“Why do you think I didn’t get more?”
The client asked the question during a review of the past year’s tax information– including investment returns. They knew the market was doing well, and were concerned that they had only garnered a 3% return on nearly $20 million in investments – shouldn’t they be earning a higher return? It just didn’t sound right.
It didn’t sound right to Tax Principal Agnes Spoelker, either – so she called in the Barnes Dennig Wealth Management team, knowing we were getting significantly better results. A no-cost investment analysis showed that the client’s equity portfolio was at a valuation premium over the already expensive valuation of the S&P 500 Index.
Their current stock portfolio was tilted toward growth stocks and included over 65 positions. Essentially, the current financial advisor wasn’t managing the client’s portfolio risk in an active and coordinated way – and the client realized it was time for a change.
The Value of Value Investing
The Barnes Dennig Wealth Management team’s strategy is value investing – buying into high-potential investments at attractive starting valuations. Generally, this means that stocks are purchased at a level identified as discount to the broad market and considered a value at acquisition.
Of equal importance is the evolution of those holdings and continuing to evaluate the future risk and reward for the correct time to exit. The active component of good value investing involves the trimming or removal of positions as they approach full value. Value investing is a long game, where high-quality businesses are acquired at a temporary discount and held for multi-year periods for the valuation gains to be realized.
A Better Strategy – and a Big Win
As a trusted advisor to this client, the Wealth Management team was able to offer a different approach, including tax-efficient rebalancing of their holdings- starting with those where the risks were deemed to be the highest. While some of the portfolio strategies made sense, there was value in discussing the client’s overall goals for the financial plan.
It was important to be transparent about the time it would take to make overall changes to their portfolio, emphasizing that completely liquidating all holdings wasn’t the right economic choice, identifying other tax advantages to take advantage of as well as timely investment options, including alternative investments as an addition to their portfolio, showed that Barnes Dennig’s Wealth Management team has the client’s best interests at the forefront.
The Barnes Dennig Wealth Management Advantage
Barnes Dennig Wealth Management brings an advantage that most other financial advisors simply don’t have – the in-depth tax expertise and insight to optimize assets not just for investment returns, but also to minimize the tax burden. And while there are strategies that include selling at a loss to offset taxes, the Barnes Dennig Wealth Management team knows it’s critical to not sacrifice investment value to save on tax.
Talk to a member of the Wealth Management team about a free investment analysis. It’s a great way to get started building a better, brighter future.