No wonder Don Haisman ended up becoming a financial advisor: As a boy in Falls Church, Va., one of his favorite pastimes was watching his father, a government engineer, review his investment portfolio at the table after dinner.
And his father was good at it. “His financial acumen paid for a lot of my sister's and my college tuition,” Haisman says.
Apparently, Haisman, 60, studied at the feet of the master: Today his firm, Haisman Wealth Management, an SEC-registered investment advisory firm, oversees $100 million for both high-net-worth clients and not-for-profit organizations nationwide from his modest offices in Fort Meyers, Fla.
Like his father, Haisman majored in mechanical engineering, but unlike his dad, he chucked engineering in favor of finance. His moment of revelation? In 1975, while working on a U.S. Navy submarine project, Haisman realized that his fellow engineers noticed that he had a talent for finance and sought him out for investment advice.
“That's when I realized I'd rather be a full-time financial advisor than an engineer,” Haisman says. “But, none of the major firms I contacted would hire an engineer to do investments. They wouldn't even give me an interview. I suspect they thought I couldn't work with people, only numbers.”
So, Haisman, married with three children and living in Canton, Ohio, went out on his own. In 1979, not long after he opened his own financial-planning practice, he moved to fast-growing Fort Myers. Unlike most financial advisors, his practice is a hybrid: about half institutional (55 percent of his assets belong to nonprofit organizations) and nearly half high-net-worth retail investors. A certified financial planner and registered representative of Securities Service Network, a broker/dealer and RIA based in Knoxville, Tenn., Haisman serves as chief investment advisor for the Roman Catholic Diocese of Venice (Florida) and represents that diocese on the pension investment committee for the combined Archdiocese of Miami, Diocese of Venice and Diocese of St. Petersburg Pension Plan Trust.
One of the keys to his success? That 1968 engineering degree that the brokerage firms were wary about 30 years ago. “Engineering teaches you to take complex mathematical situations, identify and analyze the relevant factors and display them graphically and easily so that people can understand them and make decisions,” he says. “I'm surprised at how many portfolio managers I encounter who are also engineers by training.”
Recently Registered Rep. contributing Editor Ann Therese Palmer interviewed Haisman about his investment and management strategies for nonprofits and high-net-worth clients.
Registered Rep.: How did you become an expert in financial planning for nonprofits?
Don Haisman: I wanted to give back to the community and initially volunteered for our parish's finance committee. In 1984, the vicar-general for our brand-new diocese of Venice, Fla., asked me to volunteer for its finance committee. They'd accumulated some money, but didn't know where to invest it. I helped them write an investment policy statement and showed them how to solicit money-management bids. I was helping them review the proposals, when, during a meeting, the other committee members asked me to leave the room. When I returned, they said they wanted to fire me as a committee member and hire me as their investment advisor on a fee-basis.
RR: Advising religious groups and high-net-worth clients must be very different.
DH: They are very different. With nonprofits, we're working with a group of people, a board or a committee of mostly volunteers. They make a collective decision; individuals decide what they want to do and do it. The committee changes regularly as people come and go. There's also a wide disparity of investment knowledge that I've got to take into consideration when talking to a group. Some are more investment savvy. Others have no investment knowledge whatsoever. But, all of them are fiduciaries of funds that aren't their own. This is a much different mindset compared to working with an affluent family.
RR: What's involved in writing a nonprofit's investment policy statement?
DH: I've written about a dozen nonprofit investment policy statements for Baptists, Presbyterians and nondenominational charities in addition to Catholics. Most religious denominations are directed by their national governance groups. But the criteria they provide to individual dioceses or churches are quite general. The general criteria: “Do no harm, avoid evil.” The most frequent prohibitions are against investments in alcohol or tobacco companies. When I write a religious nonprofit investment policy statement one of the first places I check is the Internet because many religious groups post their policy statements there.
RR: How tricky is socially responsible investing?
DH: It can be very difficult. Here's an example: Occasionally a religious nonprofit directly prohibits me from investing in a cigarette-manufacturing company. But, what about a trucking company that transports tobacco products? Do I avoid investing in them for this reason? Or is it OK if the company gets less than 50 percent of its revenue from the offending business? You can get into a quagmire over where you draw the line. It's very nebulous and very difficult. We do the best we can. But if someone's going to witch hunt an organization about this issue, they'll find something objectionable.
RR: How do you construct an investment plan so there's money for current expenses and money for long-term growth?
DH: We encounter this situation a lot, particularly for endowments trying to increase their assets for the future while funding today's particular mission, like educating seminarians or helping the poor. We use a mix of bonds for income and stocks for long-term growth. Our success has been equity-income funds that generate both at the same time.
RR: How do you handle short-term income needs?
DH: In general, we use debt for short-term and medium-term needs because the returns on their investments have been greater than the cost to borrow. Our institutions have been making money on the spread. When we have good markets, they may take some of the investment gain and pay down the debt.
RR: Explain a little about the Diocese of Venice. How is its pension plan invested?
DH: The pension fund has 22 percent in fixed income, 47 percent in domestic equity, 15 percent in international equity, 10 percent in real estate and 5 percent is tactical. We use 15 fund managers.
The objective is to meet or exceed actuarial projected returns necessary to meet the retirement obligations of the plan. The portfolio is managed taking a multigenerational view, since it is unlikely that there will be any large influx or dispersal of plan assets at one time. This allows our investment committee to take positions in not only traditional but also alternative investments that may take a longer time to reach maximum value. The size of the plan allows us to subdivide the various investment categories. For example, there are five portfolio managers for the domestic equity component alone.
RR: What kind of risk do nonprofits tolerate?
DH: The risk will depend on their time frame and the amount of dollars they have relative to their budgets and net worth. Some boards are much more conservative than others. That's why an investment policy statement is critical. Generally we'll only use stocks and bonds with portfolio betas well under one.
Other boards, on the other hand, realize that their money will be out there earning for decades. They can take a longer-term approach. They understand volatility and long-term growth. If their investment policy statement allows, we'll look for investments with betas of 1.2 or 1.4. We don't use a smoothing formula because the equity-income dividend relative to the capital does the same thing.
RR: What do you use for benchmarking?
DH: For board use, we use the S&P 500 because that's the only benchmark that everyone on the board has heard of. We use it even though we personally don't like it. Nonprofit boards are comfortable with it because so many firms use it. We also use the Lehman Brothers Bond Aggregate. And we've constructed our own benchmarks that match investment and index fund risks.
RR: As a nonprofit's investment advisor, do you ever refuse appreciated stock as gifts?
DH: When I agree to advise a nonprofit, one of the first things I do is write a policy on accepting securities as gifts. That's got to be approved by the charity's board and accountant, so the charity, without knowing it, inadvertently doesn't accept an investment that has unrelated business taxable income. Charities that I've advised have come close to accepting these types of investments, but I was able to diffuse it at the last minute.
Be careful with real estate. You don't know what's underground environmentally. Don't accept any real estate gift until you run it by the proper professional. I try to educate nonprofits to get me involved early on, before they accept any investment-type gifts. I can't protect them unless I know about it ahead of time.