Debra Brede is working longer hours these days and devoting more of those hours to face time with clients than during any period in her more than quarter century in the business–even back in the days when she was a fledgling broker making cold calls in the 1980s. Like most of her peers, Brede finds that she's making less for those longer hours as the level of assets under management has declined.
"In the end, what you're trying to do is keep people from making bad decisions," she says of her current role. "They want to sell everything and get out and have you tell them when to get back in, when things are better. They don't understand that the green light doesn't come on. The best time to go is when the red light is on."
Among the bad decisions that Brede has helped clients avoid was getting involved with the world's grandest Ponzi scheme to date. "I had several people ask me about Madoff, and I said I wouldn't do it," she says. "One even came in right before Thanksgiving and had wanted to put money with Madoff, because his relative was with Madoff. I explained about how when I looked into Madoff I couldn't understand how they were getting these kinds of numbers." When the founder of Bernard L. Madoff Investment Securities and former Nasdaq chairman was arrested on December 11, Brede's perception was proven to be on the mark.
Brede is the president and sole owner of the eponymous D.K. Brede Investment Management in Needham, Massachusetts, a wealth management firm serving a base of 400 "active" clients out of 600 total, with AUM of $434 million as of the end of February 2009.
In the past, Brede says client meetings usually ran about 45 minutes long. These days the average is twice that and the conversations start to veer into the realm of psychology. "It's more than just hand-holding," she says, explaining that a lot of what she's doing is trying to help clients understand that they don't need to turn all of their assets into cash. "I try to make them understand that what you take out you can't recover."
Brede has always urged clients to keep five years worth of their estimated income needs in cash, bonds, or other liquid assets and is now suggesting that they adjust that figure to cover 10 years' needs (see Dealing With the Downturn sidebar).
Although she passed the certified financial planner course at Boston University and has been helping clients plan their financial futures for years, Brede feels that's not where she excels. The firm has a CFP on staff who draws up the actual financial plans for clients. "I will then take that information and build the investment portfolio around it," she says.
Brede personally constructs all client portfolios. "I like what is liquid," she says of her investment preferences. "So if I do real estate, for example, I'll do it under a [publicly traded] REIT investment."
Her range of investing vehicles tends to run the gamut of the traditional–blue chip stocks, mutual funds, institutional money managers, municipal bonds, corporate bonds, and Treasuries. For the most part she has avoided the alternative investment arena. Her aversion stems from her days as a broker in the 1980s when limited partnerships in oil and gas or real estate were all the rage. "I used to read the prospectuses and I just felt there was too much juice in it for the general partners and everyone involved, except the investors," she recalls. "A lot of these alternatives I see as partnership deals [that are] illiquid, whether it's private equity or hedge funds."
Looking at History
Although every prospectus will tell you that past performance is no guarantee of future results, Brede believes that history has some lessons to teach us. "People are not moving on fundamentals in this market, they're moving on fear," she observes. "I look at this market and say, 'What an opportunity!' This is a great time to keep adding to stocks, and to stock funds. I don't think these opportunities come up that often."
She notes that an individual who invested $100,000 in the stock market when she started in the industry in 1980 could have walked away with $500,000 a decade later. "And that was an ugly period of time," Brede says pointing to high levels of inflation and unemployment. Now, however, "We've got low interest rates, commodity prices are fairly low, oil is down . . . and when the fear subsides, this market is going to come back with a vengeance."
Brede is positioning clients for the eventual turnaround with intelligent stock purchases, looking at "great stocks," such as Microsoft, Johnson & Johnson, Coca-Cola, Procter & Gamble, Verizon, and 3M, which have been offering dividends above what 10-year Treasuries are paying. "Not only will we get paid with dividend yields–and increasing dividends–along the way, but we're also going to have a nice move in the market," she explains.
"These are companies that are going to be there. You don't need to have a bank on every corner, but you do need to have Band-Aids, diapers, soap powder, computers, phone service. If you look at a stock like Coca-Cola, it's off almost 39% from its price 10 years ago but the cash flow, the earnings, book value, and sales have all gone up. It's not like Coke is selling less Coca-Cola, it's just that the market is saying, 'All these stocks look bad here, let's get out of them.'"
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