Advisor Success Story–Mike Karstens

By focusing on powerful techniques such as wealth management, Mike Karstens has built an impressive business.

Advisor Mike Karstens of Nebraska-based Karstens Investment Counsel subscribes to a simple but powerful formula: wealth management = investment consulting + advanced planning + relationship management. Karstens says that this wealth management formula reflects a larger understanding of how an investment advisory business should operate. The simpler the approach, stripped of conflicts of interest, the easier it is to implement. Others have become successful in different ways, Karstens admits, but his approach is one that works for him. Indeed, using this approach to wealth management, he has built a fee-only investment advisory firm with close to $400 million under management and nearly 300 clients.

Karstens began in the business in the early 1980s, working for an investment firm before starting KIC in 1993. He was a CFP by that time, and he expected to build his business around financial planning. But having figured out the simplest and most straightforward way of approaching his business, Karstens began to unearth other cutting-edge trends that he saw he would need to incorporate into his practice.

For example, Karstens decided that he would adopt an investment management approach that was based on value investing and modern portfolio theory (MPT). This theory, developed in the 1950s, holds that the definition of risk is volatility over time. By figuring out how much risk a client can accept, Karstens uses MPT to build a portfolio of investments that might better track that individual’s overall risk tolerance.

In the mid to late 1990s, Karstens incorporated wealth management techniques to complement his financial planning and MPT approaches for building wealth. The firm he used to help him create and implement wealth management techniques was CEG Worldwide, a leader in wealth management coaching for advisors and the firms that work with them. CEG Worldwide helped Karstens refine his holistic approach to each client’s financial picture by focusing on all their needs—from investments to advanced issues such as tax and estate planning. Karstens had been involved with financial planning but now saw that he also needed to implement more comprehensive plans. To that end, he began implementing strategies by working in partnership with other professionals.

Most important, Karstens realized he could serve clients best by helping them align their wealth with their deepest values. By becoming even more skilled at helping clients determine how to invest their wealth, Karstens says he provides a valuable service that likely could not be obtained in the normal course of service within much of the rest of the industry.

By combining wealth management with financial planning and relationship management, Karstens has created a unique and powerful financial program. The basics of each approach are simple enough, but many financial advisors don’t effectively use them all together (and sometimes don’t even use them separately). Once upon a time, all that the financial advisor might have to offer clients was a “tip” as to the next hot stock. But this kind of approach was long ago commoditized by the very computers and technology that make Karstens’ sophisticated services possible. It is the technology itself that is partially the driving force behind Karstens’ innovative financial advisory program. But even though technology makes Karstens’ business possible, many financial advisors remain “behind the curve.”

“What we have built at Karstens in Nebraska can be built anywhere in the United States,” Karstens admits. “You should be able to find the same approach in, say, New York. But in many cases you won’t—not because the know-how isn’t there, but because many advisors don’t think through the process or commit to it properly.”

For Karstens, being a superior advisor these days is not about resources or even necessarily working with a big firm. Instead, the best financial advisors are those who grasp the basic principles of their business and then go out and organize their services in the most efficient and practical ways. It’s about “thinking better” to do better. Karstens sums it up this way: “Keep in mind your goals, and move toward them by sticking to the basics.”

He cites objectivity as one of the main elements and building blocks of his firm, and explains how he implements it: “We intentionally limit our business to fee-only investment planning. We do not recommend proprietary products, nor do we receive commissions for any products that we may recommend. We do not engage in any business that might compromise our advice to our clients. We are a true partner, wholly devoted to our clients’ financial affairs.”

And he adds, “It’s our job to help clients manage their financial resources, from investments to tax planning, from insurance needs to retirement planning, estate planning and beyond. We take it very seriously, and we won’t stop until we have provided our clients with the entire gamut of services for their needs.”

Here’s another formula for Karstens’ success: best practices + technology + common sense and objectivity = satisfied customers. Any way you add it up, Karstens is on the right track.

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