Category: Personal Interest

28
Sep

Sail Away from the Safe Harbor

Content provided by Robyn Murray, Freelance Writer

john-and-kristen-welch

John and his wife, Kristen.

John Welch grew up in a small, rural town in Maine where most of the industry was concentrated in logging and farming. Neither held any interest for him, and as soon as he could, he left.

More than 20 years later, he knows he made the right choice.

“Use your head, not your hands”

Eastbrook, Maine has a population of about 400 people. About 150 miles from the densely populated southern coast and just a few miles inland from the Gulf of Maine, Eastbrook is isolated but beautiful. It’s surrounded by forests of fragrant balsam firs and stretches of lakes and ponds where families go kayaking and birdwatching. As a child growing up, Welch spent hours outside exploring the acreage where his family’s farmhouse stood and the nearby woods and lakes. It gave him a sense of creativity and freedom and a connection to nature that never left him. But he always dreamed of something more. His father, who worked for the local power company, told him to remember one thing when it came to his future. “Dad always told me to use your head, not your hands to make a living,” Welch said. “That was instilled in me from a very young age.”

Always interested in numbers, Welch enrolled at the University of Maine, a small campus of fewer than 10,000 students on the banks of the Stillwater River. He majored in finance and built lifelong friendships there, but he was still looking for more. “I couldn’t wait to get out to a big city and just go, go, go,” he said.

As soon as he graduated, Welch headed back to Eastbrook. In two days, he’d packed his bags and moved to Boston. “I just wanted to figure things out,” he said, “to challenge myself and get my career going.”

It was a challenge. An expensive and competitive city, Boston had a lackluster job market at the time and sky-high rents, particularly compared to Maine. But the challenge only motivated Welch to work harder. “I just pushed myself to do more,” he said, “to outwork everyone else.”

After six months of living on a friend’s couch, Welch got a tip that financial services firm, Sun Life of Canada, was hiring. He was temping for an insurance agency at the time, and he jumped at the opportunity. He got started and over the next three years was promoted several times until he took a position at MFS Investment Management as a sales rep, one he quickly realized was a good fit. Today he’s been in sales for 20 years and is the Regional Vice President of Sales at CLS Investments where he covers 10 states in the Northeast. He’s on the road four days a week, and he loves the constant change of scenery. “It’s never boring, always exciting and changing,” he said. “I like change, I know it’s a constant, and I really thrive in that kind of environment.”

john-welch-maine

John at his home in Main.

Welch still goes home to Maine often. When he visits his family, he finds them waiting for him, financial statements at the ready for his advice and counsel. He says his father is proud of what he’s accomplished in his career and happy he took his advice so many years ago. “I’ve grown as a person,” he said. “I’m more than just this naive kid growing up in a small town in Maine.”

While he’s glad he left and got the opportunity to experience a different life, Welch says he appreciates his small town roots now more than he did growing up. A few years ago, he bought a house on a lake near his old home, and he brings his two sons there often. “It’s a special place where they get to be kids, he said. “They get to live a life of freedom.”

john-welch-kids

John with his sons Jack (age 9) and Parker (age 7).

2435-CLS-9/22/2016

 

13
Sep

Get Busy Living

rash-family

Shari and her daughters, Olivia (5) and Lola (2)

Content provided by Robyn Murray, Freelance Writer

I caught up with Shari Rash when she was out buying last-minute necessities for a family trip to New Jersey. With two kids in tow, one in a stroller and the other rushing down the aisles in front of her, Rash was getting ready for a big family gathering at her parents’ shore house. “We’ve got a bunch of family flying in,” she said, holding her phone to her ear, one hand on the stroller and the other herding her 5-year-old. “It’s going to be great.”

Rash is a wholesaler based in Bel Air, Md. She works with financial advisors, helping them solve problems for investors, in a region that covers eight states. While she thrives on the constant travel and busy schedule, what really keeps her going is knowing she’s making a difference. By juggling meetings, analyzing data, and presenting solutions, Rash is helping people — one individual investor at a time.

“I wanted to be able to help”

Rash grew up in Atco, New Jersey, which is considered a suburb of Philadelphia. She went to Temple University and originally wanted to be a journalist. She liked the idea of presenting in front of people and imagined herself a television news anchor. “But I came to realize I’m a pretty black and white person,” she said. “Something either works or it doesn’t work.”

That trait eventually made her a good fit in finance, a field she’d always been interested in. Her parents had taught her the importance of healthy finances and having a plan, and she recalls reading through her father’s stock list and watching together as the prices moved up and down. But she only started thinking seriously about a financial career when she went to college, particularly after seeing the burden that rising college costs were placing on her Millenial generation. Student loan debt has soared in recent years, and Rash saw the impact of it firsthand. “It struck a chord with me,” she said. “You shouldn’t have to not go to college or feel like you have to sacrifice because of cost.”

Rash realized that financial planning would have helped many families, and she started to think seriously about finance as a career. “I wanted to be able to help people,” she said. “I wanted to help parents afford their kids’ educations, have a nest egg, and retire when they want to.” During college, she interned at Lincoln Financial and soon after graduating got acquainted with wholesaling at Prudential Annuities. That’s where she realized she could help financial advisors on a broader scale — while enjoying the busy pace of a woman on the go.

Today, Rash is Regional Vice President of Sales at CLS. Her clients are based in a broad region that stretches from North Carolina to Indiana. She’s on the road four days a week, and she loves it. “It’s not for everyone,” she said with a laugh. “But I enjoy the craziness of traveling and being in a car and waking up in a different city every day. That to me is fun.” She’s also “always on,” which is a nice throwback to her anchorwoman dreams. “Every meeting is different, every personality is different, every advisor is different,” she said. “So, it’s never the same, and that’s what I like the best about it.”

While Rash doesn’t get to work with individual investors on a daily basis, she gets satisfaction knowing she makes an impact on people’s lives behind the scenes. She recalled a recent call from an advisor, which involved a young woman who was widowed with two children. She had been left some money from her deceased husband, and her advisor called Rash to ask for help figuring out how to generate income, while still accumulating wealth. “We came up with a plan to get this woman what she needed,” Rash said. “That was really rewarding, and it’s nice to work with people that care about their clients and want what’s best for them.”

Rash said she’ll never meet the people she’s finding solutions for, but she feels good knowing they trust her to help, and even better knowing that she can. “There are solutions to a lot of problems if there’s someone there to help you,” she said. “That’s what draws me to the industry. You can help people, and they can have their problems solved.”

 

2374-CLS-9/1/2016

 

26
Aug

Jersey Roots

MikeZ and wife

Mike with his wife, Lauren.

Content provided by Robyn Murray, Freelance Writer

When Mike Zarren’s friends were biking through the woods or swimming in the lake at summer camp, he was inside, enjoying the air conditioning, and making money.

“I’m not a big outdoorsy guy anyway,” Zarren said in a recent interview. “I’d rather be working.”

Zarren has worked since he was 11 years old, babysitting and helping neighbors’ kids with homework. He collected baseball cards, which he traded and sold for a profit, and every school break — spring, summer, or winter — he’d work at the paper distribution company where his father worked. “I’m motivated by success,” Zarren said. “I’m in the game to win.”

Zarren grew up in the Garden State near the Jersey Shore where he says he spent time taking in the sun, eating seafood, and trying to be seen. His parents instilled a drive for independence and a passion for competing. He was fiercely competitive at school and in sports, and he credits his upbringing — both his parents and his childhood and teen years on the Jersey Shore, which gave him plenty of incentive to one-up the competition.

“I decked it out Jersey style”

Reality television is generally not where we look to find an accurate portrayal of a city or state. But, at least according to Zarren, shows like The Real Housewives of New Jersey, which depicts hyper-competitive, status-driven New Jersey women who dress to the nines in designer clothes and heavy make-up, do a pretty good job. “That’s like every family,” he said with a laugh. “Riding the Jersey Shore, it’s just like the stereotypes you see on TV. You want to be noticed.”

When Zarren was in high school, he used the money he’d saved to buy a car and fix it up just the way he wanted: a souped-up 1986 Nissan 300ZX with a brand new stereo and a neon underglow. The license plate: MIKESZX. “I decked it out Jersey style,” Zarren said. “And I miss it,” he added wistfully. “I really do miss it.”

After high school, Zarren got interested in finance when he realized his money-making skills could be enhanced by learning the ins and outs of investing. He studied finance at Towson University in Baltimore and later took a job at Rydex Investments where he served as an analyst and a relationship manager. Zarren moved from there to a director of relationship management role at Ceros Financial Services, and in 2013, a position opened at CLS. He jumped at the opportunity. “I’d met executives and leaders across NorthStar [CLS’s parent company],” Zarren said, “and when the opportunity presented itself to join the team, I couldn’t pass it up.”

Today Zarren is Director of Key Accounts at CLS. He spends much of his time on the road or on the phone working to build exposure for CLS’s wholesalers and internals and get them in front of financial advisors. A typical work week is 55-60 hours, but he’s always on call. “It’s not required,” he said, “but that’s just how I am. I want people to be able to count on me.”

One day, he swears, it’ll be time for play.

“I work a lot, and maybe that’s not a good thing,” he said, “but I’ll be able to play more when the time for play does come.” Zarren looks to his wife’s grandparents, who retired at 55, as an example. They worked and saved their whole lives, retired early, bought an RV and traveled on an extended trip through Europe. “They had more than 20 years together in retirement,” he said. “I’d like to retire one day. I want to enjoy life with my wife when our kids are established in their own lives.”

MikeZ and girls

Mike with daughters, Melanie (14 months) and Hailey (5 years)

The plan, for now, is to buy a home in San Diego or a Caribbean island where his kids can visit and soak in the sun, just like he did on the Jersey Shore beach. And maybe he’ll buy a fun sports car to cruise the seaside streets. But that’s still several years away. For now, he’ll take care of his family and stick with something reliable, and less flashy. His current ride: a Toyota Camry.

“But with aspirations of a Chevy Tahoe,” he added quickly. He paused and laughed. “Now that I have two kids, I have a family car. How times change.”

2272-CLS-8/11/2016

 

03
Aug

A Play in Three Acts

Content provided by Robyn Murray, Freelance Writer

Brian Ragle has taken a detour-driven road to get to where he is. He started out as a theater major who traveled to New York to audition for the stage. A few years later, he was deep into the savings and loan industry about to face an epic crash that would cause his life to veer in yet another direction. Today, he lives on a farm out in the Texas countryside where he raises cattle and grows farm-fresh vegetables.

Looking back, he wouldn’t change a thing.

Ragle youth

Brian in 1974, during his theater days at Baylor.

Act One: The Stage

Ragle, who grew up in Graham, Texas, attended Baylor University where he switched majors at least twice. “I was pre-law for a while, and then I wanted to be a foreign diplomat,” he said in an interview from his Texas home. “But I graduated with a degree in theater.”

After college, Ragle moved to New York and auditioned for several productions, but he said he quickly realized he would be waiting tables for a significant portion of his life if he stayed on that path. “I decided that wasn’t for me,” he said. “So, I came back and went into business with my dad.”

Ragle generations

Four generations (1981): Brian (standing, left), his father (standing, right), his grandfather (sitting, left) holding his oldest son, Travis. 

Act Two: The “Godforsaken” Savings and Loan Business

Ragle’s father ran a savings and loan business, which had been handed down from his father. When Ragle bought in, the two invested everything they had into it. It was the 1970s and business was good. But neither could foresee the looming crash that would soon throw them both off course.

Things first started to go wrong in 1980, Ragle said, when the government raised interest rates on capital borrowed by banks in an effort to combat inflation. Ragle said “all hell broke loose” particularly in states like Texas where usury laws, which limited interest rates on loans going out, were still in place. “We were immediately under water,” he said.

The crisis was worsened by speculation and widespread fraud, and it lasted through the mid-1990s, resulting in the failure of nearly one-third of all savings and loan associations around the country and a deep recession.

Ragle and his father’s books were clean, but the business went under and the stigma of the crisis was hard to shake. “It was really devastating,” Ragle recalled. “I went from flying my own airplane to chasing quarters around baseboards to send my children to school with lunch money.”

His father took the crash badly, partly because he was older and closer to retirement. But Ragle decided he wouldn’t let this beat him. “You have a fork in the road, and you can either take the high road or the low road,” he said. “I did a lot of soul searching, a lot of reading, and a lot of praying, and all that really helped. This business is sales, so if you don’t have a good attitude you’re not going to be very successful.”

Ragle’s wife went to work and started what became a successful catering company, and Ragle got licensed in financial advising. It was about 15 years before he stopped worrying about his next paycheck, but he recovered. “We managed to just pull ourselves up by our bootstraps,” he said.

Despite the difficulties, Ragle now believes the crash was the best thing that could have happened to him. “It taught me so many things,” he said. “It taught me a lot about how the government works. It taught me about personal fortitude and discipline.” The most significant lesson he took from the experience was the importance of diversification, and it motivated him to work with others to help prevent such dramatic losses. “It gave me a very keen passion for helping people save money,” he said, “to start saving money earlier in their careers, and to maintain a lot of diversification in their portfolios, so this doesn’t happen to them.”

Act Three: Finding Home

Ragle worked as a financial advisor for nearly a decade, and in 2000, he took a position with CLS. Today, he is the Senior Vice President of Regional Sales, and he spends much of his time on the road, meeting people and finding out what’s working and what’s not for financial advisors around the country. After working for himself for so many years, it might have been a difficult transition, but Ragle doesn’t see it that way. “It’s almost like being in business for myself still,” he said. “It’s just that I have a 401(k) and a nice health insurance package.” In fact, it’s a lot better. While he still works 60-80 hour weeks, Ragle can switch off when it’s time to go home. He also feels a sense of security, which helped get him through a second crash-of-a-lifetime in 2008. “I’ve built a business here that will continue no matter what the market does,” he said.

Six years ago, Ragle began another phase of his life. He and his wife bought a 160-acre farm outside his hometown of Graham where they grow wheat and raise livestock. “Cattle, chickens, and a lot of grass to mow,” he said with a laugh. His wife grows vegetables and herbs and cooks from scratch, and this is where Ragle spends his time when he’s not on the road. “We’re into raising our own food as much as we can,” he said, “trying to stay young and vital and pay attention to what we eat and what we drink. It’s kind of our hobby now.” The couple has people who manage the farm for them, but they still do a lot of work. “When we’re out here, we’re working,” Ragle said. “We’re not watching TV, I can tell you.”

Ragle still goes to the theater as often as he can (he was readying for a trip to Dallas to see a friend perform at the time of this interview), but most of the time, it’s a day’s hard work and a good, healthy meal to close it out. He wouldn’t have it any other way.

“We live a pretty good life out here in the country,” he said.

Ragle Family

The Ragle family.

 

1863-CLS-7/7/2016

22
Jul

The Importance of an Investment Philosophy (The Second P of Money Manager Due Diligence)

Business people having meeting in office building

Content provided by Rusty Vanneman, CFA, CLS Chief Investment Officer

In a recent commentary, I wrote about the “Five P’s” of the money manager’s due diligence process:

  • People
  • Philosophy
  • Process
  • Performance
  • Positioning

I followed that commentary with a more focused blog on the most important P: People.

In this commentary, I will discuss the next P: Philosophy. What is meant by an investment philosophy? In short, what does an investment manager believe about the markets and investing? About managing money? What is his or her ultimate goal? When picking managers, it’s important to understand their philosophies for several reasons, including:

  1. it will help you understand how and why they manage money the way they do
  2. it will help make sure you are comfortable with that philosophy

At CLS, our investment philosophy can be summarized this way: To help investors succeed, we believe in Risk-Budgeted, globally balanced ETF portfolios. Let’s break this statement down into more detail.

Helping Investors Succeed

Our ultimate goal is helping investors reaching their financial objectives. To accomplish that, we believe global, balanced, Risk-Budgeted ETF portfolios along with clear and consistent communication and investor education will help investors achieve success.

Risk Budgeting

At CLS, we build Risk-Budgeted portfolios. We believe for investors to reach their goals they need to assume risk and the best way to do so is to measure and manage it via Risk Budgeting. We also believe this is a better way to build balanced portfolios.

CLS uses Risk Budgeting because of three core beliefs:

  • All investors have a capacity to bear risk, and the best way to control risk is to measure it, rather than relying on a traditional stock-to-bond ratio.
  • Over the long term, investors are rewarded for bearing risk; having too little risk hurts investor returns.
  • Investment methodologies should be designed to pair a disciplined risk management system with a flexible approach to asset allocation. Doing so enables CLS’s portfolio management team put together risk-appropriate portfolios by looking at the broadest set of choices.

Global

We are global investors, investing not just in domestic securities but also overseas. We believe diversification across domestic and international assets provides improved risk-adjusted returns over time.

Balanced

We believe asset allocation — and keeping the proper balance between assets — works for investors. Investors stay in balanced portfolios longer than other portfolios and they have smaller “behavior gaps” (differences between investment returns and investor returns). Balanced portfolios offer a better experience for all parties involved.

ETFs

Though CLS does manage some mutual fund portfolios, our preference is to use ETFs whenever possible. We believe ETFs provide numerous benefits for investors, including lower costs, tax efficiency, and investment precision.

Summary

In the end, empowering advisors to help investors succeed is our ultimate goal. Whether it is through sound investment management by building reliable portfolios or through investment education and counseling through our communication, we want investors to be comfortable and stay the course.

P.S. On every weekly meeting agenda, the CLS Investment Team includes this list of what we believe:

We Believe:

  • We believe our ultimate goal is to help advisors and investors reach their investment objectives. This is accomplished through our relationships, portfolios, and communication/education.
  • We believe in risk-managed portfolios (especially those that are Risk Budgeted).
  • We believe in globally diversified, balanced portfolios.
  • We believe in the power of
  • We believe in client service and communication that is accessible, honest, and educational. “Plain talk; simple talk.”
  • We believe in constant professional growth. We are always trying to improve.
  • We believe in the power of teamwork. We help each other and hold each other accountable.
  • We believe that every basis point of performance matters. We play to win.

 

14
Jul

A Man’s World

Content provided by Robyn Murray, Freelance Writer

Jessica Golson often finds herself the only woman at the table. A trading manager at CLS, Golson works in an industry dominated by men. So much so, that a 2014 study by recruiting firm Vettery, found a full 77.5% of first-year analysts on Wall Street were men. How women fare in investment firms nationwide is not as well documented, but the ratio of senior-level men to women is even more disproportionate across the industry.

Golson, however, has never let a boy’s club bother her.

“The only girl in the room”

Born and raised in Omaha, Golson has always enjoyed the challenge and logic of numbers. “I always liked math,” she said. “And I remember seeing tickers going across the TV screen and wanting to know what that meant someday.”

After high school, Golson enrolled at the University of Nebraska at Omaha as a business administration major. She excelled at accounting, and her teachers pushed her in that direction. “I liked accounting because I was good at it, and it was numbers,” she said, “they were all right there.” But the subject didn’t challenge her enough. “In accounting, there’s just one answer,” she said. “You can get to it a lot of different ways, but there’s still just one.”

Golson tried out a class on investing and, coincidentally, CLS Portfolio Manager Scott Kubie was her first teacher. “You could tell he knew a lot,” she recalled with a laugh. “He still likes to teach me things.” Golson remembers Kubie encouraged her to think beyond the surface and dig deeper to get the real data. She soon discovered finance was far more fascinating than straightforward calculations. “There are just so many different variables that come into play,” she said.

Golson decided to continue in finance and enrolled at Creighton University, where she was one of a handful of female students. “[The investment industry] is totally dominated by men,” she said. “But I grew up with two older brothers, so I’ve just never been intimidated by being the only girl in the room.”

JessG Bio pic

Jessica, with her brothers Eric (left) and Tim (right).

Golson credited her mother with making sure she always knew she could do anything her brothers could do. She said she’s never viewed being in the minority as a hurdle or a reason for hesitation, but she understands how it could be. “I think the biggest thing is you have to not be afraid of challenges,” she said. “Take them on and make decisions. You just have to be able to take it and get over being concerned with what people think.”

Golson earned her master’s degree in securities analysis at Creighton, and today, as the only female operations manager at CLS, she believes she offers a different perspective, and at times, a more empathetic stance. She recalls an experience that still influences her decisions. As a financial advisor — her first position after college — she counseled investors through the financial crash of 2008. She recalls one man in particular, who was her father’s age, ready to retire. His wife had recently been diagnosed with breast cancer, and he’d just lost everything in his retirement savings. “He’d done everything right, saving for so long,” Golson said, “and then when it came time to do something, he couldn’t do it.” The client was crying in her office, she recalled, and that made everything she’d learned in the classroom suddenly very real. Golson keeps that experience in mind when she’s making decisions based on data, and she believes that type of empathy in this industry is crucial. “It’s really easy to just look at numbers,” she said, “but that’s someone’s actual life savings.” Golson said CLS prioritizes the individuals behind the numbers, and that’s why its role is so important.

Golson recently began assisting the Portfolio Analyst and Management Team a few hours a week. It’s a new challenge, and she’s not yet sure where it will lead her. Her original goal after college was portfolio management, but she’s intrigued by the many areas of specialty available to her. CLS, which puts a premium on diversity, is encouraging her to rise through the ranks. Whatever she decides, she won’t let being the only woman in the room stop her.

“I do care about people first and foremost,” she said. “But I’m also not afraid to stand my ground and take charge.”

1862-CLS-7/7/2016

23
Jun

The Dos and Don’ts of Saving for Retirement

a young boy looking with a chart (focus on boy's hand and pen)

Content provided by Kostya Etus, CFA, CLS Portfolio Manager

There have been numerous studies about the dismal savings rates of Americans. One recent survey* found that a third of the population has no retirement savings at all and a majority are significantly behind on their savings. Millennials are causing the most alarm as they will have fewer safety nets (such as corporate pension plans, which seem to be going the way of the Dodo) to rely on in retirement than previous generations. Gen Xers face another troublesome issue as they are frantically trying to rebuild their savings that were decimated by the Great Recession of 2008.

If you feel you may be in either camp, you are not alone. But there are some easy dos and don’ts to help get you on track and feel more reassured about your retirement.

Dos

  • Diversify. Everything in life should be diversified, but let’s start with investments. Utilize a variety of asset classes in your investment accounts (stocks, bonds, cash, etc.) for smoother returns over time with lower risk.
  • Manage tax locations. Utilize a mix of account types, such as tax-deferred (401(k)), tax-free (Roth), and taxable (standard individual) accounts because the future is uncertain, and each can be beneficial in certain scenarios.
  • Max out available employer 401(k) matching. It’s free money!
  • Save on taxes. Don’t forget contributing pre-tax dollars to your employer’s retirement plan lowers your current tax bill.
  • Utilize direct deposits. Putting away savings automatically every month takes some of the planning and worry out of the process.

Don’ts

  • Accumulate debt. Don’t get deep into debt, but don’t use paying off debts as an excuse to avoid saving for retirement either. You can pay off debts and save at the same time.
  • Invest in one stock. The idea is to diversify your holdings with many securities to mitigate the risk of any one position having a severe loss.
  • Cash out early. Try not to pull money out of your retirement account. First, there may be penalty fees involved, but more importantly, you are eating into your retirement livelihood. If you cannot keep your retirement account open for any reason, simply roll it over to another account.
  • Chase performance. Don’t consistently sell out of poor-performing investments and buy outperformers. Aside from increasing transaction costs, you may miss out on significant turnarounds as markets tend to be cyclical. In other words, focus on the long term.
  • Move to cash. The stock market is volatile, but historically it has recovered and often outperformed over long periods of time. You are better off staying invested and diversified. Getting scared and moving to cash may cause you to miss out on significant gains, which may make it harder to recoup losses in the future.

Now that you have had a chance to go through these brief suggestions, think about your own situation. Do you want to be eating ramen or relaxing on a beach when you retire? There is no better time than now to stay balanced, diversified, and save, save, save!

*http://time.com/money/4258451/retirement-savings-survey/

 

1728-CLS-5/27/2016

16
Jun

The First P: People

Business people meeting at table in conference room

Content provided by Rusty Vanneman, CFA, CLS Chief Investment Officer

I’m often asked to describe the role of a Chief Investment Officer (CIO). A short answer that seems to work in many parts of the country (especially here in Nebraska) is that a CIO is like a football coach. The CIO is accountable for the investment team, how it’s managed, and how it ultimately performs. Of course, a team doesn’t just depend on one person. It takes a lot of talented people working for the same purpose to make a winning team. At CLS, I’m lucky to have one.

Another way I describe the CIO’s role is being responsible for the four Ps: people, philosophy, process, and performance. The four Ps have provided an effective checklist throughout my career, not only in managing my team but also in selecting money managers for my clients.

For many years, I worked in Boston. I was either on, or managing, high-performing teams building portfolios of mutual funds. To do my job, I interviewed Portfolio Managers across the country and who managed every asset class, conducting well over 2,000 interviews. Our task was to identify managers and funds that we could confidently use for our clients and shareholders. After doing our due diligence, did we trust the managers? Respect them? Like them? In that order actually – and we didn’t have to necessarily “like” managers if we thought they were good, but we did need to have a working relationship with them. What I’ve learned from that experience is the most important P to being a successful CIO is the first one: people.

People

How I manage the people on my team is by offering them respect, providing resources, and facilitating an open, collaborative atmosphere. For a more complete picture, here are a few questions I’m often asked about our team at CLS:

  • How does the portfolio management team make decisions?
  • Each strategy at CLS is team-managed. Each portfolio vote is majority-rule; it does not have to be unanimous.
  • How does the CLS Investment Committee (IC) get involved in investment decision-making?
  • The CLS IC is comprised of the senior investment professionals at CLS and additional senior management. It meets quarterly. The IC is fully responsible for two items: (1) the CLS Risk Budgeting white paper – our foundational document for how we manage money, and (2) the CLS Investment Themes, which every CLS portfolio must articulate in some way. These IC votes must be unanimous.
  • Does the team have good chemistry?
  • Successful investment professionals typically have a combination of humility and confidence (some may call it ego!), so we do have some spirited internal debate on the markets, portfolios, and performance. But we are a team built for performance. We play hard each day at practice, but we are unified on game day.
  • Does the team have adequate resources?
  • At CLS, we have a dozen people on the investment team. Compared to other ETF strategists (i.e., money managers who build portfolios mostly of ETFs), this is very competitive. And we have multiple people who have managed money for several decades, including veterans from Fidelity Investments in Boston, Goldman Sachs in New York, and Russell Investments in Seattle. Our team members also have experience at TD Ameritrade, Schwab, and E*TRADE. We have a variety of third-party tools ranging from FactSet to Bloomberg, which help with security selection and portfolio management. Bottom line, we’re loaded with resources (but, of course, we always want more)!
  • What are our credentials?
  • Besides our many years of investment experience, we currently have five Chartered Financial Analysts (CFAs) on board. We also have three candidates sitting for their final exams in the next few weeks. We have a Certified Investment Management Consultant (CIMA®), a Chartered Market Technician (CMT), and a portfolio manager who is a Chartered Alternative Investment Analyst (CAIA) candidate.
  • How accessible are they?
  • At CLS, we like to think we are primarily known for two things: Risk Budgeting and the access advisors have to our portfolio management team. We communicate often, whether through presentations, written commentary, videos, or podcasts. We want advisors and investors to be comfortable about how we manage their money. CLS portfolios should behave as expected. If investors are receiving our messages, there are no surprises.
  • Are they disciplined? Competitive? Passionate about the markets? Achievement-oriented?
  • Personally, these are all qualities I look for in investment professionals and new hires. This is the environment I want to foster and the environment advisors and clients should expect.

This first P: people, is critical to understand when selecting a money manager. Ultimately, it’s about developing comfort with that person – do you trust them, respect them, like them? That, in turn, should lead to comfort with a portfolio or strategy and how it behaves over time (recognizing, of course, that no strategy works all the time). An investor doesn’t want to be surprised by how a strategy or portfolio behaves, so make sure you conduct this first step of due diligence and select the right person for the job.

Stay tuned for my take on the next three P’s.

1716-CLS-5/25/2016

15
Jun

A Family Business

Vitallo Family

Mike, his wife Teri, and their children, Cody (7), Luke (8), and Kate (5).

Content provided by Robyn Murray, Freelance Writer

Mike Vitallo began his career in the printing industry. In a small town outside Chicago, he printed catalogues and brochures with his two brothers at a company founded by his father. Mike Vitallo Sr., the grandson of Italian immigrants, built a thriving business and instilled a respect in his son for the value of a dollar and a day’s hard work. “I started there doing janitorial work just to make money in the summertime,” Vitallo recalled. “I probably could have gone into any job there, but I think my dad wanted me to start at the bottom and work my way up.”

Today Vitallo works at a company that is little like the print shop and miles from his Chicagoland home. He’s an operations project manager on the trading desk at CLS Investments in Omaha. After 11 years in printing, he decided to try something new. It’s a different place and a different type of work, but one thing has stayed the same. It’s a family business.

“He learned how to make do with little”

When Vitallo was growing up, he watched his father build his printing company from a small 1,500 sq. ft. shop to a large, successful business that employed hundreds of people. He knew what the success meant to him. His father didn’t have much when he was a child. He was the grandson of new immigrants who scraped by to make their way in a foreign country. Vitallo’s father told him stories about attending a camp for underprivileged children as a boy, and he knows the lessons from his childhood stuck with him. “He learned how to make do with little,” Vitallo said, “so once his business became successful, I think those values stuck with him.”

After getting a degree in business and marketing, Vitallo joined his father’s company and worked his way through different positions, from contacting film to designing page layouts. But in 1997, his father sold his share of the company and Vitallo decided to make a switch. He moved to Omaha to be closer to his wife’s family, who lives in Grand Island, and after a few years with a local printing company, he took a chance and enrolled in a training program at TD Ameritrade. He’d always been interested in finance, and his father’s success had prompted him to think about managing money and putting it to work. “Stock picking, analyzing stocks, and figuring out what’s a good buy,” he said, “the thought of managing money or helping people manage money, always interested me.”

After a year at TD Ameritrade, Vitallo got his Series 66 and Series 7 licenses and went to work at Orion, a subsidiary of NorthStar and sister company of CLS. In 2012, he moved over to CLS’s trading desk where he now works with a small team and enjoys the daily challenges of figuring out trades and navigating the ever-changing markets. “Coming up with the strategy and working out how to get the best execution is challenging and fun,” he said. CLS’s portfolio managers, whose performance depends on success at the trading desk, keep him motivated. “Every basis point counts,” he said, reciting the team’s motto. “We try to do the best we can for the team.”

It’s a good fit for the hard-work ethic his father instilled in him but also for what Vitallo views as the most important value his parents imparted: family. Aside from working together, the Vitallos spent holidays in typical Italian-family style. “My parents would host Easter,” he recalled, “and 50 people would show up.” At NorthStar, founded by Patrick Clarke, whose sons run the subsidiaries, Vitallo has found a comfortable fit. “I’ve been at NorthStar for 10 years,” he said, “so I think there’s something to be said about the company, the environment, and the family atmosphere.” NorthStar and CLS put people first and place a value on family and work-life balance – something Vitallo appreciates as he and his wife are kept busy raising their own family of three kids. “When you’re younger, it’s all about work,” Vitallo said. “But now, I don’t want to miss out on my family.”

1729-CLS-5/27/2016

26
May

In His Counting House

Drew Pic

Andrew, with his wife Stephanie, are expecting their first child in September

Content provided by Robyn Murray, Freelance Writer

It’s Christmas morning, and brightly colored wrapping paper lies in shredded swirls as four kids sit around the tree tearing through presents. Ribbons, papers, and boxes fly around the room, while 7-year-old Andrew Reisdorff keeps a mental tally. In the lead, his eldest sister with $50 worth of toys. But close behind, his other sister, who still has one more present left to open than she does. In third place, he and his brother are neck-and-neck.

This is how Christmas works in Reisdorff’s number-crunching brain.

“I’d keep a running total of how much they got and how much I got,” Reisdorff recalled with a laugh. More exciting than any shiny new toy or gift were running the numbers, besting the competition – and of course, counting the money. “I’ve always liked money,” he said. “I just like accumulating it. I’ve always been a saver.”

At home, Reisdorff made a mini business of penny sales, selling stuff he didn’t want to his siblings and making small profits. (When your parents buy it, you don’t have to sell it for much to make a profit.) At school, he’d trade football and basketball cards, feeling exhilarated when he made a good deal.

Today, Reisdorff is still counting dollars and making trades. But the prices have gone way up.

From the Playground to the Trading Desk

Reisdorff, a 6’ tall guy with an easy laugh, grew up on 15 acres of prairie farmland outside Lincoln, NE. His father, an accountant by day, planted rows of spruces and pines and turned the land into a tree farm where families could drive up and pick out their Christmas trees for the holidays. It was a small, successful side business, and it kept the family busy. Reisdorff learned a little about managing money from the business and watching his father work as an accountant. “It brings security,” he said. “If you have money, it’s not something you have to worry about. If you don’t, it’s something you do.”

Reisdorff envisioned himself working at a bank, providing loans for homes and cars to his neighbors. He hadn’t imagined the possibilities of finance until he went to college and enrolled in his first general finance class. After he graduated, he took a job providing loans at a finance company in Omaha, and four years ago took a position with CLS. Now, he is on a team responsible for making multimillion-dollar trades. The team works with brokers to get the best trading prices, or trades directly, which Reisdorff enjoys most. “Trying to get the best price, moving it up and down, trying to get someone to come to your price,” he said. It reminds him of being back on the playground trading cards. “You’re trying to get the best value for what you have to give up. Both sides have to agree, but obviously you want to come away pleased.”

Reisdorff enjoys the team he works with and the company. “It’s growing,” he said, “which is good to be a part of. Every six months or so, there’s something new here. It’s never stagnant or stale.” Reisdorff’s personal life is growing too. He got married last summer, and he and his wife are getting ready for a baby in September, painting rooms and picking out names.

If anyone’s keeping tally, Reisdorff is doing well. He might not be living the dream, but he’s pretty close. “A dream job would probably be to run a pro football or basketball team, but that’s a pretty big dream,” he said with a laugh. “No, this is where I want to be.”

1721-CLS-5/26/2016