Wealth managers eye strategies to retain business

Wealth managers in the Phoenix area say that the financial crisis and its calamitous impact on the stock market is forcing them to rethink their investment strategies.

“Whatever we’ve done in the last 13 years is out the window,” said Randy Oldenburg, owner of Camden Financial Management, a Scottsdale, Ariz., firm with about $120 million under management.

Mr. Oldenburg, whose clients must have a minimum of $2 million in investible assets, said that he is putting some clients’ assets in certificates of deposit with a local bank, despite the fact that those assets will no longer be under his management — and will produce no fee income.

“We have to ask ourselves what different things we need to be doing, and for some clients this is the right thing,” he said.

Similarly, Mr. Oldenburg is helping other clients buy as much as $1 million worth of gold bars and coins, in spite of the fact that those assets will also be out the door.

While he will get paid a retainer, he said the moves would, more importantly, help him retain business and get new referrals from grateful clients.

“We also have a fiduciary duty to put clients in the most opportune place,” Mr. Oldenburg added.

Gold is seen as an investment “insurance policy” by Thomas Connelly, president and chief investment officer of Versant Capital Management Inc. in Phoenix, which has about $200 million in assets.

Currently, he said he is recommending that his clients have 5% to 10% of their portfolio in gold or gold stocks.

Mr. Connelly also said he finds stock valuations compelling and global index funds attractive.

“But I tell clients I don’t know what’s going to happen. I’m not a guru,” he said.

Noting that 70% of his clients are retirees, Paul Ahern, principal for Scottsdale-based WealthTrust Arizona, which manages about $450 million in assets, said the firm is being “more conservative now than ever.”

But he added the firm does not believe passive investing is the best approach to the current market.

“We believe a lot of dislocation exists in the market,” Mr. Ahern said.

As a result, WealthTrust Arizona is working with active asset managers who the firm believes will identify opportunities in the stock market “they may have never seen in their investing lifetime.”

Other wealth managers say they are sticking to their knitting — albeit with an eye to the shell-shocked current markets.

Northern Trust Corp.’s conservative investing approach has yielded a “flight to quality” for its Phoenix office, according to David Highmark, chief executive of the Chicago-based bank’s Southwest region. Northern has approximately $8 billion in assets in Arizona, he said.

Unlike in previous recessions, wealth management clients, particularly retirees, “are finding it very difficult to cope. Fear has mixed with anger. They are less certain this time. They’ve lost confidence in the playing field,” said Dennis Miller, president of Miller/Russell & Associates Inc. in Phoenix, which has about $1 billion in assets under management.

Miller/Russell hasn’t changed its investment strategy, which remains anchored in active management of stocks and bonds, he said.

“When our investment policy committee met, we asked if we were doing something wrong,” Mr. Miller said. “We concluded the answer was no, that we were just in a perfect storm. We just hope the boat is strong enough to ride through it.”

E-mail Charles Paikert at [email protected].

Related Topics: Wealth Management Market Report