23 Apr Leaning on Dividends and Balance Sheets
The following article appeared in the Wall Street Journal on April 23, 2020 and was written by Matt Miller. Photo by David Vintiner.
In 1984, Mark Schulten joined the advisory team that his father founded about two decades earlier. The group, now called TSG Wealth Management, grew to be one of the largest at Wells Fargo Advisors before migrating to Wells’ independent platform, Wells Fargo Advisors Financial Network, last year. As part of the move, the Long Beach, Calif.–based firm acquired new offices and invested over $250,000 in technology. That has proved to be a huge advantage when Covid-19 hit, with so much business being conducted remotely and team members working from home. TSG has $3.6 billion under management and 40 team members who serve some 2,000 clients.
Barron’s: A significant portion of your clientele isn’t part of the ultrahigh-net-worth crowd. Is your approach more egalitarian?
Mark Schulten: Our book tends to have a little bit of everything. We don’t focus on billionaires; we don’t focus on small. We have some clients with over $100 million, and we have some clients with $250,000.
No matter how much money they have, each client has a different need in terms of their income, capital preservation, and long-term appreciation. I don’t think it’s really dependent upon their brokerage or bank balance as much as it is about their individual goals and objectives. It’s really client-specific rather than dollar amount.
Are you changing your broad allocations?
Our focus, like most shops, is a balance of cash, fixed income, and equity. Our equity focus continues to be on companies with strong balance sheets and dividend growth. That hasn’t changed for decades, and certainly not through this period.
Our recommendation to clients is that if we put this strategy together last year and we still believe in the strategy, there’s no reason to disrupt it and make a lot of changes to it now. If we’ve built a portfolio to drive investment income for the client, we believe that investment income will survive this crisis and give the clients peace of mind.
It does seem to be a good time to be doing tax swaps in taxable accounts and then be able to have that tax deduction available in the future to offset potential future capital gains. If you’ve got a stock position, say, in one depressed energy company and you swap it with another, you have the same industry exposure and you’ll be able to realize a taxable loss in your portfolio that you can use in the future at your discretion to offset capital gains. It’s a way to take advantage of the downturn in the market without ruining the long-term structure of your portfolio.
How is your firm interacting with clients during the coronavirus crisis?
Some of our advisors have been helping out older clients, purchasing groceries, running errands. Older clients tend to be shut in by themselves. So we’ve been making a lot of outbound calls, not necessarily to review the everyday movement of their portfolio, but just checking in to see how they’re feeling, what they’ve been doing, just talking through their loneliness.
What are you doing for retired clients, in particular?
When you build their portfolios, you typically don’t build it so they have to tap into capital. You build it so that income from their fixed income, and from equity positions through dividends, is going to be sufficient to meet their cash needs. What we try to do is get clients to focus on their expected portfolio income and cash reserves, instead of just making an emotional decision based upon the value of their portfolio that day.
How has the firm grown over the years?
Not only have we had the typical organic growth, but also, over the past 20 years, we have purchased 14 retiring advisors’ books of clients. The advisor population is getting older. The business is getting more complex. It’s also very challenging to be a sole practitioner these days.
Have you changed your business structure over time?
We’ve added relationship managers, Certified Financial Planners, chartered financial analysts, certified divorce financial analysts, insurance specialists, traders. Having a larger team does give us the ability of specialists who have hands-on experience with different client challenges.
We’ve actually created branches that have focuses depending on their location. Our original location in Long Beach is mostly focused on retirees and small-business owners. Beverly Hills emphasizes the entertainment industry, and Reno, Nev., is built around the relocation of Californians. Orange County is focused on NBA athletes and other professional sports like golf.
Original Article can by found at https://www.barrons.com/articles/top-100-advisors-tsg-wealth-management-caters-to-clients-large-and-small-51587167742
*Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. TSG Wealth Management is a separate entity from WFAFN.