What if Hunter Harrison was a Financial Planner? My Guide to a Precision Scheduled PracticeFinancial Planning Investing
One of the forefathers of Precision Scheduled Railroading (PSR) was Hunter Harrison. He had a long and storied career in the industry. His legacy to the railroad industry will be the principles of PSR that he implemented at the numerous Class 1 railroads that he operated. The final railroad that he ran before his passing was CSX. The other day I was going through the CSX 2018 Annual Report and there the company outlines 5 key principles of PSR. It got me thinking about PSR and how could I implement those principles in my financial planning practice, Highball Advisors.
Railroads strive for 100% compliance with operating and safety rules to protect their employees, customers, and communities they operate in. In the financial planning industry, I am more concerned about the financial safety of my clients then the physical safety that railroads are concerned about. It is why every client goes through a detailed risk profile assessment making sure they are comfortable with any investments we put into action. As a Registered Investment Advisor, operating safely is making sure Highball Advisors is fully compliant with the regulations that govern investment firms. In my case I’m regulated by the state of South Carolina and by an independent, nongovernmental organization called FINRA.
Improve Customer Service
CSX states it as doing what we say we are going to do. Know your customer and understand how you can drive value. Proactively communicate at all times including when we cannot meet our commitments. I couldn’t agree more with that statement. The most important word is “value”. There is study after study on the "value" that advisors bring to their clients over time. However these are irrelevant if my clients don’t believe they are receiving "value". At the end of the day if you aren’t constantly delivering "value" to your customers then you will have no need to exist in the marketplace. In addition, proactively communicating with clients is the hallmark of delivering value. This even includes when the markets turn south and you have nothing but bad news. It is when communication is needed most. Anyone can communicate when it's all unicorns and ice cream and the market is on a tear, but when times get unsteady that's when you have to be reaching out to your clients.
When most railroaders think of PSR this characteristic comes to mind. Controlling costs means the elimination of unnecessary steps that add complexity and expenses to operating a railroad. However, in my practice it means finding and eliminating unnecessary expenses in my client’s life. These could be high expense ratios associated with mutual funds or exorbitant premiums on insurance policies or even reducing interest payments on mortgages and so much more. The ability to drive down costs and still achieve the client’s goals is what I strive for in my practice.
Optimize Asset Utilization
While most railroaders think about controlling costs when it comes to PSR , it really is this feature that drives PSR. It is the ability to do more with less by maximizing the value of the assets by increased transit speed and lower dwell. When it comes to financial planning it’s the client’s assets that need to be constantly optimized. After understanding my client’s goals and their individual risk profile that is when I earn my keep by making sure their assets are fully optimized. For example, let’s assume a young couple in their 30s want to keep all of their money in a checking account earning 0.10%APR. They plan on retiring at 70 and have dreams of a grand retirement. In their case they're under utilizing their assets which in turn make it harder to achieve their goals for retirement. Or the 60 and 30 railroad retiree who buys another annuity even though they already were funding the best annuity out there with their Tier 2 payments. Another example would be clients who have their money in mutual funds with high expense ratios when they could be getting equal returns in lower cost ETFs that provide the same level of returns. I could go on forever with examples of under utilization of assets. Optimizing your assets so they are working for you is where the rubber meets the road for good financial planners.
Value and Develop Employees
Out of the five principles this one really doesn’t relate to my firm as Highball Advisors is a solo RIA. Instead of employees, I strive to value and develop my clients. By developing clients, it means that I proactively educate my clients so they understand how we partner together to help them achieve their goals. You do this by asking questions of each other. Having a dialogue instead of monologue helps my clients and I grow and develop.
While I won’t be running a class 1 railroad anytime soon, the principles of PSR that CSX outlined in their annual report are already in my practice. Controlling costs and optimizing your assets is something everyone should be doing in their life if they plan on meeting their financial goals. If you need assistance in optimizing your plan and controlling your costs, please schedule a free consultation.
Get Your Free Railroad Retirement Assessment
Photo by Joseph Cermak
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved.