2 min read April 2022 — Rising interest rates are eventually going to be positive for the economy, according to V. Raymond Ferrara, executive chair and CCO of ProVise Management Group. In an interview with Invest:, he said that interest rates need to normalize longer term. The economy will adapt and continue to do well, he added. Ferrara also discussed the mistakes people make when doing financial planning and the landscape for retaining and recruiting talent.
What are the most common mistakes that people make when creating a financial plan on their own?
The biggest mistake is that they try to do it on their own. Almost everybody reaches a point where they at least want someone to confirm that what they’ve been doing is right. The key is something I call TIK: time, inclination and knowledge. A lot of us might have the knowledge, but we neither have the time nor the inclination to do things. To do something successfully, you must have the time, the inclination and the knowledge. If you’re lacking any one of those three, the odds are that you’re not going to do as good a job for yourself as you would if you were to hire a professional.
Do you perceive an increase in demand for your services because of the pandemic?
The short answer is yes, and it has evolved over the last two and half years. In the very beginning of the pandemic, when we were all scared, a lot of people began to understand their mortality and that they weren’t going to live forever. There was heavy interest in doing estate planning. However, as the pandemic went along and because we weren’t spending money the way we once were — we weren’t going on vacations, we weren’t going out to eat, we weren’t doing all these other things — and because of the various pieces of legislation that provided a lot of money to the bulk of Americans, they ended up with a lot of money saved. They paid off debt and then they still had this extra money. The question then became, what do I do with it? Do I save it for retirement, or do I use it to pay for the kid’s college education? Do I keep it as an emergency opportunity fund? Do I invest it? A lot of questions emerged about what to do with this extra money. Today, I fear that the emphasis that people put on these very important financial issues will wane with the pandemic.
What are the strategies implemented by your company to recruit and retain talent under the current circumstances?
We’ve been very fortunate to retain both our staff and professional group. However, attracting talent, which is extremely important for us, is more difficult today than it has been in a long time. It’s always been difficult to find the right talent with the right values. But now, it’s harder to find that talent.
We have been selected as one of the best places to work in the financial services industry by Investment News. We work hard, we play hard, we have fun together, we care about each other and that’s allowed us to retain the folks that we have, not to mention that we pay very well also. Attracting talent is the most difficult that I have seen in the entire 50 years I’ve been in this industry.
To what do you attribute that difficulty in attracting talent?
The past ten years or so have been very good for the financial planning industry and thus, people are happy with their current employment. People are reluctant to change if they’re happy. Despite the Great Resignation, or maybe because of the Great Resignation, this is happening. People have gotten comfortable and they feel good in their space. They’re reluctant to make a move.
How do you expect the market in your line of business to change because of increasing interest rates?
The initial increases are not going to have an immediate effect on inflation. Raising interest rates by ¼% was probably all the Federal Reserve could do at the March meeting. But given inflation, we still have negative returns on interest rates and that’s not healthy.
It probably won’t be until the Federal Reserve gets to a Fed Funds rate of 2% that we will start to see the scale tip and then start to have a negative effect on inflation. Interest rates for a healthy economy are too low today and need to normalize for longer-term success. The short-term might be painful, but it will be a long-term positive to have higher interest rates for people who have money in savings and checking accounts. Who’s excited about earning .01% on your checking account each month? Who’s excited about getting a one-year CD for 0.5%? The economy will adjust to higher interest rates and should continue to do well throughout the year, although there won’t be free money. That’s OK because free money usually leads to excess, which is not healthy for the economy.
What makes Tampa Bay unique for doing business, especially now?
I think that the Florida legislature and governor have helped make Florida a fantastic state in which to do business. It was just recently projected that over the next decade we’re going to add 2.5 million people to our population, which is a 10% increase. Here in Tampa Bay, we’ve got it all: great weather, great arts, great job opportunities and great universities.
What is your outlook for your company over the next two to three years?
I believe that we have a very bright future not only for ProVise but for the financial planning industry. I would love to be 45 instead of 75 and have another 30-year run. I think the future of our business is a very good one.
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