Whats New In Wealth Management

April 6, 2007
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GRAND RAPIDS — While most of the traditional investment vehicles remain the same, local experts are seeing some new trends in wealth management.

As Barbara DeMoor, president and CEO of AMBS Investment Counsel LLC, sees it, one thing that has been happening a little bit over the last few years is that high-net-worth individuals are tending to look at more complicated investment plans in order to increase the diversification of their portfolio.

“We’re seeing that, especially in the ultra-high-net-worth individuals, but also just wealthy people, looking to get into more exotic investments than perhaps they have been in the past — things like hedge funds,” she said.

DeMoor said her concern is that some people are getting into some of the riskier types of investments because those investments are often written about in the popular press, and people begin to think they have to have them, too. But in following the crowd, so to speak, people may be stepping into some kinds of risks that are greater than they really need to be in order to achieve their goals, she pointed out.

“Fifteen years ago or so, everybody had to have junk bonds. In the late 1990s, everybody had to have technology stocks. Those are things that work well for a while, but they’re risky,” DeMoor said.

“They’re riskier and they tend to blow up at some point, and if you don’t really understand what you’re getting into to begin with, it can cause more pain in the long run than the joy you got from it when it was going up initially.”

DeMoor said that from what she has seen among West Michigan investors, there is still a tendency to stay closer to the basics. She’s not seeing as many people take excessive risks here as are investors in, say, New York or California, she added. 

Robert Stark, president of Stokes & Stocking Inc., said the Internet has been a wonderful tool for investors but also is a little overwhelming because there is so much information available online.

“It may well be that our role today is to help to distill that information and remove some of the confusion by helping people establish what it is they want to do, and then help them put together a portfolio that will work for them,” Stark remarked.

He said the exchange-traded funds that were introduced to the market four to five years ago have become very successful and trendy among professionals. His company was one of the early adopters of exchange-traded funds, which he says are very low cost and very tax efficient.

“Exchange-traded funds have been around for a while, but there has been explosive growth in the number of offerings available in the last couple of years,” Stark said.

Ron Knipping, CFP, president of The Rehmann Group, said his company has seen two areas in wealth management where trends are starting to emerge. First, high-net-worth individuals and families are becoming more and more time constrained, so time savings has become very appealing. 

“If they are able to take care of their tax planning, estate planning, financial planning, asset management and insurance within the same organization, they can tell the same story once and get all those services performed for them in an integrated manner, as opposed to piecemealing it,” Knipping explained.

Second, as baby boomers age, high net worth families more and more have the desire to do planned philanthropic giving. They don’t want to just write a check to a local charity as much as they want to make sure their gift makes an impact, he said.

“There’s more and more of an awareness of the ability to make a positive impact on the community and on any organizations or charities that are important to them,” Knipping said.

Besides that, he observed, planned philanthropic giving is also a great way for people to teach their children the value of wealth. In many families, if they don’t do the proper planning and teaching of values, the children are suddenly left with a big pile of wealth, and it actually ends up hurting them, Knipping observed.

Kris Anderson, a financial consultant and principal with The Rehmann Group, said another thing that is a little different and has caught on is individual stock portfolio management, where the focus is on listening to the market or identifying where the market is going next.

The Rehmann Financial Alpha Quant Model Portfolio runs stocks through 17 screens with the idea of identifying stocks that have the ability to outperform in the near term. There’s a money-flow screen, for example, that basically tracks the flow of institutional monies as an indicator of where the institutions’ interest is in stocks, Anderson explained.

To be considered for inclusion in the portfolio, a stock must pass all of the screens used by the manager’s proprietary decision-making model. The Alpha Quant Portfolio recently earned a five-star rating with Morningstar, Anderson noted.

According to Knipping, fear and greed are what move the market, and that’s what hurts people.

“Working with a wealth management group helps the investor keep check on his or her emotions,” Knipping said. “If you have a rational investment plan tied in with your financial plan and everything else, you can have a little bit of high-risk money, but if your serious money is in a serious investment plan, it can work great.”    

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