Names: David Passman, Aaron Saperstein, Joel Talish
Firm: Westchester Wealth Management Group (Wachovia)
Location: Old Greenwich, Conn.
AUM: $400 million in house ($100 million outside)
Clients: 300 households
Industry experience: 60 years combined
When the Dow nose-dived more than 3 percent in late February, the Westchester Wealth Management Group received a walk-in visit from a multimillionaire client who wanted to buy the market. He wanted ETFs.
“He didn't want to wait for the next day to either purchase a mutual fund or for the money to be allocated to separate account managers,” says Joel Talish, who, along with his partners, Aaron Saperstein and David Passman, make up Westchester Wealth Management Group. The client wanted immediate and specific market exposure as it sank, what Saperstein refers to as a “surgical strike”-type application of ETFs.
While Westchester uses ETFs, on occasion, to speculate and hedge for clients like that one. But, as comprehensive wealth managers/financial planners, the firm most uses ETFs to build cost-efficient, broadly diversified portfolios for their less-wealthy clients. Separate accounts, which Saperstein says his group uses a lot with higher-net-worth clients, make far less sense than ETFs for someone with assets of $50,000 to $350,000, he says. For clients in that range he prefers to use one of Wachovia's professionally managed ETF Advantage Portfolios. Currently, Wachovia advisors can choose from four asset-allocation models (comprised of 25 to 40 ETFs): conservative growth, conservative income, moderate growth and long-term growth.
“Really, the entire equity portfolio could be in ETFs; in fact, you could run a good business that way,” says Talish. But for wealthier clients, his group tends to use them as tactical “complements.” Some examples: An ETF could be used for exposure to international equity, says Talish, “but by picking country-specific ETFs we can add alpha.” They can also gain access to hard-to-reach asset classes — “emerging-market currencies is a good example.” And since picking stocks isn't the strength of most advisors anymore, sector ETFs are great alternatives, says Talish: “If you like semi-conductors — especially after the shellacking they've taken — but you don't want to pick AMD or Intel as an ultimate winner, a semi-conductor ETF takes the business-specific risk out of it.”