Planning Different

Kim Butler’s advisory firm delivers advice based on a proprietary software platform, and she doesn’t recommend that her clients buy stocks or bonds.

If you’re wondering who runs the most out-of-the-box financial advisory practice in the U.S., my nomination would be Kim Butler, of Partners4Prosperity.   She and two staff members work remotely with about 750 clients in all 50 states out of her home in Mt. Enterprise, TX (population 457).  She technically has no AUM and doesn’t recommend mutual funds, stocks or bonds for her client portfolios.  She does a lot of analysis for her clients, but it comes out of a proprietary spreadsheet program, and she doesn’t call it financial planning. 

“I prefer to use the word ‘strategy’ rather than ‘planning’ as we work with clients,” Butler says, “and I don’t analyze things beyond the next 10 years because I don’t feel like any assumptions we’re making beyond that holds any meaning.”

Oh, and she recommends whole life insurance as both an investment vehicle and a cost-efficient source of funding for other purchases or investments.

Butler’s business model started out somewhat conventionally.  She worked as a loan officer at a bank, where she noticed that many of the bank’s customers were financially naive, and decided she could help.  She received her CFP in the early 1990s, left the banking industry and for five years she ran financial planning analyses and sold mutual funds to clients through Provident Mutual Life’s broker-dealer, PML Securities.  “It was local, face-to-face work in Phoenix, AZ,” she says.  “And I have to say I loved it.  But at the same time, it seemed to me that typical financial planning didn’t really work for my clients.  I felt that it was too assumption-based, and that the long-term projections we were making were a joke.”

Looking for a better way, she encountered, in her local social circle, the author Robert Kiyosaki, the author of Rich Dad, Poor Dad, and an advocate of investing for cash flow rather than accumulation.  The two hit it off, brainstormed about what was missing in traditional financial advice, and Butler started to counsel clients, for a fee, on what she calls Prosperity Economics.

That was 1995.  “At the time, there were a number of online calculators,” she says, “so if people really wanted a financial plan, I would point them to where they could do it themselves on the web.”  She went through a series of broker-dealers before going independent in 1999, and phased out her mutual fund business altogether in 2000 to focus on life insurance analysis and prosperity advice.  Along the way, she dropped the CFP designation.

Marketing was not a problem.  “Robert would go out and give speeches all around the country,” says Butler.  “And if people came up to him and asked for financial advice, he would say, ‘call Kim Butler in Arizona’ and give them my contact information.”

From 2000 to 2005 Butler gave no investment recommendations to her clients, many of whom already had investment portfolios of their own.  But then she found a couple of investments she felt comfortable with, which were cash flow-based and more in line with the conversations she had been having with Kiyosaki. 

“Having been in the life insurance business, I felt comfortable with Reg D programs that invested in life settlements,” she says.  “And having worked in the loan department of a bank, I felt comfortable recommending private deals where they made bridge loans in the real estate environment.”

Today, Butler will talk with clients from anywhere in the country, first on the phone, and then for her first engagement meeting (and all subsequent meetings) she’ll send an invitation to participate in a teleconference using Zoom—basically doing planning face-to-face remotely.

“You send them a link, they click on it and away we go,” she says.  “If we’re sharing a calculator or a statement or a life insurance illustration, I can share my screen so we’re both looking at the same thing.  I think people feel better about you if they can see your face,” she adds.  “You can get down to business and get the work done quicker and more efficiently, which clients appreciate.  They want to go play with their kids, instead of getting stuck in traffic on the way to your office.”  Not uncommonly, a client’s CPA, attorney or spouse in another location will also be on-screen at the same time.

Outside the mainstream

Butler charges a flat one-time fee of $3,500 to do an analysis which could not be described as financial planning, using her proprietary spreadsheet called Truth Concepts.  The underlying principles will be controversial to most members of the mainstream profession; Butler helps her clients cultivate a “prosperous mindset,” which looks for opportunities rather than safety; she encourages them to adopt a big picture perspective where all aspects of their financial life are connected; to recognize opportunity costs; to focus on growing cash flow rather than net worth; on having control of their money rather than having it locked away in an account; to have the money move rather than sit in a single account; and to multiply dollars through those movements.

The last three principles are closely associated with the concept of leverage.  In an e-book that Butler has published, she gives the example of a client who wants to buy a sports car.  Instead of borrowing the cost from a local bank, the client invests in a cash-flowing website, buys the car on payments and pays the payments through cash generated by the online business.  Another example features a client who wants to pay for college.  This person is encouraged to save money in her own or the child’s whole life policy (where it doesn’t show up on the financial aid forms), and when the child enters college, the parent would borrow from the policy’s cash value for a down payment on a triplex near the child’s college of choice.  The child would be the landlord for two roommates who would essentially pay for four years of tuition and books through their rental payments.

The Truth Concepts software is really a lot of calculators which calculate things like the internal rate of return of an investment, perform loan analyses and calculate the costs and returns from one of the borrowing strategies.  It also defines future requirements and current cash flow.  A qualified plan calculator lets you see the impact of the plan’s various fees on long-term returns, and how much you can expect to pay in taxes upon distribution.  (The conclusion is that you should fund “to” the employer’s match but not maximize your contributions.)

The borrowing strategy calculator compares Butler’s regular advice of making a significant purchase (Car?  Home?) with a down payment and bank loan vs. putting money into a life insurance policy and then taking out a loan on the cash value.  The suggestion is that the client will not only get more financial value from the life insurance option, but that the borrowing strategy will also create more wealth than the policy by itself without the loan.  (This helps explain the movement and flow concepts.)   A more conventional distribution calculator helps create tax-aware retirement distribution strategies from various tax-deferred and taxable accounts.

In addition to the up-front fee (which can go up if a client has more complicated needs), Butler earns a management fee for the life settlement funds she recommends and a marketing fee from the bridge loan programs, plus commissions whenever she recommends whole life policies—which, as you’ve probably already guessed, is often.

In fact, part of the software is a life insurance calculator which calculates the rate of return inside a whole life policy, using the numbers in the in-force ledger.  Butler is not a fan of universal life, and only recommends whole life offered by mutual companies that share their profits with their policyholders. 

A look at two of her illustrations suggests that instead of a cash allocation paying nothing, or a bond allocation paying next to nothing, a client could “invest” the same money in a whole life contract and get between a 2% and 5% long-term, tax-free return—with the value of the death benefit as an added bonus.  Borrowing against that accumulating cash value becomes a less-costly alternative to borrowing from a lending institution.  (Butler also recommends that clients have 30-year home mortgages in place, which frees up cash for investments that generate cash flow.)

Butler understands that she’s a few miles outside the mainstream, but it was a conscious journey.  She’s happy that she’s operating as an independent RIA.  “I love the model,” she says.  “My advice, which I’ve shared with so many people, is: get your freedom.  Buy it, take it, run with it, no matter what the challenges and costs are.”

She doesn’t think she’s being irrational to regard the traditional investment markets with suspicion.  “I was involved with The Strategic Coach for a long time, and I knew all of these AUM guys,” she says, “and none of them were very comfortable either.  But none of them had any good answers for investments.”  Her clients were not greatly impacted by 2008 because their portfolios had zero correlation to the market.  The same will be true in any future downturn.

As to having one of the first virtual firms in the country, working with clients in 50 states, and having the capacity, with two staff members, to do ongoing work for 750 clients, Butler simply wonders why more advisors aren’t videoconferencing their client meetings—whether they’re mainstream or out of the box.  “I think in this day and age, it is paramount that every advisor learn how to work virtually, remotely, because we are all having clients move, and furthermore, clients want to meet over the phone.  It’s so much easier,” she says.  “You can help so many more people.  And it’s so much more efficient and effective.”