You voted for your faves and we heard your raves. Now here’s the cream of the crop, the top of the heap and (according to ya’ll) the best in the west.
You voted for your faves and we heard your raves. Now here’s the cream of the crop, the top of the heap and (according to ya’ll) the best in the west.
When Provo-based advisor David Young graduated from college, he made his living as a touring magician. He did 350 shows over four years and was easily on the road two months at a time. When he came home for his daughter’s first birthday party, she didn’t recognize his face. “I thought it was time to do something different,” he said.
He put away the magic and brought an entrepreneurial zeal to businesses closer to home: franchises, an interior design store, even a llama farm. But as those expanded across state lines, so again did his prolonged absences. He sold everything in 1986 and turned a personal knack for investing (and some proprietary momentum trading models) into a financial advisory firm, Paragon Wealth Management, which now oversees some $100 million for about 150 clients.
Family is clearly important to Young, so when his son-in-law died suddenly from a brain aneurysm, leaving his 25-year-old daughter Katie alone with a newborn, he was sensitive to the practical struggles she faced, beyond grieving.
Katie knew she’d have to complete her education. She made it work, but it was a struggle, even for someone who had the resources.
There were child care issues to navigate. How do you find someone to watch a baby when you’re at school or at work? How do you track down scholarships or assistance when you have to work to pay for child care? “If you work, you don’t qualify for the grants. But you needed to work to survive. You help your family, you don’t qualify for the grants. That’s circular,” Young says.
Katie earned a bachelor’s degree in business in two and a half years, and she and Young decided to make young single mothers the focus of their philanthropic work.
In 2010 they started the Live Your Dream foundation, and they funded it with a series of runs that soon evolved into larger “raft and runs”—participants paddle five miles down the Provo River, followed by a five-kilometer run. “It’s a unique event,” Young says, and other organizations have approached him about replicating it. Some 300 people participated, and the foundation has raised over $50,000 to fund dozens of scholarships for single mothers with little means to help themselves.
Young also facilitated a client’s gift to construct a new, $2 million child care facility at Utah Valley University for single mothers. Its students “pay” for the care by volunteering to watch each other’s children.
Next steps: A clean, intuitive website where single moms can easily find all the resources they need to put their lives back on track. “These women need someplace they can go where they can say, ‘Yes, I can see a path to this. I can see how to make this happen.’”
Our favorite items of business this quarter.
Now this floats our boat.
The Second annual Raft and Run – started by Paragon Wealth Management in Provo – raised more then $40, 000 at its event this past Pioneer Day.
All Proceeds from the five-mile raft and 5k road race go to the Live Your Dream Scholarship Foundation, which helps single mothers in difficult situations pursue their education. The money raised at the event will provide at least 14 scholarships to single moms in need.
For more information, visit www.raftandrun.com.
Read the original story: http://utahvalley360.com/bq/fall2014/index.html#page=19
Financial decisions touch nearly every aspect of an individual’s life. Working with a capable, trustworthy financial advisor can make the difference between financial success and sleepless nights. Though separating and identifying the strongest advisors from the industry’s pool of professionals is a challenge, we hope to make the daunting task a little easier. We worked with the National Association of Board Certified Advisory Practices (NABCAP), an unaffiliated, nonprofit organization, to compile a list of financial advisors you can trust.
ASSEMBLING THE LIST
NABCAP and its board of directors created an unaffiliated evaluation process in which 20 categories of practice management are evaluated. Advisors are invited and/or nominated to participate by submitting an online questionnaire. The multi-step process uses independent resources to verify the accuracy and truthfulness of the information submitted by participating practices. NABCAP’s methodology provides more transparency for investors by using largely objective, not subjective, procedures for making sense of advisors. The NABCAP list of Premier Advisors is not merely defined by assets or revenues, but identifies top advisors regardless of size, firm or affiliation.
PUTTING THE LIST TO USE
The list of advisory practices is in alphabetical order. The NABCAP suggests narrowing the list of practices by average client size. Consider selecting practices with an average client size of a quarter to half the size you estimate yourself to be. For example, if you have $2 million of investable assets, then identify practices with an average client size of $500,000 to $1 million. By doing this, you fall within the top 20 percent of the practice’s clientele, increasing the probability you’ll receive the greatest care and attention. Make sure the practice is capable of handling your needs by checking their top five specialties and designations. You should also interview at least three practices to see if you align well with different personalities, service models and practice methodologies.
Apr 01 2009
Wall Street Transcript Interview with Dave Young, President of Paragon Wealth Management.
By Daniel Kelley
TWST: Can you start with an overview of Paragon Wealth Management and your investment philosophy there?
Mr. Young: I started and sold several successful businesses back in 1986. As a resultof the sale of those businesses I had a significant savings that I needed to invest. After a lot of research I wasn’t able to find a firm that would do much more than take a buy and hold – hope and pray approach to investing my money. I was unwilling to put my life savings at risk with that approach and decided to manage the money myself.
I started out 23 years ago using a fairly simple approach based on technical analysis. Over the years our pro-active management strategy has evolved into one that is primarily quantitative with technical and fundamental inputs. After years of managing money in the markets, I still believe that there are much better investment strategies than simple buy and hold.
TWST: Tell us a bit about the client base that you have, who are your typical clients?
Mr. Young: Most of our clients are individuals and families, but we also manage money for businesses and non-profits. The majority of our clients are business owners, retirees and medical professionals. We actively manage all types of traditional and retirement accounts.
TWST: What services do you offer to your clients?
Mr. Young: Our primary focus is money management. We offer several portfolio options, some which are strategic and others that are more tactical. We are entirely fee based and do not sell any financial products or receive commissions.
When a client visits us for the first time, we determine what level of risk they would like to have their money managed, and then we put them in a portfolio that is reflective of that risk.
TWST: What portfolios do you have at present time to offer your clients?
Mr. Young: Our most popular portfolios are Managed Income which is conservative and Top Flight which is growth oriented. Many of our clients are in some combination of these two portfolios, depending on their risk tolerance. By combining the two portfolios clients are able to create a very custom, actively managed portfolio that is dialed in to their individual tolerance for risk. Both portfolios are based on tactical strategies and are constantly adjusting to the markets.
We also have strategic portfolios. Those portfolios are for clients whose primary focus is tax efficiency and want a portfolio with low turnover. Our strategic portfolios are traded much less actively and seek to generate long-term capital gains.
TWST: These have been a tumultuous few months in the market for investors, for both fixed income and equity. How have you done at Paragon?
Mr. Young: I have been through several rough markets during my money management career. We made it through the 1987 crash untouched. We also did relatively well during the 1998 Asian Crisis and the 2000-2002 bear market. This bear market has come together differently than any I have ever experienced. It really has been the perfect storm.
Our models are built to move us towards cash as markets become overvalued and into equities when they are undervalued. At the end of 2007, our models indicated the markets were at fair value. Unlike previous bear markets, this time valuations were not excessively stretched. Therefore we did not have large cash positions going into this bear market.
Also, our models are constantly measuring the strongest asset classes and moving into those asset classes. In previous bear markets moving towards strength has always cushioned the downside. Usually, there is always a bull market somewhere that you can benefit from. This time, there was virtually nowhere to hide. There was no bull market anywhere except treasury bonds.
While I’m not ever happy with losses, our portfolios did relatively well in 2008. To put it in perspective, in 2007 Top Flight returned 17% versus 5.5% for the S&P 500. We were able to triple the S&P 500 because our Top Flight was primarily invested in international markets at that time.
In 2008, those same international funds were down 47%. Top Flight, on the other hand was only down 33.8%. This year we experienced the worst declines Top Flight has ever seen. Over the past eleven years -13.6% had been our worst year up until this bear market.
Managed Income also did better than most conservative portfolios. Most of our clients have a mix of Managed Income and Top Flight, depending on their risk tolerance. As a result, that mix provided significant protection to our clients and most of them fared much better than the market indexes last year.
TWST: What is your outlook for 2009? Do you see any light at the end of the tunnel?
Mr. Young: The market is unbelievably oversold at these levels. We are back to the same levels we were at 13 years ago. When you consider the growth of the population, the advances in technology, and all of the gains in productivity it is hard to believe the market is priced the same as it was then. Stocks are incredibly cheap, and they are becoming more and more undervalued each time the government announces a new solution.
Back in late September, Fed Chairman Ben Bernanke and treasury secretary Hank Paulson initially scared investors to death with a very public and emotional plea to congress requesting $700 Billion to bailout the banks. Next, the market sold down hard in October and November because of the uncertainty surrounding a change in political leadership.
After the election the market actually rallied over 20% as investors begin to believe that Obama would govern from the center, not from the left. At that point most market participants thought that we had seen the lows and would move towards recovery.
Then President Obama started talking. He promised stimulus and delivered pork. He promised fiscal responsibility and is projected to match George Bush’s entire deficit in his first 20 months of office. Every day he comes out with another plan and another program. His treasury secretary seems lost. His policies sound more like socialism than free market.
Every time Obama talks the market tanks. Unfortunately, he likes to talk. Selling short every time Obama speaks has actually become a trading strategy because it was so successful.
I believe that if it weren’t for the foolish political mistakes this market would have turned back positive around 8000 on the Dow. Because of the extreme levels of fear we are in a spot where valuations don’t matter.
I believe that the markets will turn positive this year. This is very simplistic, but when we get to a point where President Obama can go on television and speak…and the market goes sideways or up….then I think we will be very close to a bottom.
TWST: Please describe your investment process for the Top Flight portfolio. How do you attempt to control risk?
Mr. Young: Top Flight is managed using two unique groups of quantitative models. The first group of models is proactive in nature and determines which areas to invest in. The second group of models is protective in nature and determine how much of the portfolio will be invested in equities and how much will be in cash at any point in time.
The proactive set of Paragon models is designed to identify trends and measure velocity within the universe of available market styles, sectors and industries. When trends are identified, the portfolio stays invested in those market styles, sectors or industries until certain exit criteria are met. When an exit criterion is met, the funds are rotated into other areas that currently meet the model’s recommendations. This rotation is ongoing, and the models are constantly adapting to current market conditions.
The protective set of models is designed to reduce risk while achieving a high return on investment. These models determine how much of the portfolio will be invested in the market. This percentage is based on how much risk the model measures at that point in time. When the model shows that there are high levels of risk in the markets, the portfolio holds more cash. When the model shows that there are low levels of risk in the markets, the portfolio becomes fully invested. The equity exposure in the portfolio changes depending on market conditions and will range anywhere in between 0% and 100% net long.
Top Flight invests primarily in exchange traded funds that concentrate investments in various classes of equity securities, which provides your portfolio with the greatest focus and flexibility.
TWST: What has been the return of the Top Flight portfolio since its inception?
Net of all fees, for the eleven year period from 1998-2008, Top Flight has delivered a total return of 242.1%. During that same period of time the S&P 500 returned only 11.7%. On an annualized basis, that works out to 11.93% for Top Flight versus 1.03% for the S&P 500.
TWST: We haven’t discussed your conservative portfolio. Could you expand more on your Managed Income portfolio.
Mr. Young: This portfolio’s objective is to generate higher returns than bank certificates of deposit or traditional bond portfolios without the volatility normally associated with the stock market. This portfolio is managed using some of the same techniques that Top Flight, Paragon’s growth portfolio originally pioneered, but with a much more conservative approach.
The principal asset classes we rotate between include bonds, real estate, utility stocks, bank loan funds, convertables, preferreds, alternatives, low volatility funds and money markets.
This portfolio is managed by processing market data through separate quantitative models that measure asset class desirability. Paragon also uses models to screen several thousand ETFs and mutual funds within the target asset classes to determine which funds are ranked highest. At any given time, the portfolio may include 8 to 12 positions representing various asset class combinations.
Occasionally, as opportunities present themselves, a small portion (less than 20%) of the portfolio will be allocated to low risk / high probability short-term trades using ETFs or equity-based mutual funds.
To preserve capital, the portfolio will normally exit out of volatile positions at a much earlier stage than Top Flight, Paragon’s growth portfolio.
TWST: What gives your firm its edge? What differentiates you from other wealth management firms?
Mr. Young: We have a philosophy that places a premium on proactive management, proven quantitative models and exceptional client service.
Our fundamental roots lie in money management. The methods that we use are very unique within the financial services industry. Most advisory firms simply build a diversified portfolio then wait and hope, but we actively manage our clients portfolios on a daily basis. This includes using proprietary quantitative models to measure, monitor and adjust our portfolios as market conditions change. These portfolios have a strong history of outstanding risk adjusted returns.
In the financial world, experience and judgment matter more than anything. We offer our clients a proven 23-year record of success working in all types of market conditions. Since we opened our doors in 1986, we have continually improved our investment methods and client services. When clients invest with us, they receive all the benefits and advantages of that experience.
As a registered investment advisor, we have a fiduciary responsibility for every client we serve. That means we have a legal obligation to put their interests ahead of our own. It is estimated that only 15% of all financial advisors meet this fiduciary requirement.
To make sure our interests are always perfectly aligned with our clients, Paragon advisors never sell financial products or receive sales commissions. We only receive management fees for managing our client’s accounts.
With us, there are no hidden fees or surrender charges. Unlike most investments, clients are free to move their money out of our investment programs at any time if their needs change or they are not completely satisfied with our services.
TWST: Last time we talked, you talked about how important it is to measure the amount of risk an investor is taking, not just returns. Do you want to tell our readers more about that?
Mr. Young: Since my firm was founded on the importance of reducing risk I obviously feel that it is very important. I believe that it is useless to compare returns unless you also compare corresponding risk. We use the Ulcer Index to measure risk.
The Ulcer Index is different from other risk measurement indexes, such as standard deviation, beta and the Sharpe ratio, because it does much more than simply measure portfolio volatility. Traditional risk indexes falsely assume that all volatility is bad. The reality is that investors welcome upside volatility-but deplore downside volatility. The Ulcer Index accounts for this basic psychological fact by ignoring upside volatility and penalizing downside volatility.
Since its inception from January 1, 1998 to December 31, 2008, the Paragon Top Flight Portfolio has generated an Ulcer Index rating of 8.9, compared to 19.31 for the S&P 500 and 49.32 for the NASDAQ. The lower the number, the lower the risk level.
TWST: Are there any other topics or issues that you would like to mention in this interview that we haven’t touched on?
Mr. Young: We are in a very difficult time right now and a lot of investors are simply putting their head in the sand and waiting for this horrible market to go away. That’s understandable. The fact is there is some history to this situation. We have been through 34 bear markets in last 100 years. We’ve had four bear markets that are in the same category as the one we are going through right now, that had declines of 50% and more. After each one of the bear markets we have gone through there are certain areas of the market that show extreme strength when the market finally reverses.
After past bear markets we’ve positioned ourselves in those areas of the market that have traditionally shown the most strength. Those areas have come out three to four times faster than the broad S&P indexes. For example, after the 2002 bear market we had the 2003 a bull market. That year, the S&P 500 was up 28.6% but Top Flight was up 50.3% that same year, because we moved into those areas of the market that do well after bear markets.
This type of bear market we are currently going through usually happens only once or twice in an investor’s life-time. It is also a once in a life-time opportunity. It is important for investors to be in the right places on the other side of this bear market.
TWST: Thank you. (PS)
Dec 1, 2008
By Peri Kinder
It’s been a disaster waiting to happen for years. The effects of the subprime lending industry, loose credit standards, dubious mortgage loans and a slowing economy have finally reached a peak, and now the nation faces a financial crisis of historic proportions. Not since the Great Depression have the U.S. and global economies been confronted with such a serious threat to economic stability.
Everyone in Utah, from Governor Jon Huntsman to the family next door, is wondering how the stalling economy will affect their lives. Business owners brace themselves for a tough and rocky road during the next 12 months as credit requirements tighten and loans are harder to come by.
Gray Skies Ahead
Though the picture is dreary, it isn’t all doom and gloom. While surrounding states are experiencing recessions, the Beehive State is clinging to hope that there is an economic light at the end of the financial crisis tunnel.
“It’s a scary time right now,” says Jeff Thredgold, Zions Bank economic consultant. “But we have to make the assumption we’re going to get through this. What makes the market work is confidence.”
Bear markets are nothing new for the U.S. economy. In fact, according to Dave Young, Paragon Wealth Management president, this is the 34th bear market since 1900. Young’s company tracks stock market cycles and he believes the economy has reached the upswing of the bear market pendulum. “In all of our research, bear markets last an average of 363 days and experience a 27 percent decline,” he says. “It usually takes this much time to work its way out. If you look at it historically, the high percentage of bear markets end in September or October.”
Using Young’s calculations, the 363-day bear market cycle ended at the beginning of October 2008. He feels within six months, the economy should be showing slight signs of improvement.
Anyway you view it, Utah’s economy will face some challenges during the first part of 2009. After losing nearly 15,000 jobs during the past year, the state’s construction industry will still be hurting as a sluggish economy has delayed, or even halted, major development projects. And, with acres of commercial real estate sitting vacant and dozens of development sites abandoned, contractors, developers and all those associated with the real estate market will have definite obstacles to overcome.
“They can’t sell anything because of tightened credit requirements and they’re going down in flames,” Young says. “They’re sitting on all this inventory and can’t sell it. Many of them are facing bankruptcy.”
While higher credit costs and limited credit availability have harshly influenced the state’s housing market and commercial real estate projects, historic actions by the U.S. Treasury Department should help alleviate the financial burden to many companies while restoring confidence in the credit market. Thredgold believes the U.S. housing market should show growth by the middle or end of 2009, with Utah’s industry not far behind. “The subprime lenders came in and moved from making quality loans to creating a quantity of loans. Hopefully, we can learn something from this and improve the housing market,” he says.
Surviving the Storm
Luckily for Utah, a growing broad base of industries might help stave off more severe economic hardships. With diverse job opportunities, Utah businesses are still attracting people to the state looking for jobs in technology, life sciences, research and renewable energy solutions. In fact, according to Thredgold, Utah’s jobless rate ranks among the lowest in the United States.
Jason Perry, the Governor’s Office of Economic Development’s executive director, is excited for Utah’s opportunities in the coming year. Life-science research is bringing personalized medicine into mainstream society, and Utah is at the forefront of diagnostic and preventative DNA research. Science-related companies and medical device manufacturers are also moving into the state, bringing high-paying, high-tech jobs that should help bolster Utah’s economy.
“A DNA database is an invaluable asset to the state,” Perry says. “Researchers all over the world are coming here to take advantage of it.”
Renewable energy is the way of the future and will be a big part of Utah’s job growth in 2009. With dynamic, long-term energy projects in the works across the state, Perry thinks Utah can possibly withstand the nationwide economic crisis although, “we’re part of the global economy and we’re going to feel the effects,” he says.
By developing both wind and geo-thermal technologies, state leaders hope to create energy independence in the state and develop more jobs. Construction of Utah’s first geothermal power plant in 23 years concluded in October, utilizing some of the most productive geothermal pressure in the United States. Oil exploration in central Utah, along with research into carbon capture and sequestration, which burns coal cleaner, will continue to create opportunities for new development.
“We’re facilitating renewable energy and using resources the state already has,” says Perry. “The state of Utah has great natural assets that will make us leaders in the industry. There is a lot of money to be made in those technologies.”
Lecia Langston agrees. Serving as the regional economist for the Department of Workforce Services, Langston oversees 11 counties in the central and southwestern parts of Utah. While much of the economic focus is on the larger cities in the state, her job is to strengthen and develop the small towns and counties that have been hit hard by the national financial crisis.
Counties in central and southwest Utah are also hurting from construction job losses, foreclosures and overbuilding, Langston says. The financial services industry in these areas is also feeling the pinch as fewer people are qualifying for or requesting loans. Fortunately, the current push for renewable energy has spurred new growth in these areas, which are in desperate need of good news.
“I think sometimes people think small counties are immune to national financial issues,” says Langston. “But we’re not. Unemployment rates are going up in all the counties. But people shouldn’t panic. That’s when they make stupid decisions.”
The region hasn’t experienced its current level of unemployment since 1982 and although the rate of people moving into these counties is sluggish, there hasn’t been an out-migration for decades. “The best thing to look at is what your jobs are doing. If you’re losing jobs, your economy is contracting,” Langston says. “When jobs are created, the economy is back on the upswing.”
But Mark Knold, Department of Workforce Services’ chief economist, doesn’t see an upswing in jobs anytime soon. He predicts the unemployment rate will reach 5 percent during the next year, with more than one industry being affected. The financial services sector, manufacturing companies, residential and commercial construction and em-ployment agencies are just a few of the businesses that could be facing cutbacks.
“With financial services, they’ll be lucky to find their feet in two years. They’ve got some big housecleaning to do,” says Knold. “It’s like a loose tooth. You can wiggle it a little every day until it finally falls out or just yank it out and be done with it.”
On the other hand, Perry says there are thousands of jobs available for highly train-ed people, such as engineers, designers and other technical positions. While many com-panies are having layoffs, the research and development industry is facing a workforce shortage.
“For each engineer, you need seven or eight support people for production and prototype design,” says Perry. “We still have opportunities and can keep unemployment at good levels. When some sectors start to cool down, some get warmer and some even start to get hot.”
In his publication, “Insight: Economic News of Utah and the Nation,” Thredgold points out some good news. “Education and health services, government, trade, transportation and utilities and the leisure and hospitality sector have added modestly to Utah employment ranks.”
Sink or Swim
So what do business owners in Utah do during the next year to keep their compan-ies afloat? Both Thredgold and Young say the key is to be proactive when it comes to working with financial institutions. With tighter credit requirements, banks may be reluctant to loan small businesses the money they need for growth. Larger down payments and extensive paperwork will continue to make the loan process a painful procedure.
“They need to talk with their financial institution, getting clarity and making sure they can get money when they need it,” Young says. “Getting credit or obtaining loans may be more difficult so employers shouldn’t be surprised after the fact.”
Perry agrees, but advises employers not to panic. By making wise business choices concerning growth and development, and acquiring the right kind of money, local companies should be able to weather the storm. Monitoring and managing inventory meticulously can help avoid overproduction while maintaining a solid credit rating could ensure success when the market is strong again.
“There’s a huge psychological aspect,” Perry says. “It’s a very difficult time for the United States. It’s fairly unique and something we haven’t experienced. They need to make business choices that will help them in the long run.”
Light at the Tunnel’s End?
There are reasons to be optimistic about Utah’s 2009 economic forecast. In September 2008, the Milken Institute released its national job performance rankings. The Provo-Orem area ranked first in the study with Salt Lake City earning third place and Ogden not far behind. The state’s work ethic combined with the appealing cost of doing business, affordable cost of living, strong technology and business environments, an educated workforce and growing population contribute to the ranking as well as whether each city is developing a prosperous and competitive economy.
“We do seem to have a very diverse economy,” Knold says. “We do have a history of performing much better than the national economy.”
Overall, the experts agree 2009 will show a continued downturn in the Utah economy with construction and real estate developers struggling through the entire year. Other industrial areas, like manufacturing, retail trade, transportation, financial services, professional and business services could also experience job loss due to the economic instability. Knold’s best-case scenario details a downward drop in employment with the lowest point occurring around the first part of the year, but the recent financial crisis
has made accurate predictions nearly impossible.
“I certainly don’t think we’ve hit the bottom yet,” says Langston. “I think we’ll have another year of no or very slow growth.”
Either way, business owners, consumers and employees need to be patient as the national market works through the financial crisis. Utah is not immune to the effects of the global economy and residents will certainly feel the pressure. But by practicing old-fashioned financial values, the average home owner or business owner should survive the current financial quandary.
“It’s basic finance fundament-als,” says Young. “Avoid debt and only use debt for things that appreciate. Live within your means. If you make $40,000 a year and spend $35,000, life is good. But if you make $200,000 and spend $220,000, you’ll find yourself in a losing situation. Save money if you can and if you do those things, regardless of the economy, you’ll do fine.”
Once the current financial crisis is over, the experts believe the Beehive State will come out stronger and hopefully smarter. It could be a slow, painful process as employers and employees tighten their belts, hoping to ride out the storm. Perry says state leaders are determined to keep growth steady by paying attention to the concerns of Utah businesses. Strong recruitment efforts are underway to increase the diverse selection of industries in the state and incentives could be offered to businesses to encourage their growth.
“We’re one of the few states really staying in positive territory and really focusing on job growth,” says Perry. “Utah is not just a place to be for business but the critical place to be for business.”
Jul 03, 2008
By Kathleen M. McBride
(Paragon Wealth Management was listed on Wealth Manager’s “Top Dogs” list in 2008)
Triple-A ratings were slashed, hedge funds were imploding, and it was nearly impossible to place an accurate value on many of the newer structured securities. It was starting to dawn on wealth managers, and many of their clients, that these were not normal investing times-not a regular part of the cycle. While it will take still more time to assess the extent of the damage to investors, the markets and the economy, we do know that a wealth manager’s job just became more complicated.
With all the noise that surrounds them, it is to their very great credit that wealth managers have been able to keep clients focused on the long term while ferreting out the opportunities that market uncertainty presents.
Wealth Manager’s 2008 Top Dogs survey found that the overall amount of assets under management has continued to grow, along with the number of investment firms managing that wealth. The 478 firms that participated in the 2008 survey-our eighth annual ranking of the top wealth managers by average AUM per client-manage an impressive total of $302 billion. Survey respondents do not include banks, broker/dealers or trust companies. Overall assets under management for the 2008 Top Dogs range from $14.4 billion at the largest firm to $36 million at the smallest firm, with an average total AUM of $632.6 million and a median AUM of $236.5 million in 2007, and up 28.8 percent from the $199 million reported in 2006. It’s interesting to note that, of the top to Top Dogs by total AUM, only three make the top 10 when ranked by average AUM per client.
What’s really exciting here are the Top Dog rankings by average AUM per client. Median AUM per client held steady from a year ago-again at $1.4 million for 2008-and up from $1.2 million in 2006. The average AUM per client was an impressive $3.33 million, ranging from a high of $66.9 million at Boston’s Federal Street Advisors, to $150,000 at number 478, The Tranel Financial Group in Libertyville, Ill.
The top 20 firms by average AUM per client include a wide distribution of average client assets from Federal Street’s $66.9 million to $15.2 million per client at Manchester Capital Management in Manchester, Vt; by number 100 in the ranking, The Fairman Group of Berwyn, Pa average AUM per client came in at $2.8 million. At number 200-Charlotte, N.C.-based Carolina Capital Consulting, Inc., average AUM per client was $1.7 million; the number 300 firm, Pinnacle Wealth Planning Services, Inc., in Mansfield, Ohio, reported an average $1.2 million per client. And there is an average $767,000 per client under management at McBearty Capital Management, Inc., in Knoxville, Tenn., the firm ranked number 400.
To give the nearly 500 wealth managers who participated this year, as well as others who chose not to, a glimpse at the inner workings of some of the most successful firms, Wealth Manager Managing Editor Nancy Mandell induced principals at the top five firms to reveal some of their strategy. Starting on page 42 you’ll find all 478 firms and their vital statistics; on page 61, Wealth Manager’s Top Dogs ranking methodology, and on page 59 you can see what we found by the numbers.
Dec 20, 2007
By Tribune Staff and Wire Services.
Wall Street struggled to steady itself Tuesday, with the Dow climbing back from a 465-point plunge to a loss of 128.11 after the Fed announced an unprecedented interest-rate cut. Many worried investors are expected to switch from equities into bonds or cash, but experts warn against such panic moves.
How do I avoid panicking?
“Short-term traders might have reason to panic. People who have a long-term perspective know markets go through cycles. They can see periods like today more as opportunities to add to their long-term positions in stocks. But it’s hard not to be afraid when the markets are so volatile.” – Sterling Jenson, Wells Fargo Capital Management
“Markets go up and down. Keep in mind that emotion is a big part of financial markets. Sometimes you have to swallow and sit tight.” – Jeff Thredgold, Zions Bancorp
“The best way is to have a strategy in place. The way the markets work, this is guaranteed to happen again. The essence is don’t get sucked into acting on the emotion of the moment.” – David Young, Paragon Wealth Management
How concerned should I be about the stocks-based portfolio in my 401(k)?
”There always should be a healthy level of acknowledgement of the risk when you are involved in stocks. But I think people in their 401(k)s should remember that over the long term stocks do provide the best return, as long as they continue adding money and dollar-cost averaging.” – Jenson
”We do this every 10 years. We did it with the crash of 1987. We did it with the Asian financial crisis of 1997. Ten years from now we’ll do it again. Investing in 401(k)s is by definition long-term investing. We may go lower for a while, but I think a year from now we’ll talk about stocks that are higher.” – Thredgold
”If you’ve got a short time frame, less than three years, you probably should be concerned because you need the money in the near future to live on. But if you have a longer time frame, then I don’t think you should be concerned at all because over three to five years things work out.” – Young
Can the country spend its way out of this downturn, as the economic stimulus packages proposed by President Bush and others would suggest?
”I think [the Fed’s] rate cut will be far more stimulative than the spending package in restoring confidence and helping us to avert a recession.” – Jenson
”We will get some kind of stimulus. Given what the Fed did today, it’s probably going to be larger than $150 billion. Even at $150 billion, it’s just 1 percent of Gross Domestic Product. It can provide some temporary boost in the economy [but] excesses that have built up over the last five years, you don’t solve in three or four months.” – Thredgold
What are the safest investment havens, short term and long term?
”If you want to be truly safe, you are going to be in short-term U.S. treasuries. Or you are going to be in bank CDs that are insured or in money market funds where you have a guaranteed principal value. Long term, if you are into stocks or real estate, you are always subject to principal fluctuation, so there really are no long-term safe havens.” – Jenson
”Short term would be any FDIC-insured bank deposit. Long term requires a two-year Treasury note. Bank CDs. If you can find something in the 3 percent to 4.5 percent range over the next two or three years, that would look pretty good.” – Thredgold
”The safest short term are 90-day Treasury bills. As far as long term, I’m not sure there is such a thing.” – Young
Is there any way to know whether this contraction in the economy will be mild and short or deep and long?
”At this point it’s anybody’s guess. Most economists are putting a 50-50 percent probability that we are going into a recession that could last over the course of the next year. Our best guess is that we will not go into a recession at this point. We could have a quarter or two of muted economic growth, but then we see strengthening of the economy going into 2009.” – Jenson
”There is not. It’s kind of a crap shoot right now.” – Thredgold
”There is probably no way to know. My guess is that it’s short. So far this recession is basically something that we’ve talked ourselves into at this point. The economic numbers don’t justify a recession.” – Young
December 20, 2007
By Jacob Hancock, Deseret News
PROVO – Dave Young hasn’t pulled a coin from thin air or yanked a rabbit out of his hat since quitting his full-stage magic show decades ago. Today, 160 wealthy clients trust Young to produce higher yields — work his magic, if you will — on their stock-market nest eggs.
Young, an ex-magician who founded Paragon Wealth Management in 1986, has managed to boost his company’s two main stock-market portfolios to chart-topping heights. His Top Flight Portfolio has churned out a return of 457 percent during its nine-year history, dwarfing the nation’s much-revered Standard & Poor’s 500, which accumulated a scrawny 86 percent return in the same time period.
Paragon’s Top Flight portfolio is racking up a 19 percent compound yearly return, while the S&P 500 has landed around the 7 percent annual mark. Even Young’s most conservative, low-risk portfolio, Managed Income, is beating its benchmark, the Lehman Bond Index by nearly double in its total compounded annual returns since its inception in 2001.
For the past 10 years, the former magician’s calculations have kept him in the nation’s top 1 percent of investment managers. The 51-year-old Provo resident guards his secrets like a clam guards a pearl, but he nearly comes undone in his struggle to explain his recipe for stock-market success.
“It’s like this,” he says emphatically, holding one arm diagonally. “You buy (stocks) here; get rid of it when it starts to curve here. Keep your eye on this area, though,” he said, pointing somewhere near his wrist. “It’ll get you if you don’t.”
When Young sits down to actually forecast the future of fickle stocks fastened to a feral market, he uses slightly more sophisticated models than his appendages. But “basically,” he said with a sigh of finality, “watch your curves; they’re your indicators.”
His oldest daughter, Shannon Golladay, 27, said his financial advice can be boiled down to the spend-less-than-you-earn tenet, but she is quick to mention that her dad is worth more than the cold financial figures he cultivates daily.
“He’s a real humble guy who’s done a lot of amazing things,” she said. “He won’t tell you this, but he’s raised hundreds of thousands for scholarships, given money to friends and family, and this year the company is giving money to help a (local) boy get brain surgery.”
Golladay, who works in her dad’s plush office, also said her father supports an orphanage in Uganda, Africa.
When later approached about the Uganda project, Young squirmed in embarrassment. “The thing is, money just goes so far there,” he said. “For about the price of a house here, you can make a huge difference there.”
Before conquering the world of Wall Street and years before supporting charity endeavors, the then-27-year-old magician struggled with lining up his priorities.
The moment his child was born, working with his female assistants on a stage of smoke and mirrors slid quickly down his list of priorities. When she turned 1, his magic tours disappeared.
Once, after a two-month road trip, Young slipped home one evening in 1981 just in time for his year-old daughter’s first birthday party. Instead of his daughter welcoming him with a hug, she stared coldly at “the stranger.”
“My daughter didn’t even know who I was when I came back,” Young said, looking at his office floor with a faint squint.
He shook his head. “She wouldn’t even come to me.”
He quit touring full time immediately and went to work building auto-painting and interior-design franchises in a variety of states. One of his businesses in Reno, Nev., ran so inefficiently, he said, that he could “hear a great big cash-sucking sound every time I thought about it.”
Eventually, he turned the money pit into a cash cow, sold it, played golf and hung out for a full year. “I made a decent chunk of money selling the centers,” he said.
He turned to the stock market but wasn’t impressed with portfolio managers who passively “rode out the lows” between market upswings. He joined the market anyway but managed his own portfolio manually, calculating stock averages on his 1980s computer.
A few of his younger friends hopped aboard, but it was their parents who made up the majority of his small, grassroots investment group. Friday morning, Oct. 16, 1987, Young and his clique of investors were fully invested. By that afternoon, Young completely cashed out of every stock of his investors because of a tiny but ominous-looking prospect he discovered in his finely tuned calculations.
He forgot about it and took off for a brisk October hunt.
His suspected prophecy of doom turned reality 60 hours later on Oct. 19 when the stock plunged to such a devastating low that the day was dubbed Black Monday.
“I got back and saw that my answering machine was just completely loaded with frantic messages,” he said. “Oh, they were upset, saying things like, ‘That’s my whole retirement!’ and, ‘What am I going to do?”‘
Young’s cash-out decision spared their portfolios from a 22 percent nose dive and boosted his image to attract more serious and affluent clients.
Today, with a $200,000 minimum investment rule and an average account size of $600,000 for his 160 clients, he delicately baby-sits about $100 million regularly and advises outside entities on an additional $200 million.
He tends the money from a sort of master control. He’ll casually tell you it’s just a desk. He doesn’t see the eccentricity of surrounding himself with a system of three wide-screen monitors iridescently gleaming with real-time moving graphs of the national and international markets, no doubt triggering sirens at the slightest downturn.
“It’s like a game of chess,” he said. “OK, like a challenging game of chess,” he corrected.
He doesn’t mind a challenge; he traveled halfway around the world to find new ones.
“Now, hunting a leopard, that’s tough,” said Young, an avid big-game hunter who has hunted leopards in Zimbabwe. “They’re like a mountain lion on steroids.” Shooting the leopard, he said, “was one trick I won’t forget.”
And that’s saying something for a fellow who’s been pulling off tricks since he, as a 12-year-old, received his first magic kit in the mail from a Trix cereal promotion. Since then, he’s yanked rabbits out of his hat, launched and sold profitable businesses, defeated the stock market and raised five children with his wife. And, he says, “It just keeps getting better.”
July 16, 2004
By Lynn Cowan, Wall Street Journal
If market timing is uniformly evil and prone to failure, then somebody forgot to tell Dave Young.
Young, the President and Founder of Paragon Capital Management, has been timing the market on a grand scale since 1998, when he launched Top Flight Portfolio, a separately managed account with an official minimum investment requirement of $200,000. For the five years ended in March, the portfolio has generated a compound annual rate of return, net of fees, of 22.6%; for the year ended in March, it has returned 62%, according to MoniResearch Newsletter, which tracks the performance of market-timing portfolio managers.
Top Flight Portfolio has generated its return by doing exactly what your grandfather and broker warned you not to do: It refuses to buy and hold, and instead jumps in and out of mutual funds, trying to catch market swings at the right moment-in other words, market timing.
“A lot of things we do are completely contrary to conventional wisdom,” said Young, 48, who received a bachelor’s degree in business management from Brigham Young University.
Young’s career path is also contrary to the norm. A professional magician from 1977 to 1980, he quit because he was spending too much time on tour, away from his family. After running a number of businesses, including a llama farm, he again scaled back his work life in 1986, and started managing his own money, then his friends’ money. In 1992, he set up Paragon Capital Management as a full-fledged money-management business in Provo, Utah.
He launched the Top Flight Portfolio in 1998, choosing which funds to buy and sell based on a series of quantitative models that attempt to augur which way the investing winds will blow in the short term (one to three months) and longer term (three to nine months). One model that he uses quite often breaks the market’s trends into a variety of factors-price-to-earnings ratios, price-to-book ratios-and tries to identify all the different factors being used by fund managers, and how they are performing.
“It gives us a picture under the surface, as the money starts to move toward different styles and asset classes. Then we try to move ahead of them,” he said.
Young’s taste for quick portfolio change-and the term “market timing”- aren’t embraced by mainstream public opinion at the moment. In September 2003, New York Attorney General Eliot Spitzer launched an investigation into improper mutual-fund trading, probing whether the industry’s largest mutual-fund companies were allowing institutional investors to secretly hop in and out of funds, in contravention of their written policies and to the detriment of buy-and-hold investors.
But market timing, when done in an above-board manner, is a legitimate, if not controversial, investing strategy. As long as money managers aren’t cutting secret deals to allow market timing in funds that prohibit it, it’s not improper or illegal; in fact, some fund families, like Rydex and ProFunds, encourage timers. Still, the term “market timing,” has become so tainted in the past year that portfolio managers like Young have embraced new monikers, such as, “dynamic asset allocators” or “active managers.”
Young’s portfolio, which serves 140 investors and has about $30 million in assets under management, owns about a half-dozen mutual funds at any given time. Currently, it holds Rock Canyon Top Flight Fund (TOPFX), Acadian Emerging Markets (AEMGX), Ivy European Opportunities (EOAX) and Constellation Clover Small Cap Value (TCSVX), and about 20% of its assets are in cash.
One core holding is the Rock Canyon Top Flight Fund, which was launched in 2003 by Top Flight Portfolio’s former co-manager, Jonathan Ferrell. Although it is a separate entity from Young’s portfolio, it was launched using the portfolio’s short-term investing models, which have since been enhanced by the fund. Young uses Rock Canyon Top Flight to deploy his short-term investing strategies, putting between 25% to 50% of his assets into it. The fund’s total return in 2003 was 52.8% while its return in 2004 was 1.8% as of June 30, according to research firm Morningstar Inc.
Rock Canyon Top Flight Fund operates almost like a hedge fund, both buying stocks and shorting them, or betting that their value will fall. If you believe that Rock Canyon Top Flight Fund’s returns are worth trying to reproduce, then the fund seems to be saying that mid-cap value stocks are the way to go, that the consumer service and financial-services industries are going to be hot, and that four of your top five stock holding ought to be energy companies, according to data from Morningstar. But that’s only current as of the end of June, and can change on a dime, as evidenced by the fund’s yearly turnover of 2,731%.
And forget trying to classify the fund’s style: in 2003, Top Flight was a small-cap blend fund; it’s also been a mid-cap growth fund before becoming mid-cap value this year, according to Morningstar. Such sudden asset style changes are unusual in the mutual-fund world, where most managers are religious about hewing to one type of asset class and size, and try to keep turnover to a minimum, but it’s a safe bet that Top Flight Fund doesn’t particularly care how it’s classified, as long as the returns are good and investors are happy.
“Having Top Flight Fund available allows us to be true to our short-term models and solve and short-term trading issues we might encounter with mutual funds,” said Young, referring to the increasing reluctance of other fund managers to allow frequent trading.
Top Flight Portfolio’s remaining funds currently hold about 10% its assets apiece. Young said he may hold a fund between three to nine months on average before selling, although some are held for longer or shorter periods on occasion.
There are downsides to a portfolio dedicated to fast market moves. One obvious issue is tax efficiency-and Young will be the first person to say that Top Flight Portfolio is not for investors concerned about the short-term capital gains implications of high turnover. The funds within the portfolio have an annual turnover between 100% and 3,000%.
Those who are attracted to it tend to be foundations and pension funds that don’t face the same tax issues as individual investors, or individuals who are willing to overlook the tax hit for a higher return, said Young.
“A lot of our (individual) clients says, “I don’t care if I have to pay taxes on it,”” said Young. “They’re happy to pay taxes on the portfolio because their priority is to make good terms.”
Top Flight Portfolio’s stated indifference to tax issues is an anomaly among separately managed accounts products. Because investors in a separately managed account directly own the securities chosen by the portfolio manager, a key marketing strategy is to tout their customization and tax-flexibility features over that of mutual funds. What Top Flight does have in common with other separately managed accounts is its bar for entry-most such products have income requirements and initial investment minimums of $100,000 to $200,000, much higher than most mutual funds.
Because Top Flight Portfolio is a separately managed account and not a mutual0fund product, it’s not tracked by Morningstar or Lipper. Investors must rely on Young’s own self-reported results, or on those listed in publications like the MoniResearch Newsletter, a Woodland, Wash.-based market-timing newsletter founded in 1986.
Steve Shellans, the editor of the newsletter, said he audits the results of the market-timing portfolios he tracks by asking the managers for three investors’ statements. Shellans said he asks the managers to select investors who are representative of the portfolios’ performances, but realizes that the process is dependent on managers not cherry-picking the best performing portfolios. MoniResearch doesn’t accept incentives from the money managers it audits, charging them the flat rate of %275 apiece; Shellans said he has “no ax to grind” in terms of favoring one portfolio over another.
“This is a niche market that really has proven to be successful,” Shellans said of market timers.
Young puts it another way. “I’ve never had enough trust in the markets to buy and hold,” he said.
Lynn Cowan covers the securities industry for Dow Jones Newswires.