1. THURSDAY, DECEMBER 3, 2009 © 2009 Dow Jones & Company, Inc. All Rights Reserved.
Back to Basics
Safe, boring, vanilla. This is the new world of wealth management.
By Charles Passy money-market funds—about as make sense. A case in point: play-it-safer—investments that
vanilla as you can get on Wall When David Twibell, president of are increasingly being suggested
As a wealth manager with a Street—became a less-than-sure wealth management for Denver- by financial professionals.
certification from the Wharton bet when Reserve Primary Fund based Colorado Capital Bank, Each adviser has his or her
School and years of experience saw its net asset value fall below meets with clients, he doesn’t go-to favorites, depending on
working with countless deep- $1 a share? just ask them an open-ended the client and scenario. “Not
pocketed clients, Christopher For many financial profes- question about their tolerance surprisingly, they’re things like
Turoci is used to seeking out sionals, the process begins with for risk. Instead, he presents a cash, high-quality municipal
and suggesting forward-thinking educating clients and thoroughly variety of real-life scenarios— and corporate bonds, agency-
investment ideas. assessing their tolerance for “stress-testing a portfolio,” as backed mortgages, U.S. Trea-
But these days, Mr. Turoci, risk. It may not sound like clever Mr. Twibell calls the process—so suries and TIPS (Treasury
who manages the private-client marketing, but that’s precisely he can gauge their reactions. inflation protected securities),”
group for the Irvine, Calif., the point: If you want to sell As some clients come to under- says Jim Baird, a partner and
investment firm C.K. Cooper back-to-basics, you have to play stand their aversion to risk, it chief investment strategist with
& Co., finds himself recom- it straight. makes it that much easier for Plante Moran Financial Advisors
mending something that might That is why Greg Womack, Mr. Twibell to sell them on safer in Kalamazoo, Mich.
seem downright radical—in a president of Womack Investment investments. Other financial professionals
different sort of way. “One of the Advisers Inc. in Edmond, Okla., Big financial firms, mean- are looking increasingly to
things we’ve been putting clients has designed a series of work- while, are relying on adver- exchange-traded funds. Because
in is just bank deposits,” says shops with such matter-of-fact tising to promote more secure they can be traded throughout
the 40-year-old Mr. Turoci. titles as “Planning in Uncer- investment solutions. Consider the day like stocks, ETFs offer
Welcome to the new world tain Times.” Moreover, he has a recent MassMutual Financial more control for investors than
of wealth management, where upped the number of presenta- Group print ad, promoting the mutual funds, they say. “ETFs
financial pros find themselves tions he gives—from one every company’s whole-life policies, have certainly started to take
promoting back-to-basic concepts quarter to more than a half- which shows a father and son at over,” says Darsi Ringer, a vice
and safer and more secure dozen. The idea is to continually the beach balancing on a piece of president and financial consul-
means of making money, from provide the public with clear and driftwood. The tagline: “It’s not tant with Charles Schwab Corp.
fixed-rate annuities to dividend- concise information about sound just the policyholder dividends in Overland Park, Kan.
paying stocks (utilities, anyone?) investing strategies that “can you get from a strong and stable Still other advisers like
to, yes, even bank deposits. help calm down portfolios,” Mr. company. It’s the security.” commodities, especially metals,
Of course, they can’t tout that Womack explains. The process The ad goes on to promote not because they represent some-
such ideas will yield double- seems to be working: Mr. only the company’s $1.23 billion thing truly old-fashioned—por-
digit annual returns. So instead, Womack says his firm’s assets approved dividend payout for table wealth of the real “gold
they are selling the notion that under management have grown 2010, but also its track record of standard” variety. Tom Muld-
protecting principal and seeking by approximately 20% in the past reliability, saying, “We have in owney, managing director at
modest growth is the best way year. excess of $8 billion in surplus for Savant Capital Management Inc.
to weather today’s unpredictable The face-to-face meeting also unforeseen events.” in Rockford, Ill., even advises
financial climate. has gained new currency in this It may not be a campaign investors looking to purchase
“Boring is the new sexy,” says environment. “We said if we’re designed to titillate, but appar- gold as a form of long-term
Rick Fingerman, president of going to win in 2009, this is not ently it is a message that many insurance to think about just
Financial Planning Solutions, going to happen on Madison investors are ready to hear. buying jewelry. It’s there in case
Inc., a Newton, Mass., advisory Avenue,” says Mark Pfaff, an MassMutual has seen its sales of sudden financial need, but in
firm. executive vice president at New of whole-life policies increase the meantime “you’re going to
So how does a financial York Life Insurance Co. “This is 9% through the first half of 2009. make a spouse happy,” he says.
adviser promote vanilla in an going to happen at kitchen tables Whole-life policies appeal to Annuities are gaining appeal,
investment world that previously with our agents getting in front investors today because of their too, particularly for clients who
went crazy for the more exotic of clients.” generally decent—though rarely are currently retired or nearing
flavors of money-making ideas At such meetings, financial spectacular—returns and the retirement and need a guaran-
on the menu? And what does professionals are often using payout guarantee at the end. The teed stream of income in the
playing it safe mean in a world new methods to illustrate why same can often be said for other coming years. “It becomes more
where just a year ago, even a conservative approach may play-it-safe—or at the very least, like a self-funded benefit plan,”
(over p lease)
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2. says Barry Fine, a Commack, idle—“I run into resistance,” says officer with Cedar Brook Financial he says, they offer almost the
N.Y., financial adviser who has Mr. Kahler—he feels it is a neces- Partners LLC in Cleveland, points same rates as short-term CDs, but
created and started to market a sary hedge for safety’s sake. to the fact that while investors with the added advantage of full
Just-in-Time Retirement Funding Which is not to suggest that might think there is more safety liquidity. Plus, anything that goes
program using a fixed-indexed playing it safe is always so, well, in foreign opportunities, that isn’t in a bank is now guaranteed up
annuity. safe. Part of the problem in today’s necessarily the case if they are to $250,000 by the Federal Deposit
But while such solid, tradi- financial world is that little can buying those overseas investments Insurance Corp.
tional investments have their be taken for granted. With annui- with American dollars—as the And for his high-wealth clients
place, financial professionals also ties, for example, the returns are investments go up, the currency who need to be in cash, Mr. Turoci
caution that there is more involved
good only so long as the insurance could go down. suggests the USA Mutuals Part-
in creating a portfolio with secu-
companies behind the investments “Every money manager has to ners’ new Insured Cash Shelter
rity in mind. Increasingly, they
are emphasizing diversification—a stay in business—a real concern ask additional questions we never Account, which can spread up to
mantra that never seems to go in a post-American International thought to ask before,” says Mr. a $10 million investment among
out of style—and recommending Group Inc. blowup era. Nakhooda. several banks, thereby still guar-
that retirees keep more in cash. And that’s not factoring in other In the end, that may make the anteeing FDIC protection. Even
Richard S. Kahler, a financial threats to investments, from a most traditional of investment though it was paying a mere
adviser in Rapid City, S.D., used to weakening dollar to the potential vehicles—the old-fashioned savings 0.40% recently, it offers safety in
suggest a six-month reserve; now, for runaway inflation. It makes account—the “sexiest” option of an otherwise unpredictable world,
he has upped it to two years. Even simple and seemingly sound all. Certainly, Mr. Turoci, the C.K. says Mr. Turoci.
though some clients balk at letting strategies far more complex. Cooper investment manager, is a “We all know everything can
so much money sit relatively Azim Nakhooda, chief investment fan of such accounts. At this point, happen,” he says.
*Dividends on a whole life policy are not guaranteed.
**The dividend interest rate is not the rate of return on the policy. Dividends consist of an investment component, a mortality component and an
expense component. Therefore, dividend interest rates should not be the sole basis for comparing insurers or policy performance.
MassMutual Financial Group is the marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies
and sales representatives.
Reprint provided courtesy of MassMutual, Springfield, MA 01111-0001
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