WealthManagement Magazine

Select Service

A clear separation of responsibilities keeps the team running. Burke manages clients and Chicotel manages their portfolios. When Nikki Chicotel and Sheila Burke's Silicon Valley clients are mulling a job change, they turn to their brokers to help them make the decision. No one understands the lucrative stock option plans of high-tech companies better than Chicotel and Burke, reps with First Security

A clear separation of responsibilities keeps the team running. Burke manages clients and Chicotel manages their portfolios.

When Nikki Chicotel and Sheila Burke's Silicon Valley clients are mulling a job change, they turn to their brokers to help them make the decision. No one understands the lucrative stock option plans of high-tech companies better than Chicotel and Burke, reps with First Security Van Kasper in San Francisco. The two teamed up 10 years ago to leverage their knowledge of high-tech execs' financial needs.

We decided to provide superior service to a select group, Burke says. We wanted our clients to see that we knew more about their issues than they did. We determined that we'd anticipate their problems. It's what Chicotel and Burke call life planning.

We can walk 30-year-olds through what to expect in their career path through their 50s and create suitable investment portfolios, Burke says. They usually need to buy a house, have stock options and 401(k) plans, will go through job changes in the industry and want to plan an early retirement.

Options-Intensive Planning

Chicotel has designed a variety of detailed investment programs to meet the unique financial needs of high-tech clients. Her stock buying program is at the heart of the team's service.

Using 30 years of experience on both the buy and sell sides of the stock business, Chicotel combines fundamental and technical analysis to create her own version of the Dogs of the Dow. When a stock climbs 20% to 30%, she sells one-third of the position she's built in client portfolios. If it goes up another 20% or so, she sells another third.

Chicotel overlays a covered call writing program when the market is high and she determines she needs downside protection. She's drawn up a worksheet to help her project profits if a stock is called.

The team also uses call writing to manage clients' large stock positions. Even after clients switch companies, they often still hold a lot of their previous employer's stock. Burke and Chicotel counsel clients to reduce the positions to 10% to 20% of assets. The call writing program gives these investors an orderly way to liquidate positions and potentially reduce taxes, Chicotel says.

The partners teach clients to accept losing the shares if the stock is called away, even if the stock continues to rise, emphasizing that they still have ample shares that benefit from the upturn.

Many clients have much of their net worth tied up in stock option plans. They fear exercising stock options because of the risk of a large tax hit, yet fear holding them because of the expiration risk and risk of a market downturn.

To curb clients' fears, Burke recommends they sell a percentage of options each year. She creates a systematic approach to liquidation that begins with evaluating expiration dates and identifying nonqualified and incentive stock options. Burke walks clients through cashless option trades, making sure to carefully track tax implications.

Chicotel constructs subportfolios to finance specific needs. For example, she'll create a tax-free muni bond portfolio for a client who needs to finance a large home mortgage. Clients can also have subportfolios to pay taxes and to hold venture capital investments they bought elsewhere.

As part of her regular research, Chicotel tracks the financials of the firms their clients work for. When the team sees trouble, Burke alerts clients and discusses whether to reduce their position in the company.

Burke has become a Rule 144 stock expert. Determining how much stock to sell after their employer goes public is a common challenge for most clients. Burke takes them through planning how and when to sell the stock, monitoring it once the company is public and developing a strategy to reposition assets after the sale.

Getting the Job Done

A clear separation of responsibilities keeps the team running. Burke manages clients and Chicotel manages their portfolios. Each has a registered assistant. Burke's helps her construct and track financial plans. Chicotel's assistant helps her construct and track portfolios.

The full team meets once a month to brainstorm new investment ideas. The partners meet off-site annually to review their written business plan.

The main focus for us now is keeping abreast of the changing economy and market, Burke says. Despite the rocky times many Silicon Valley companies have weathered lately, she says their clients aren't panicked. The partners chalk it up to their clearly defined strategies and daily e-mails to their 200 active clients.

For 2001, the two are working on increasing client communication further, Burke says, and pursuing strategies to manage client expectations.

Burke and Chicotel now control nearly $80 million in assets, working only for fees with those who have a minimum of $200,000. Even amid the tech market turmoil, their approach has appeal. Burke says, We brought in $2 million from September through December in the worst market we've ever experienced.

Registered Representative welcomes your comments on this story. Contact Editor in Chief Dan Jamieson at Dan_Jamieson@Intertec.comor call our editorial department at 800/621-0720.

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