by Doug Childers
The last 12 months have been tough for wealth advisers. As client portfolios slid south with the markets, many advisers found themselves serving as grief counselors. Dalal Maria Salomon, director/investment officer with the Richmond-based Salomon & Ludwin Financial Consulting Group of Wells Fargo Advisors, says half-jokingly that she keeps a box of tissues in her office.
“It wears on the psyche of the client,” says Ryan Sprowls, one of two managing directors of investments in the Alexandria office of Wells Fargo Advisors.
Despite some of the worst financial news in decades, though, many wealth advisers in Virginia are guiding high-net-worth and ultra-high-net-worth clients through the storm, and 25 of them recently have received national recognition from Barron’s magazine.
The 25 advisers are among the top 1,000 wealth advisers selected by Barron’s in February using a system developed by author R.J. Shook. Barron’s bought Shook’s organization, the Winner’s Circle, last year. During the past five years, the Winner’s Circle had developed lists of top advisers for Barron’s and regional business publications such as Virginia Business.
Keys to success
Advisers on the Barron’s list attribute much of their success to adhering to a few standard rules that are especially apt in this economic climate:
Don’t join a trend at its peak.
Diversify your portfolio.
Know your risk tolerance.
And above all else, don’t panic.
“Almost every client wanted to get into the real estate market at the height of the market, and we advised against that,” says Salomon, whose group manages assets valued at more than $400 million. “People always want to go into what is doing best, usually at the worst possible time.”
In a bear market, conserving wealth can be as important as generating it. Virginia advisers who made Barron’s list proved adept at this skill. As the stock market dropped last year, for example, Sprowls and Ted Dicken, the other managing director of investments in the Alexandria office of Wells Fargo Advisors, “moved several 401(k) plans to lighten up the equity,” says Dicken. “As of late, we’ve been less aggressive doing that.”
The Sprowls & Dicken Wealth Management Group manages assets worth $735 million and has about 200 clients with investable assets of $1 million or more. “We’re focusing on companies that pay dividends,” Sprowls says. “We agree with research here that large-cap growth will lead us out of this bear market.”
Likewise, Randy Beeman, managing director of the Wise Investor Group in the Reston office of Robert W. Baird & Co., moved clients away from financial stocks when they were high-priced in early 2008 “because I couldn’t see how they were making their money,” he says. Beeman, who is the top-ranked Virginia adviser on Barron’s list, manages assets worth between $1.3 billion and $1.5 billion. Beeman also limited his clients’ exposure to the cyclical market, reducing the firm’s investments in equities from 60 percent in 2007 to 40 percent last year. “If we can capture the bulk of an upturn and lose less in a downturn, the market is in my favor,” he says. “We are down maybe a third or less than what the broad market was down last year.”
Treading lightly in equities has helped Salomon’s group as well. She says her clients, with a typical account of $1 million to $5 million of investable assets, have fared better during the current decline than many others because their investment strategy revolves around cash-flow planning. “We try to design our portfolios to generate a significant portion of a client’s spending requirement. So we didn’t have to panic as things were falling and ask ourselves, ‘What are we going to sell?’ ”
Planning ahead has meant that many of Virginia’s wealth advisers on Barron’s list have made small adjustments, but no wholesale makeovers, as the recession deepened. “We have added more cash and Treasury-represented securities, but most portfolios we haven’t had to adjust dramatically,” says Lee Corey, a senior vice president in Morgan Stanley’s Alexandria office. “They’re on track. Pick a strategy for good times and bad, and you’ll be fine.” Corey manages assets for 25 ultra-high-net-worth clients (average investable assets of $25 million) and corporations, along with 100 high-net-worth clients (investable assets of $3 million to $5 million). In all, she manages assets valued at more than $500 million.
Christopher Coffing, didn’t make a major change in overall strategy either, but he undertook “a meaningful re-emphasis on asset allocation and reliable investment income, such as quality of dividends.” He is first vice president–investments, senior financial adviser and portfolio manager PIA program in Merrill Lynch’s Norfolk office. “I believe one of the most important services a financial adviser can provide in this difficult market is to remind clients that they need to stay focused on their long-term goals,” Coffing says.
“The reality is that the market recovers,” Sprowls notes. “If you let these cycles determine your strategy, you might as well watch cable TV for the latest breaking news all day.”
Opportunities and risks
What opportunities do the advisers see now? It depends on their clients’ needs. “It’s a great time for a younger client to invest for the long term right now,” Sprowls says. “With a long-term investment horizon, I think stocks are undervalued and present an opportunity for the younger generation. This is a great entry point to start dollar-cost averaging.” Dollar-cost averaging involves investing a fixed amount at regular intervals.
Beeman suggests it’s also a great time to add high-quality stocks to your portfolio. “When the market irrationally sells everything off, you get to buy quality stocks at a good price,” he says. “If you don’t have Procter & Gamble and you think it fits into your portfolio, you should buy it.”
William Calliott, senior vice president and financial adviser at Davenport & Co. in Virginia Beach, is bullish on stocks, too. He encourages clients “to maintain their equity exposure because equities historically outperform bonds.” Calliott manages assets for 75 high-net-worth clients with investable assets of $1 million to $5 million and 10 clients with investable assets of more than $5 million. While he acknowledges that his group is doing more fixed-income investing than in previous years, “that’s a function of older clients’ needing less risk in their accounts. You’re only getting 2 to 3 percent in CDs, but there’s a safety factor.” In addition to equities, Calliott sees opportunities in the municipal and corporate bond markets, especially corporate debt from companies such as CSX Corp. and Dominion Resources Inc.
Coffing is advising his clients about two main developments: “Reversion to the mean, implying equity prices will rebound to a more normal level and valuation, and also narrowing of spreads, meaning the disparity in yields on corporate and treasury securities should narrow.” He adds, “Clients could be less focused on perceived eventual inflation and be more concerned with the opportunities that exist in achieving a reliable income stream.”
This is also a great time to refinance mortgages, Corey says. “Capture that opportunity immediately. It locks in debt at a low rate.” Those low rates also make buying property attractive, if you have the cash, she adds. Corey also suggests possibly expanding your holdings in exchange-traded funds. “You’re buying an index that’s liquid, inexpensive and fairly tax-efficient,” she says. Finally, she’s offering clients “tax-free or tax-deferred municipal-type investments because we believe in two to three years, income tax rates may be much higher. That lets our clients be in position for that change before it happens.”
Likewise, Sprowls and Dicken are positioning their clients to weather future crises. “We’re taking profits on the longer-term bonds and moving them to the short term in anticipation of inflation in the next 12 to 36 months,” Sprowls says. “As rates move up, we’re trying to position bond portfolios for that.”
Salomon also is looking down the road and encouraging clients to lock in gains on market strength as she transitions clients into portfolios that are better positioned for the next downturn. “As we go through markets like this, it’s a great opportunity for all of us to see what affects us emotionally,” she says. “This won’t be the last time something like this happens, and each time we survive it better.”
| CUSTOMERS |
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| High Net Worth | Ultra-High Net Worth |
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| Total Assets | Typical Account | Typical Net Worth |
| Name | Firm | Location | (Up to $1mil) | ($1-10 mil) | ($10 mil+) | Foundations | Endowments | Institutional | ($mil) | ($mil) | ($mil) |
1 | Randy Beeman | Robert W. Baird | Reston | Ÿ | Ÿ | Ÿ |
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| 1595.8 | 2.5-5 | 3.5-7.5 |
2 | Joe Montgomery | Wachovia Securities | Williamsburg | Ÿ | Ÿ | Ÿ | Ÿ | Ÿ | Ÿ | 15800 | 5-12 | 5-30 |
3 | Ric Edelman | Edelman Financial Services | Fairfax | Ÿ | Ÿ |
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| 3415 | 0.44 | 0.80-1.5 |
4 | Dalal Salomon | Wachovia Securities | Richmond | Ÿ | Ÿ |
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| 469 | 1-5 | 3-10 |
5 | David Speck | Wachovia Securities | Alexandria | Ÿ | Ÿ |
| Ÿ | Ÿ | Ÿ | 650 | 1.5 | 2-3 |
6 | W. Jeffrey Carlton | UBS Financial Services | Vienna | Ÿ | Ÿ | Ÿ | Ÿ | Ÿ |
| 950 | 5 | 5-10 |
7 | Marc Cooper | Smith Barney | Newport News | Ÿ | Ÿ | Ÿ |
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| 550 | 0.5 | 2 |
8 | Allan Strange | Smith Barney | Richmond | Ÿ | Ÿ | Ÿ | Ÿ |
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| 450 | 0.75 | 3-5 |
9 | Ryan Sprowls | Wachovia Securities | Alexandria | Ÿ | Ÿ | Ÿ |
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| 735 | 1-10 | 1-10 |
10 | Lee Corey | Morgan Stanley | Alexandria | Ÿ | Ÿ | Ÿ | Ÿ | Ÿ | Ÿ | 555 | 2-15 | 3-15 |
11 | Robert Olcott | Wachovia Securities Financial Network | McLean |
| Ÿ | Ÿ | Ÿ | Ÿ |
| 975 | 15-30 | 25+ |
12 | Robert Wood | Wachovia Securities | Richmond | Ÿ | Ÿ | Ÿ |
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| 200 | 1 | 3 |
13 | Greg Popera | Merrill Lynch | Vienna |
| Ÿ | Ÿ |
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| 500 | 20 | 25 |
14 | James Cox | LPL Financial Services | Colonial Heights | Ÿ |
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| 415 | 0.5 | 0.75 |
15 | Kelly Campbell | Campbell Wealth Mgmt. | Fairfax |
| Ÿ | Ÿ |
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| 195 | 2 | 3-5 |
16 | Barry Glassman | Cassaday & Company | McLean | Ÿ | Ÿ | Ÿ | Ÿ |
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| 991 | 5-25 | 10-50 |
17 | James T. Barnette Jr. | Raymond James | Sterling | Ÿ | Ÿ |
| Ÿ |
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| 200 | 0.50-2.5 | 1.5-3 |
18 | William Calliott | Smith Barney | Virginia Beach | Ÿ | Ÿ | Ÿ | Ÿ |
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| 247 | 1.5 | 5 |
19 | Christopher Coffing | Merrill Lynch | Norfolk | Ÿ | Ÿ | Ÿ |
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| 193.6 | 0.75 | 5 |
20 | Sean Geiger | Smith Barney | McClean | Ÿ | Ÿ | Ÿ |
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| 156 | 2 | 3 |
21 | Brenda Blisk | Spire Investment Partners | McLean | Ÿ | Ÿ | Ÿ |
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| 230 | 0.75-5 | 1.5-22.5+ |
22 | William Orlando | Wachovia Securities | McLean | Ÿ | Ÿ | Ÿ |
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| 600 | 1 | 3 |
23 | Stephan Cassaday | Cassaday & Company | McLean | Ÿ | Ÿ |
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| 991.5 | 1.2 | 2 |
24 | Kirk DeHaven | Smith Barney | McLean | Ÿ | Ÿ | Ÿ |
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| 925 | 5-10 | 10-20 |
25 | Jeff LeClair | Wachovia Securities | McLean | Ÿ | Ÿ | Ÿ | Ÿ | Ÿ | Ÿ | 740 | 2-10+ | 5-20+ |
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