In this week’s issue of Barron’s, the focus is on the top financial advisers in the country. In times like these, it’s a good idea to see what the leaders in the financial advisory services are thinking and how they go about positioning their clients’ investments to take advantage of the downturn, and maybe the upturn, once the markets will turn around. For the past ten years, the stock market returns are zero. Where do we go from here and what financial instruments seem poised to gain in the next three to five years? Very few of the top financial advisers – the top ranked one in each state – advise investments in stocks; most of them favor high-quality corporate bonds, or Treasuries. If they do look into stocks, then the names most often used are the likes of Johnson & Johnson (ticker: JNJ), Coca Cola (KO), 3M (MMM) or Colgate-Palmolive (CL). These are the low-hanging fruits – safer securities offering good returns.
After the big scare of last year, the affluent investors are looking for this year? Transparency and liquidity, coupled with safety tend to be the choices of 2009.
Barron’s has profiled the top financial adviser in each state. Let’s go through the list and select the ones with good advice for us.
“If we can help clients by reaching out to other clients, we’ll do that”, says Robert Runkle of Merrill Lynch, representing Alabama. Connecting people is an important job of the financial adviser, as he brokers the information flow between his clients. As for an investment idea, Mr. Runkle likes high-quality corporate bonds.
From Alaska, the top performer is Tom Konop of Smith Barney. His advice is that “the guy in the suit may not be the one with the money” as his clients include fishermen, oil roughnecks, wilderness pilots and hunting guides. His recommendations are buying munis and selling Treasuries.
The Arizona representative, James Pupillo of Citi Institutional Consulting, lives by a simple rule: “If you can control the risk in portfolios, the returns will come.” He seeks opportunities overseas, where “many countries still need basic things like running water, electricity and telephone service”. “The businesses that innovate and deliver these products will prosper”, he says.
Mark Curtis of Smith Barney is a financial adviser from California. His advice is summed up this way: “Laser in on the client’s focus, and don’t get confused by how much money you will make on an individual investment.”
Timothy Kneen of UBS Financial Services is from Colorado and his focus is on low-correlated assets, investments that are unlikely to move in the same direction simultaneously. His belief is “regression to the mean”, where returns will come back to their averages over time. He thinks that emerging markets and high-grade corporate bonds are due for a rebound.
Jeff Erdmann of Merrill Lynch – Connecticut – starts every conversation with an in-depth lifestyle and cash-flow analysis. Reduce your book your business to include smaller number of families in order to develop deeper relationships with them. Always ask about their children, to see the family dynamics.
Marvin McIntyre, Smith Barney – District of Columbia – “To do your job right, you have to be an extraordinary listener. You have to have empathy for your client.” The conversations go beyond investing, from finding a summer job for a kid or a contractor for a house renovation. Preserving wealth is job #1. “One of the most important things we want to do is protect the client’s lifestyle.” “We start by giving the client sufficient cash flow to retire. Whatever else happens on the growth side isn’t devastating if it doesn’t work in the short term.”
Louis Chiavacci, Merrill Lynch – Florida – Work in teams, with a tax expert and a bond specialist. Disclosure is key, make sure the clients understand every element of risk.
James Hansberger, Smith Barney – Georgia – “All growth in my life has come from adversity.” “Just because there has been a tremendous storm in the markets, you don’t get away from the basics.” Investors should focus on businesses which are able to build their businesses from good cash flow and low debt levels. Some companies in the biotech and data-processing areas fit that profile and could provide excellent returns in the next few years.
Mike Strada, Morgan Stanley – Hawaii – “If you think it might be time to reduce sail, you should already be up there doing it.”
Robert Rathbone, Wachovia Securities, Idaho – specialized in fee-based asset management, builds in depth client relationship and steers clear of the commission-based business of selling individual stocks. Today’s environment offers investors and aspiring advisers a rare opportunity, because the prices so low that the market looks poised for dramatic appreciation, comparable to the years following 1974 and 1981. “somebody getting into the business now has a high probability of looking good in five to ten years.”
Scott Magnesen, Morgan Stanley, Illinois – serves more than 3,000 families. His philosophy: think long term and invest in high-quality instruments: Treasuries, top-notch bonds, mutual funds, utilities and blue-chip stocks. Each time a CD approaches maturity, Magnesen picks up the phone and calls the client. “Bad decisions are made in volatile markets. When the market turns, it will reward you in spades.”
John Cooke, Wachovia Securities – Indiana – His clients get rigorous net-worth assessments twice a year. “We make sure that the clients are diversified, have high-quality investments, and that the managers we are using for them don’t have any problems.””It has been one of the scariest years for anyone in the profession. But during these times, your clients need you even more.”
Edmund Nasief Jr., UBS Financial Services, Kentucky – advisers and their clients often have much in common, they are in sync. Today’s events in the market will scar investors for long time, just as the Great Depression did in the 1930’s.
Kevin Knobloch, JP Morgan, Louisiana – “Diversification in the past four months didn’t work, unless you were in Treasuries or cash.””That doesn’t mean asset allocation is a failed theory. We’ll see it work once again.”
Michael Boyson, Smith Barney, Maine – “Long term, we find the prices of great companies here pretty attractive. But credit has to come back before stocks can come back”
Tom Hill, Smith Barney, Maryland – Inflation is coming, not this year, or the next, but it will come. “Corporate America is on sale.” His prediction: Stocks will bottom in the spring, ahead of a fourth-quarter economic recovery.
Raj Sharma, Merrill Lynch, Massachusetts – sees opportunities in credit markets, dividend-paying stocks and energy, tech and emerging-market shares. “Our job is not to make clients wealthy. Our job is to make sure they stay wealthy.”
Robert Stulberg, Merrill Lynch, Michigan – keeps as low a profile as possible; takes customers only by referral and concentrates only on an unglamorous investment niche: municipal bonds. Very discrete, he goes to extreme lengths to protect investors’ privacy. “Your doctor is your most important professional relationship. We’re next.”
Peter Eckerline, Merrill Lynch, Minnesota – used to sell peepholes for three months before joining Merrill Lynch, to get used to rejection. Now, he is trying to be a partner to his clients, helping them to do everything from picking a car to starting an effective charity. The market crash has strengthened his client relationships. Lately he favors municipal bonds, which he thinks provide attractive yields, and Treasury inflation-protected securities.
Michael Dowell, Smith Barney, Mississippi – his secret is to understand the nooks and crannies of each client’s finances. Check the facts of each financial instrument of your client. He has long favored fixed-income instruments, beginning two years ago to recommend managed futures accounts that capped losses at single digits.
Andrew Laszlo, Morgan Stanley, Montana – “I prefer to deal with good and interesting customers, not just people with money.”
Ron Carson, Carson Wealth Management, Nebraska – adheres to fundamentals, but uses some technical analysis, especially of insider transactions. He says, “Technical information simply tells you about the fundamental information that is not widely known to the marketplace”
Tom Sedoric, Wachovia Securities, New Hampshire – dual degree in finance and psychology. Everyone thinks they’re risk tolerant investor until a bear market. People should be honest with themselves when it comes about money.
Richard Mercil, Merrill Lynch, North Dakota – preaches a methodical approach with clients, educating them on potential scenarios and options. Continue to educate, and you’ll win.
August Cenname, Merrill Lynch, Ohio – “When people are lost in the jungle, they realize they need a guide.” People don’t need a guide through a walk in the park. Now, he is taking a defensive approach to managing clients’ investments. Preserve wealth and generate cash flow. Growth is not a realistic expectation now. Hosting family meetings for clients, to get everyone together and talking.
Joey Sager, Wachovia Securities, Oklahoma – “We’d love to beat the market, but that’s secondary to meeting our clients’ expectations.”
Steve Spence, UBS Financial Services – drawing from his experience negotiating the sale of publicly traded companies, he views each portfolio transaction like a corporate acquisition, by how much cash the investment can generate. Started buying beaten-up oil stocks in November.
Saly Glassman, Merrill Lynch, Pennsylvania – “Clients are interested in preserving their wealth and leaving a legacy.”
Robert Vingi, Wachovia Securities, South Carolina – helping clients doesn’t necessarily mean investing their money. He will advise the clients to pay down debt and build a cash cushion before they invest with him. He likes TIPS and bonds with maturities of five years or less. He also likes gold as an inflation hedge, and finds munis an “incredible bargain”. He also likes oil, other metals and other heavy equipment makers. He tries to identify themes, and ideas that are actionable on those themes.
Gordon Wollman, Cornerstone Financial, South Dakota – maintains client loyalty with monthly seminars and frequent email communications. “Every time the market takes a big dip, we send out some type of communication to let clients know what we are suggesting they do.”
Michael Gilbert, Gilbert Advanced Asset, Tennessee – shifted clients into corporate bonds, and bought into the S&P 500 index. “If you can keep your hands off your portfolio for 10 years, you’ll probably outperform everybody.”
William Corbellini, Merrill Lynch, Texas – forged relationships with investment bankers. His game plan: determine the cash-flow needs, then nail the asset allocation. In current market, underweight financials and overweight defensive stocks, such as consumer staples. “By the time this recession is declared officially over, the great majority of the rise in stock prices will have already occurred.”
John van Wagoner, Merrill Lynch, Utah – his job is about asking questions and listening, diagnosing clients’ needs and then prescribing. His guardedly optimistic prognosis for the economy calls for a bumpy ride nevertheless, but a recovery should be in place by year-end. His advice: keep 6-12 months of liquidity needs in cash; focus on yield through high-quality bonds and dividend-paying stocks.
Tom Wilkins, Merrill Lynch, Vermont – “I try to keep the investment very simple, so that clients can understand.”
Phil Scott, Merrill Lynch, Washington – “investors get myopic” they believe that the markets continue their downtrend and they lose all their money. “Things are cheap, but they might get cheaper. It’s a good time to look, so long as you think longer-term”
Casey Robinson, Morgan Stanley, West Virginia – “returning phone calls and responding to clients’ fears are vital in the current market. Basic compassion, he says, can go a long way. “You have to be able to relate proper decision-making in terms the clients are comfortable with, and be prepared to address their emotions.”
Andrew Burish, UBS Financial Services, Wisconsin – “We try to produce an absolute return, so we don’t care what S&P 500 is doing.” He says there is a bubble in Treasuries, so he is moving his clients into high-grade corporate bonds.
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