Wealth management.

• Position: Industry Outlook - Interview

With a great deal of uncertainty remaining on Wall Street and in the financial sector, wealth managers discuss the importance of risk assessment and long-term planning--and the importance of hanging on through tough times. Participants also take on information overload from the media and how they work to keep their clients level headed and on track to meet their financial goals.

We'd like to give a special thank you to Hal Heaton, professor of finance at Brigham Young University, for moderating the discussion and to Holland & Hart for hosting the event.

[ILLUSTRATION OMITTED]

The center of the hurricane may have passed, but we're still definitely in the middle of a storm with a whole lot of uncertainty to be resolved. How is it affecting your business? How is it affecting your clients?

MCNEAL: The times of uncertainty are the times that allow for excess returns. It's that uncertainty that disturbs forecast models. It's that uncertainty that, as a finance individual, you build in a bigger return to compensate you for that risk. Let's just recognize the fact that this has been a fantastic opportunity to make money. In 2009, the S&P 500 returned 26 and a half percent. High yield bonds returned 58 percent in the same year. For the clients themselves, it's just a matter of a lack of education. They don't understand what's going on in this environment, and it makes them apprehensive. If you provide the education and the understanding for what's going on, they're OK with it. If you can show that you're a trusted individual and that you understand what you're doing and you work well together, this has been a fantastic opportunity. There are fortunes to be won and lost in recessions.

[ILLUSTRATION OMITTED]

ULBRICH: Along with that, these periods of uncertainty allow our clients to sit back and really undertake a review of their goals and objectives. What are your goals around retirement, around educating your children and around your lifestyle going forward? Understanding those goals will help guide you through some of these decisions about whether or not you should liquidate assets now or die this year versus next year.

YOUNG: I agree it's been a fantastic opportunity for the last 18 months. We've seen phenomenal returns. And as advisors, we should be capitalizing on that for our clients, because times of uncertainty create the biggest opportunities. But the real question is what were people being advised in 2008? Because if they got obliterated before that, then they didn't have the capital to come back. So you've got to advise them with a long-term approach.

I've seen people come in with their accounts down significantly--they're still down 50 percent from where they were a couple years ago just because they made a lot of bad investment decisions. There's two sides to it. We've got to have a good long term strategy in place.

We all know what clients should have done in the past. The question is what do they do now?

WELLS: For most clients, it's really about "what are the goals for my accounts and how do I achieve those goals?" It's really about creating a portfolio that can meet that goal and succeed regardless of what happens. We find ourselves and our portfolio really focusing on the stock side on three main areas. One is companies that are going to be fairly resistant to economic cycles, companies like Procter & Gamble. Also, dividend paying stocks. It's a move we started making about two years ago. It's become very popular recently. And then the third one is growth--fortunes can be made and lost in times like this. But you've got to be careful that fortunes aren't lost; and by having a portfolio that has pieces in different areas that can win regardless of what happens going forward, clients are very well positioned to succeed.

POELMAN: From a tax perspective, clients should seriously consider doing certain things with the serious prospect of gift tax rates increasing, capital gains rates increasing, dividend tax rates increasing. Clients should consider a number of strategies. One is making taxable gifts this year, and another is selling capital assets this year. And the last is making dividend payments from these privately, closely held companies this year.

TERAN: Our role as advisors is helping them understand complex things. We talk about uncertainty as if someday that will be built of things that are all certain. We know that's not true. It'll just be different things that are uncertain. We should be helping them understand that we build from what we know, we know that things will change and try to be prepared to adjust to that change as it comes.

So are you saying "hold tight" or are you advising shifts in the portfolio?

BIRD: The best folks we worked with who came through the last two and a half years were the ones who agreed with the notion of moderation, where changes are made perhaps at the margin, but the core structure didn't change. When we view our roles as wealth advisors, a big part of it is indicating the investment policy right up front. They're not going to get too euphoric at market highs and push you hard--because at the end of the day, it's their money, not your money--to increase allocations to risk assets, nor are they going to panic at market lows and force the advisors to increase safe assets at market lows. The folks who are most successful are the ones who have maintained a consistent posture through the market cycle.

PETERSON: What we're seeing now is a true reflection of emotions that take part when you're investing. We've got fear and greed; we all know that. The greed took over when we had the technology boom. Recently we had the real estate boom. We've all had a lot of clients, I'm sure, who migrated to real estate all the way up to capital markets. Now we have the opposite. We have the fear factor stepping in. People tend to follow the herd when they get in scary situations, and I think that's what they're doing.

NEWTON: There are two things I always guarantee to my clients: The market will go up and the market will go down. And other than that, anything else is rolling the dice. Two years ago, October 16, 2008, before we hit the down in the market on March 9, 2009, Warren Buffett wrote, "Buy America. I am." And he said, "Be fearful when others are greedy; be greedy when others are fearful." Since that letter, through Friday, October 8, 2010, the S&P gained a 29.1 percent total return through that two-year period. Now, if you go back and look at the market from 1925, before the '29 crash through 2000, the large cap stocks average annual yield was a 10.2 percent return. So that includes the Depression, a number of recessions, the crash of '87, and all the way on up. That tells us what we can expect is averaging a 10 percent return. So now if we turn around and look at what's happened, we've actually just in the S&P averaged a 15 percent return. Are we set now for a downturn in the market? Is it really wise to be in bonds? Maybe it is. Nobody's got that crystal ball.

[ILLUSTRATION OMITTED]

PETERSON: In a 10-year period, though, you've got a zero return.

NEWTON: But that zero percent return was actually through 2009. So now we're back ahead. But how much longer will the S&P keep going before we see the national downturn? Because every three to four years we see a natural downturn in the market. You layer that on top of the coming presidential election in 2012-every presidential election year, we see a downturn.

MCNEAL: It really comes down to the conversation between strategic asset allocation and integrated or tactical asset allocation. From what I gather, most people here at this table are focused on that strategic asset allocation side, where you invest for the long term, you're looking over long periods of time, and you're trying to achieve those average...