Advisor Spotlight
Dan Catone | CEO, Golden State Wealth Management

Serving over $1.7 billion in brokerage and advisory assets2, Golden State’s infrastructure provides its network of advisors with succession planning, compliance oversight, and dedicated transition support in addition to a cost-efficient investment platform and Turnkey Asset Management Program that offers its advisors equity ownership opportunities.

Q: What do you believe differentiates your approach with clients?

“There’s a famous Warren Buffet quote that says, ‘Be fearful when others are greedy.’ But I think there’s something fundamentally missing from that,” Dan says. “I don’t believe investors should simply counter bad decision-making with the same level of emotion, only in reverse.” Instead, Dan wants to help his clients counter bad instincts with virtue.

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Dan Catone

Dan Catone, recently named a 2019 Top 40 Financial Advisor Under 40 by Investment News1, is Founder and CEO of Golden State Wealth Management, LLC, part of the Golden State family of companies, SEC registered investment advisers dedicated to independent financial professionals and their clients.

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If we’re not able to digitally transform and to engage the next generation in the ways they want...we all stand to lose.

Q: What first drew you to the financial advice industry?

“The reasons I became an advisor are different than why I’ve stayed.” Joining the industry shortly after September 11, 2001, Dan says he was initially fascinated by financial markets and intrigued by investment-related concepts. “But I stayed because of the relationships. After all, most of our time as advisors isn’t spent managing investments, but rather building and nurturing relationships. And I’ve made so many friends in this business.”

Q: Why is a goals-based approach to investing important to you?

“As I’ve gotten older, I’ve come to the conclusion that having a goals-based approach is vital, but maybe not in the traditional way folks have seen it.” Dan has a high degree of confidence in the goals-based approach, but thinks that too often the goal is so abstract or so far into the future that it lacks significance.

“Investors are conditioned to think in terms of how much money they’ll need to retire 20 years from now. But attaching a figure to that goal is where planning has failed in many ways.” Dan believes good financial planning has to begin with what the client wants for their life, not with an aspirational dollar amount.

“Step 1 in the relationship is to listen and really hear what my clients are saying. I have to discover what they really want, because wants convert to goals.”

Step 2 for Dan is translating wants into goals. “Because when [clients] say, ‘I want to have this amount of income in retirement,’ what they may really want is safety or comfort or pleasure or the ability not to have to work so darn hard day in and day out.”

Step 3 is the means. “It’s wants, then goals, then means — or how you’re going to obtain the goal.” Dan likens the process to a surgeon whose patients may describe vague, referred pain. “Like a surgeon, it’s my job to figure out what’s really going on and then get to work.”

Dan says advisors are often taught to ask people, “What do you want?”, which makes sense, or how else would you know.

“But if you only ask me what I want,” says Dan, “the answer may not actually get you to my goals. The better question to ask is, ‘Who are you?’ I’m a father, a husband, an investor, a Catholic. Who I am is going to largely determine what my goals are going to be. So you have to find out who your clients are. And to do that, you have to really listen.”

As I’ve gotten older, I’ve come to the conclusion that having a goals-based approach is vital, but maybe not in the traditional way folks have seen it.

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Q: Why do you think investors often think of a financial goal as a far-off, future dollar amount they need to accumulate? 

“Why? Because a lot of the financial services industry is geared toward building recurring revenue for themselves. A lot of large institutions are trying to move the public in a way that benefits the company more than the actual investors.”

Dan believes this focus on recurring revenue at any human cost can even distort investors’ sense of what’s real. “A theme that’s been repeated, and one a lot of folks buy into now, is that ‘It’s not a real loss until you sell.’ That’s just not true. You’ve lost that money. It’s gone. These are real liquid assets with real values.”

That’s why he believes so strongly in the value of the advisor-client relationship. “Because through that relationship, by building that trust, you earn the right to help educate your client on reality rather than what they’re being spoon fed.”

Dan believes financial advisors play a crucial role in recognizing the individuality and humanity of investors. “Mass customization is a myth. There is no one size fits all. The tale we were all told is that you work for 40 years and then go on vacation for 20. But that’s just not most people’s lives.” What people want or need for their lives, Dan believes, is unique to them and their situation.

Q: How do you help clients stay focused on their goals during a crisis? 

“I think the best thing we can do for our clients is to tell them the truth. But you can’t tell the truth unless you know what the truth is. That’s why as advisors, we have to step up our game during a crisis. We have to dramatically increase the amount of reading and research we do.”

Dan talks about the fact that clients today are as plugged in as they’ve ever been, awash in a steady stream of headlines that don’t necessarily tell the whole truth. “That’s the voice you’re competing against. For example, what’s really happening with COVID-19? Can you get that from a single network news segment? No, you have to dig. That way you can say, ‘What I’m reading and seeing is this and these are my sources.’ You have to do the work.”

Dan says that while his clients’ political learnings bend every which way, the appeal of truth is universal. “Truth is not political. My clients are hungry for the truth today, for the facts. And there’s value in their being able come to me for it, someone who has no agenda in that space. My only agenda is to know my clients and help them achieve what’s important to them — even if what’s important to them is something that I personally disagree with. It’s simply a matter of trust. Trust that I’m working in their best interest, not anyone else’s.”
 

Q: What are the most common questions clients ask?

Dan says the two questions he gets asked most often are, “When should I take Social Security?” and “Should I pay off my house?” He says they illustrate why good financial planning is individualized and why the best planners take the time to get to know their clients.

“Take Social Security,” he says. “Mathematically, if you’re a person of some means, it makes sense to delay taking Social Security until the age of 70. But the reality is there are a lot of 62-year-olds who want to enjoy their money today. Perhaps they have an older spouse with whom they want to travel or grandkids they want to spoil.” In many cases, Dan says, there’s the financial planning answer and the actual person answer. And the “correct answer” isn’t always right for that individual.

The same holds true for paying off your mortgage. The mathematical answer tells people, “No, because your interest rate is only 3.5%, which is inexpensive debt, and you can still continue to deduct the interest.” But, Dan says, that answer ignores or at the least undervalues the human component. “The reality is that it feels great not to owe anyone. And that feeling of freedom may be worth more to that individual than a mortgage interest deduction.”

Q: Have the questions changed during the pandemic?

A lot of the conversations Dan is having now are more personal in nature.

“There’s more fear but it’s not financial fear. Instead, people are kind of scared for their lives right now. I think we’ve all smelled our own mortality, so the questions have shifted away from ‘Which investment is best?’ to more personal ones about their health and their family’s wellbeing. They’re not asking, ‘Can I generate $3200 a month in income?’ Instead, it’s ‘How do we live now? How do we see or spend time with each other?’”

Dan wishes advisors were better-equipped to have those kinds of conversations. He laments the fact that advisors get little to no training on how to counsel clients through life crises or life-altering events.

“I think one thing we’ve missed is the emotional side of things. We don’t get the psychological training and counseling we need to help clients cope or even cope better ourselves. For example, no one ever trained us on what it’s like to have a client die. These are lifelong relationships, so the death of a client is something we deal with regularly. And that can be difficult.”
 

Q: Why don’t you think advisors get that type of psychological training?

“I think there’s always been this focus on the STEM side of things. And while that’s obviously important, the softer side of finance—our humanity—I believe plays at least an equal role in our success. But it often gets put on the back burner.”

Dan believes the financial services industry’s STEM (Science, Technology, Engineering, and Mathematics) bias is far-reaching and points to Environmental, Social, and Governance (ESG) investing as an example.

“OK, so we have these questions of what’s good or bad when we analyze investments for their environmental impact, and it’s all relatively easy to quantify. But when you get to the S part of ESG, who determines what’s good or bad? CFAs and investment folks are making these calls but these are not financial questions. They’re not questions you can answer with a balance sheet.”

Dan points out that there are typically no ethicists or theologians or philosophers on ESG investment committees — no one actually trained to explore what is socially good for a modern society. “It’s cognitive bias writ large. There’s just a massive bias in this industry toward the finite things that can be easily quantified, or the idea that you can easily grade things. And that bias raises interesting and challenging questions about how to best serve investors’ humanity.”
 

Q: What is the most important thing advisors can do for clients today?

Dan says the COVID crisis comes closest to what 9-11 felt like. “The 2008 Great Financial Crisis was like a math question. It was just this implosion of the financial services industry. But I still vividly remember the fear people felt after 9-11. It was a personal, visceral thing, much like what we’re experiencing now. Fear of physical spaces, of flying, of not being able to see our kids or grandkids. Fear of them getting hurt or falling ill.”

So how can advisors help clients now? “Listen to them,” Dan says. “It seems like a passive activity but it really isn’t. And people change over time. So as they change, you have to continue to hear them. You have to know their lives. What they love. What they fear. What they’re worried about now.”

COVID-imposed social distancing shouldn’t be an impediment, says Dan. “We may not be able to meet in person but the tools are there for us. Pick up the phone and call. Zoom. FaceTime. Skype. Google Meet. You have to still maintain those relationships and you still have to keep listening and learning.”

Dan believes that it’s during crises like this when advisors can learn more about who their clients really are. “As advisors, we’re always having discussions about risk with our clients. But discussions about hypothetical scenarios don’t mean as much as when it’s happening in real life.” He describes these moments of truth as real-world stress tests, where you can confirm the truth about a client’s emotional or behavioral responses to stress.

“If I’ve done a good job of listening,” says Dan, “then the portfolio I’ve built should be one they’re willing to stick with or we can make small adjustments as needed. But if whenever a crisis hits, we’re rebuilding a client’s portfolio? Then I didn’t listen as well as I should have the first time.”

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“The opposite of fear isn’t greed,” Dan says. “It’s courage. And the opposite of greed isn’t fear — it’s prudence.” But these virtues, Dan says, like most pursuits in life, take practice. “With enough practice over time, and if we’ve done our job as advisors, then our clients should be able to readily exercise more courage or more prudence as the situation calls for.”

Q: How do you see the financial advice industry changing?

“A tremendous transformation has taken place in the industry from the 1980s to today,” says Dan. “First, there was the Gordon Gekko stock broker model of the 1980s. That gave rise to the mutual fund era of the 90s and the burgeoning of financial planning. Then, in the 2000s, ETFs came on the scene and we began to see the mass customization of financial products.”

But the fourth stage, Dan says, is the full integration or realization of technology-enabled personalized financial planning delivered in the way that customers want. He doesn’t believe that’s happening yet. Furthermore, he thinks the industry is deeply failing younger generations of investors.

“Younger investors want to engage in a different way than their parents and grandparents did. Theirs is the Amazon.com or the Instacart generation. They want and expect a certain level of ease, efficiency, and speed. They’re not lazy or impulsive, despite the bias that persists. Rather, they’re conditioned to expect a certain kind of instant online interaction. And that causes friction when it bumps up against a more traditional financial planning process.”

Dan says the traditional financial planning discovery process, for example, entails three 1-hour face-to-face meetings. That can seem outdated, archaic, or just plain burdensome to the younger generation. “There’s a disconnect. They want the instant, personalized interactions, but they still need the advice.”

The rise of newer online retail investment firms or trading platforms may be better at digitally engaging younger investors, Dan says. “But at their worst, they seem to feed on investors’ bad instincts. And even at their best, they fail when it comes to giving investors the financial planning help they need.”

And that planning help may look different than what people expect. He believes there's a ton of bias against the younger generation, who have been accused of not wanting to work or of being impulsive. “In my experience, they’re actually great savers. Think about it. Those who entered the job market in 2008 came in during the Great Financial Crisis. Fast forward just twelve years and they’ve also had to contend with incredible political divisiveness, social unrest, COVID, and the purposeful shutdown of our own economy. Bottom line? That’s going to color the way they look at money. They tend to be cash heavy, skeptical of stocks, and have high risk aversion.”

Dan says this generation is more like the Greatest Generation and believes that younger investors may be more at risk of underfunding their goals without the right financial planning help.

Q: What’s the single biggest issue facing advisors and practice owners today?

“I think there’s a reckoning coming if, as an industry, we can’t band together and address the elephant in the room: the aging demographics of advisors and clients. If we’re not able to digitally transform and to engage the next generation in the ways they want — more conveniently, more consultatively, more humanely, more professionally, and more personally — we all stand to lose. We’ll see the Amazonification of the advice industry. And I don’t think that’d be good for the industry or for investors.”

Dan says his firm is focused on building a team of collaborative, consultative, digitally enabled advisors who are also “fantastic” human beings. While he thinks others should be similarly focused, he cautions against advisors trying to do it all themselves. He sees a lot of inefficiency and unnecessary competition out there. “Golden State wants to partner with the best financial professionals in the industry, and believes that specialists in the industry can improve the client experience and transform our industry into what it can be.”

Dan urges advisors to figure out what they’re really good at and totally focus on what you do best. “You have to know your limitations. And then seek to partner with others who have the same client orientation as you but can complement your talents and expertise.”

Q: What about being an advisor continues to energize you?

Dan’s voice gets excited when he mentions his firm is “working on bringing to market some really innovative stuff on the digital planning and ESG side of things” that Golden State’s financial advisors will be able to use with their clients to engage the client in the manner they wish.

“In the end, I’m really energized by solving problems. And I, as do my partners at Golden State, see a lot of challenges in our industry. What’s really exciting for us is being able to positively impact the entire industry as a company. To create change for the better. Both for advisors and for the investors they serve.”

InvestmentNews’ 40 Under 40 nominations of advisers and associated professionals are evaluated based on: accomplishment to date, contribution to the industry, leadership and promise

2 As of April 2020


Daniel R. Catone is a Registered Representative with, and Securities Offered Through LPL Financial. Member FINRA/SIPC. Investment advice offered through Golden State Wealth Management. Golden State Wealth Management, Horizon Investments and LPL Financial are separate entities.

The views expressed are those of the interviewed advisor and may not necessarily reflect the opinions of Horizon Investments.

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I think the best thing we can do for our clients is to tell them the truth. But you can’t tell the truth unless you know what the truth is. That’s why as advisors, we have to step up our game during a crisis.