I sent a last minute call to a good friend and great wholesaler Bob Leahy to see if I could meet two of the asset managers he represents.
Bill: “Bob, sorry for the last minute call. I’m going to be in Kentucky tomorrow. Can you arrange meetings with Andrew Beck from River Road and Tony Weber from Veredus?”
Bob: “Let me see what I can do”.
Bill: “I know Tony Weber / Veredus story. I want to make sure he’s sticking to his process in this miserable market.”
Bob: “Veredus has an open door policy; you’ll be more than welcome”.
Bill: “I’ve been watching River Road from a far. They’re numbers are great. I need to know their story.”
Bob: “Let me see what I can do.”
As always, Bob came through.
As I drove around downtown Louisville looking for River Road Asset Management, I wondered how many other advisors fly around the country looking for value. Couldn’t I just do a conference call like most advisors?
I showed up at their offices with a set of prepared questions. Like a reporter looking for a flaw in their story, I’d find out for sure if this was a boutique money manger.
As I sat in reception, River Road had posted in big letters on the wall, “Discovering Value, Off the Beaten Path”. Great tag line, I’ll need to borrow that one from time to time.
I got the tour of their office and was pleasantly surprised by two things. A board room table that was easily converted to a billiards table (I guess I want one of those for my office) and all employees were from the Kentucky area, even the CFAs and portfolio managers (Kentucky accent is hard to miss). I was expecting Wall Street types and ivory leaguers that were transplanted to Louisville. I was told that you had to be from the area to work at River Road. They want long term employees. I guess the typical blue-blood Yankee types don’t last long in Louisville. Interesting culture, hidden value possibly?
I received thorough presentation by Andrew Beck. Impressive, boutique to the core! Identifiable edge, structured sell discipline, unique story. River Road is able to find value in undiscovered, under-followed, and misunderstood companies via an absolute value strategy. If I were fishing for boutique money managers, I just caught another one.
Time was running short. I needed to get on the highway, head north, visit Veredus, and find time to procure some fine bottles of bourbon (another value quest) before heading back to Boston.
Not being from Louisville, the directions I had for Veredus was hard to follow. Had they told me of their proximity Ruth Chris Steak House, I would have found it instinctively, oh well.
I’ve been a fan and a client of Veredus for quite some time. I know their story, and have always been impressed with Tony Weber. I have had many meetings with the Todd Patterson (Director of Marketing) from Veredus, but had never met the master fund manager of Veredus Aggressive Growth and Veredus Select Equity.
Over lunch, I was schooled on theory earnings momentum. I probed for weakness in the theory, especially in this current volatile environment. “I been doing this successfully since 1980, I’m not changing my strategy”, stated Tony. Upon completion of presentation, I was more than convinced
The conversation quickly switched to bourbon (by me of course). The quest for bourbon began. Tony sent me to a secret location. I was to ask for John Smith (name changed to protect the innocent). Tell him, “Tony sent you”. Jackpot! 8 bottles of the finest, single barrel bourbons made their way back to Boston. Unfortunately, I need to check my luggage. Smuggled 8 bottles home, 7 made it all the way. One crashed and we had many unhappy pieces of luggage smelling like bourbon. Oh well!
Thursday, July 24, 2008
Sunday, July 13, 2008
What the hell is a boutique money manger?
While on a recent boat trip with friends, I was discussing the joy of finding some new boutique money mangers.
“What the hell is a boutique money manager”, asked my friend. I had never really had to explain it before; it was just an innate style that my firm had come to appreciate.
I took a sip of my Harpoon Ale, and said, “Here’s what its not: it’s not Fidelity, Federated or MassMutual. It’s not a company with a fund for every flavor under the sun. And, it’s never located on Wall Street. Boutique managers live off the beaten path. They have uncanny methods for managing money. They are disciplined and patient. They don’t rely on hunches, but stick to criteria. Most importantly, their performance is excellent and consistent”.
Hope that answers your question.
“What the hell is a boutique money manager”, asked my friend. I had never really had to explain it before; it was just an innate style that my firm had come to appreciate.
I took a sip of my Harpoon Ale, and said, “Here’s what its not: it’s not Fidelity, Federated or MassMutual. It’s not a company with a fund for every flavor under the sun. And, it’s never located on Wall Street. Boutique managers live off the beaten path. They have uncanny methods for managing money. They are disciplined and patient. They don’t rely on hunches, but stick to criteria. Most importantly, their performance is excellent and consistent”.
Hope that answers your question.
Sunday, June 1, 2008
Wholesalers
A day in the life of a Certified Financial Planner® consists of meetings with fund managers and “wholesalers”. In our industry, fund managers are rock stars. Sometimes they are hard to get meetings with. Some are accessible while others consider themselves elite. Frankly, we will not deal with the latter mucky-mucks.
Mutual fund companies rely on wholesalers as informational conduits or inside technical sales force to distribute their products to financial advisors. Wholesalers are very bright, highly trained, financially savvy, and articulate. They are the gatekeepers of information. I could not do my job without them.
Advisors do a considerable amount of analytical work identifying great fund managers. However, true value isn’t always found in analytics. Great mutual fund managers have a disciplined process, an identifiable edge. Analytical services such as Morningstar® can’t always ferret out that process. Advisors need to go digging for these great managers, and wholesalers are the gateway to the gold.
Mutual fund companies rely on wholesalers as informational conduits or inside technical sales force to distribute their products to financial advisors. Wholesalers are very bright, highly trained, financially savvy, and articulate. They are the gatekeepers of information. I could not do my job without them.
Advisors do a considerable amount of analytical work identifying great fund managers. However, true value isn’t always found in analytics. Great mutual fund managers have a disciplined process, an identifiable edge. Analytical services such as Morningstar® can’t always ferret out that process. Advisors need to go digging for these great managers, and wholesalers are the gateway to the gold.
Tuesday, April 1, 2008
IRA Refresher
This is our first blog post. We chose the subject of IRAs for our first web-log. Why? We need a refresher.
IRAs are pretty straight forward. Most of us only think of rates of returns when choosing IRA options. Traditional IRAs and Roth IRAs are powerful vehicles for building long-term tax deferred wealth. While asset allocation is important, successful navigation of the rules governing IRA contributions will be an essential ingredient to help build that personal fortune.
Always deposit traditional or Roth IRA contributions by the tax filing date of April 15th. Filing a tax extension does not allow for an extension for traditional IRA or Roth IRA contributions. It’s worth repeating, “You have until the April 15th tax return date to make your traditional IRA or Roth IRA contributions.” The IRS gives no extensions or exceptions to this rule, so don’t forget. Also, remember to contribute for your spouse, especially if they are not working. The non-working spouse is allowed a traditional or Roth IRA contribution as long as the working spouse has earnings and they file a joint tax return.
The maximum amount that can be contributed to all IRAs for 2007 is $4,000. If you are 50 or older, you can add an extra $1,000. You cannot contribute $4,000 to a traditional IRA and $4,000 to a Roth. The maximum is a combined $4,000 for all IRA types (SIMPLE IRAs and SEP IRAs have their own sets of rules). The traditional IRA contribution may be deducted on your taxes; the Roth IRA contribution is never deductible.
If you make the mistake of contributing too much, it’s called an excess contribution. Any excess contributions may be assessed with a 6% excise tax penalty. This penalty can be easily avoided by removing the excess contribution by tax filing date, extensions included.
Be sure your IRA contribution is allowed. For example, if you over the age of 70 ½, you are forbidden from making an IRA contribution. However, if the taxpayer turned 70 ½ in 2008, they have until April 15th, 2008 to make that final IRA contribution.
In order to make a contribution, you need earned income. You must have wages, self-employment income or commissions, even alimony counts. Interest, capital gains, dividends and unemployment payment do not count as earned income.
High salaries do not limit traditional IRA contributions. However, your tax deductibility may be limited if you have a company sponsored retirement plan. If you do not have a company sponsored retirement plan, you can deduct 100% of your traditional IRA contribution.
If you are covered by a company plan, your traditional IRA contribution may not be fully deductible. You may still make the contribution; you’ll just be unable to deduct it. For 2007, if you are married and file a joint return, contribution deductibility starts to phase-out when your income hits $83,000. You will be phased-out entirely if your income exceeds $103,000. For single filers, the income range is $52,000-$62,000. The phase-out range increases to $156,000-$166,000 if your spouse is covered by a company plan but you’re not.
With regard to a Roth, the IRS may discriminate against a high salary. In fact, high incomes may disallow a Roth IRA contribution altogether. For 2007, the phase-out range for a married couple is $156,000-$166,000 and $99,000-$114,000 for single taxpayers.
Making a Roth IRA contribution when your salary disqualifies you is an excess contribution. You may be assessed a 6% excise tax on the contribution amount if the excess is not removed by tax filing date plus extensions. Another alternative for these misguided contributions is “re-characterization”. In other words, you can reclassify the type of contribution. For example, an excess Roth contribution can be re-characterized to a traditional IRA contribution (assuming another traditional IRA contribution wasn’t already made for that year).
These are just a few of the rules regarding IRA contributions. The government changes the rules all the time, and it’s you’re responsibility to know the rules. While financial institutions are great at anticipating problematic contributions, they are not infallible and have limited access to your personal situation. Knowing the ABCs of IRA contributions will help to build your personal fortune. When searching for answers with regards to IRAs, refer to IRS Publication 590 (Individual Retirement Arrangements (IRAs)); or, visit the IRS website, http://www.irs.gov/.
IRAs are pretty straight forward. Most of us only think of rates of returns when choosing IRA options. Traditional IRAs and Roth IRAs are powerful vehicles for building long-term tax deferred wealth. While asset allocation is important, successful navigation of the rules governing IRA contributions will be an essential ingredient to help build that personal fortune.
Always deposit traditional or Roth IRA contributions by the tax filing date of April 15th. Filing a tax extension does not allow for an extension for traditional IRA or Roth IRA contributions. It’s worth repeating, “You have until the April 15th tax return date to make your traditional IRA or Roth IRA contributions.” The IRS gives no extensions or exceptions to this rule, so don’t forget. Also, remember to contribute for your spouse, especially if they are not working. The non-working spouse is allowed a traditional or Roth IRA contribution as long as the working spouse has earnings and they file a joint tax return.
The maximum amount that can be contributed to all IRAs for 2007 is $4,000. If you are 50 or older, you can add an extra $1,000. You cannot contribute $4,000 to a traditional IRA and $4,000 to a Roth. The maximum is a combined $4,000 for all IRA types (SIMPLE IRAs and SEP IRAs have their own sets of rules). The traditional IRA contribution may be deducted on your taxes; the Roth IRA contribution is never deductible.
If you make the mistake of contributing too much, it’s called an excess contribution. Any excess contributions may be assessed with a 6% excise tax penalty. This penalty can be easily avoided by removing the excess contribution by tax filing date, extensions included.
Be sure your IRA contribution is allowed. For example, if you over the age of 70 ½, you are forbidden from making an IRA contribution. However, if the taxpayer turned 70 ½ in 2008, they have until April 15th, 2008 to make that final IRA contribution.
In order to make a contribution, you need earned income. You must have wages, self-employment income or commissions, even alimony counts. Interest, capital gains, dividends and unemployment payment do not count as earned income.
High salaries do not limit traditional IRA contributions. However, your tax deductibility may be limited if you have a company sponsored retirement plan. If you do not have a company sponsored retirement plan, you can deduct 100% of your traditional IRA contribution.
If you are covered by a company plan, your traditional IRA contribution may not be fully deductible. You may still make the contribution; you’ll just be unable to deduct it. For 2007, if you are married and file a joint return, contribution deductibility starts to phase-out when your income hits $83,000. You will be phased-out entirely if your income exceeds $103,000. For single filers, the income range is $52,000-$62,000. The phase-out range increases to $156,000-$166,000 if your spouse is covered by a company plan but you’re not.
With regard to a Roth, the IRS may discriminate against a high salary. In fact, high incomes may disallow a Roth IRA contribution altogether. For 2007, the phase-out range for a married couple is $156,000-$166,000 and $99,000-$114,000 for single taxpayers.
Making a Roth IRA contribution when your salary disqualifies you is an excess contribution. You may be assessed a 6% excise tax on the contribution amount if the excess is not removed by tax filing date plus extensions. Another alternative for these misguided contributions is “re-characterization”. In other words, you can reclassify the type of contribution. For example, an excess Roth contribution can be re-characterized to a traditional IRA contribution (assuming another traditional IRA contribution wasn’t already made for that year).
These are just a few of the rules regarding IRA contributions. The government changes the rules all the time, and it’s you’re responsibility to know the rules. While financial institutions are great at anticipating problematic contributions, they are not infallible and have limited access to your personal situation. Knowing the ABCs of IRA contributions will help to build your personal fortune. When searching for answers with regards to IRAs, refer to IRS Publication 590 (Individual Retirement Arrangements (IRAs)); or, visit the IRS website, http://www.irs.gov/.
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