour earlier.  You cannot be productive if you start your day late or off on the wrong foot.

What is something you do over and over and recommend everyone else do?

Create a budget for yourself.  Without understanding your expenses and where your earnings are coming from and where they are going, it is impossible to begin to develop a savings strategy. The average American has $90,460 in debt, from credit cards to personal loans, mortgages and student debt.

Although younger Americans are the most likely to have debt (89 percent of Gen Xers and 86 percent of millennials), older generations are increasingly carrying debt into retirement, a heavy burden when your earning capacity is very limited.  80 percent of baby boomers hold some form of debt.

A financial advisor should do much more than recommending investments, he or she should help you get your financial house in order, and that often starts with a frank discussion about spending and saving and more effectively managing your debt.

How do you build relationships with your clients?

Building relationships requires me to ask a lot of questions to my clients. I need to understand who they are as people before I can even begin to make sound investment recommendations. I think another important part is making yourself available to answer questions. This is a personal and professional relationship. You should be there to help them when needed, but you should also not be afraid to show them who you truly are. Most people would prefer a financial advisor that they feel they know personally.

Describe how you handle demanding clients. What would you do if they pushed you to act unethically?

Demanding clients are best met with quick replies and well thought out answers. If you can assure them that you are available to help, they may back off a bit. As far as unethical behavior goes, that is a zero tolerance policy, and I would just have to politely explain that I cannot proceed to work with them as it stands to jeopardize my licensing. In a competitive industry, there really is no place for poor ethics.

What information do you use to evaluate a client’s financial position? Why?

This would begin by determining their income and expenses. It may make sense to help them a budget, as if you do not have any retained earnings, you cannot begin to think about investing. Beyond this, we look at their debts and investments as well as goals. We need to know what you already have and where it is you would like to go. Marriage, children, education plans, plans to purchase a house or a boat, all of this is relevant. If someone is already very happy where they are and they’ve hit all of their goals, that plan is going to be very different from someone who is just starting out.

How do you stay current on industry developments?

I read the Wall Street Journal as much as possible to stay current. There are continuing education requirements for financial advisors that allow us to stay relevant as well. To take it a bit further, I attend weekly training and am currently working towards my Certified Financial Planner (CFP) designation, which is a series of 7 graduate level courses designed to develop the professional standards of the industry. I genuinely find investment finance very interesting, so this part doesn’t feel like work to me.

What are the current economic risks that could impact your clients’ financial plans?  How do you recommend reducing the impact of these risks?

I think COVID-19 is by far the most impactful event in recent history, and the finance industry is not separate from that. Clients should pay attention to government bailouts and their impact on interest rates. It seems unlikely that the rate hikes implemented in recent years will be sustainable, and we may be heading back towards negative interest rates. This current environment, coupled with us being at the tail end of the longest period of market growth in history, suggests clients should be focused on conservation of capital for the next few years at least.

How important is asset allocation?

Asset allocation is a smart investment strategy that divides the money invested in a variety of assets. For example, a sum of money is divided among stocks, bonds, or cash investments. The reason behind this strategy is to minimize the risk involved in the event of volatility that may affect the market. It is important to remember that your needs will change over time as they pertain to your financial goals.

What should investors consider when planning their investment allocations?

Investors should consider time. What is your timeline for reaping the rewards of your investment? Whether you need a return in months, years, or decades, making this decision will help you decide on asset allocation.

Investors should consider risk tolerance. How big or small of a risk are you willing to take? If you’re comfortable with losing some or all of your original investment, or if you cannot afford to take a risk, answering these questions will help determine asset allocation.