Beyond Financial Planning

Specializing in Equity Management

There are currently just short of 100,000 certified financial planners (CFPs) in the United States, according to the CFP Board, a non-profit organization that serves the public by fostering professional standards in personal financial planning.

But once an individual has a financial plan, what happens thereafter? An equity/portfolio manager specialist might be the answer for many.

A specialist — like Kelley Wright of Investment Quality Trends (IQT), who serves as managing editor of the IQT Newsletter and as chief investment officer and portfolio manager for IQ Trends Private Client, which is based in San Juan Capistrano, California.

Kelley W“At IQ Trends Private Client, we’re strictly an equity manager. We don’t offer planning services; we want you to have all that worked out before coming to us,” Wright told Advisors Magazine in a recent interview. “And when you do come to us, we want you to say ‘here, this is my equity allocation.’”

Given Wright’s past experience as a partner in a full-service financial planning firm, he recognizes that the planning is an excellent exercise and a useful tool to organize financial activities and to create a disciplined structure.

“But a lot of planning practitioners can overwhelm you with the minutia,” Wright observed. “Some of that is by accident, some by design. So, what I call client control should be the objective.”

He added: “But that being said, just an understanding of your current cash flow and budget is sufficient to make some reasonable assumptions for a retirement budget.”

Such fundamental information will provide a framework for how much a client needs to save, the required rate of return on those savings to meet desired goals, as well as how much insurance might be needed for one’s family in case a client becomes disabled or dies prematurely.

“I would just say this though,” Wright emphasized, “If you’re unsure about where you stand, don’t guess. And if you need help, I recommend that you engage a fee-only financial planner, not a planner that also sells products, or implements the plan—I just don’t think that they’re objective enough.”

Wright maintains that a reputable fee-only financial planner will help the individual structure all those elements. He notes that one’s tax preparer or attorney should be able to provide some good financial planning references.

“And whether you decide to go it alone or you require some assistance, just make sure that you get that part of the process done,” Wright stressed. “Knowing what you need and when you will need it is critical to the process. So, when it comes to your future, don’t be afraid to ask questions.”

Role models and Heroes

Wright’s first job in 1984 was as a stockbroker at a small privately held boutique in La Jolla, California. One day, his manager handed him a financial newsletter. He told Wright, ‘I think you’d like this; you and the publisher seem to be of like minds.’

It was a copy of Investment Quality Trends, first created in 1966 by Geraldine Weiss, who came to be known as ‘The Grand Dame of Dividends,’ courtesy of the LA Times.

“I started to read it and it did resonate with me,” Wright recalled. “It was very much in keeping with my upbringing and my education. And then in 1988, Geraldine Weiss had authored a book titled Dividends Don’t Lie—and I absorbed all of that.”

Wright was raised by his maternal grandparents in Kentucky. After the Great Depression, Wright’s grandfather struck out on his own with his brothers and started a painting and construction business. They landed a contract with the Commonwealth of Kentucky to paint the electrical towers that line highways.

Kelley upright“It was really dangerous work, and they were one of the few to bid on it,” Wright said. “So, they got the job, started making money and then they opened a retail painting and glass business,” he added. “After a while, when my grandfather had a few nickels to rub together, he wanted to put it to work, and he decided to use the stock market as his vehicle.”

Wright learned many valuable lessons from his grandfather and fondly recalls him as his very first teacher.

“He was not formally educated,” Wright said. “Everything he learned about investing was from hands-on experience. And that helped form his philosophy, which was to buy high-quality dividend paying stocks.”

And as Wright grew up, his grandfather imparted a wealth of first-hand investing concepts—knowledge that the grandson took with him to the University of Kentucky.

Flash forward to 2002 when Wright had an opportunity to meet Geraldine Weiss who was already one of his heroes.

It was supposed to be just a 30–45-minute meet and greet at her place in La Jolla. “But some two hours later, she reached over and patted me on the knee and said, ‘Honey, you get it. I think you should run it’,” Wright chuckled. “And so that’s how I came to not only run my own practice, but to also become the managing editor of Investment Quality Trends.”

Framing the Goals

In his role as chief investment officer and portfolio manager at IQ Trends Private Client, Wright’s approach is to frame all a client’s investment activities around achieving goals based on current and projected needs.

“We will have a long discussion,” he said, “And that’s usually around a client’s needs; needs being anything that makes us feel safe and comfortable—the obvious things like food, clothing, shelter, medication, education, recreation, and more.”

Wright added: “And the way that we pay for those needs is with cash. The whole purpose of investing is to generate cash to meet our needs. It’s a business. And I want people to think about it as a business—not as a casino or an auto-pilot computer or app.”

In being clear about what for, when, and for whom a client’s money will be used, and in approaching it all like a business, Wright helps his clients then establish rate of return goals—around how much risk they can tolerate.

Kelley quote right 
And that ‘pushing towards’ often means what stocks should be bought, sold, or held.

Investment Quality Trends is a laboratory of quality and value,” Wright said. “And while the analysis itself is pretty sophisticated, we’ve really drilled it down to make it simple for the do-it-yourselfer, where all they have to do is look at dividend yield to make those critical buy, hold, and sell decisions.”

In fact, Wright tells clients that a portfolio of 25-30 stocks is really all that’s needed. “There are 10 sectors, and if you can diversify equally across those 10 sectors, you will end up with 25 to 30 stocks and that’s sufficient. If you start getting too much more than that, hell, you might as well go buy an index fund.”

Wright added: “And for those folks who don’t have the time, inclination, or confidence to do it themselves, we will do it for them as an investment advisor over at IQ Trends Private Client, where we are dealing with high-quality, blue-chip stocks.”

The focus is on equities, according to Wright, which tend to perform well regardless of the macroeconomic environment.

“Over the course of 25 years, you’re going to get hit with the kitchen sink in terms of geopolitical, economic, whatever events,” Wright said.

So, one of his core principles is that IQT’s stock picks should have 25 years of uninterrupted dividends –because those are the companies proving time and again how well they are positioned to withstand anything that happens.

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