"We use fund managers who have low volatility rates, even when there is great volatility in the market. We want to consistently generate a positive return. Timber or real estate are examples of alternative investments that could be included in our absolute return strategy," she says.
Clients also are advised to have a dynamic portfolio. Aggressive investors will be directed to emerging markets like China, as well as developed international markets. Clients facing large estate tax burdens in the future may want to have a revocable trust and plan some insurance strategies. Sometimes high-net-worth clients can have a $2 million capital gain that is taxable from the sale of a single stock. Winch might advise using as much of the proceeds from the sale as possible for charitable giving, then selling down each year to offset the losses. But each decision depends on the individual investor.
"You cannot just plop a portfolio on a client. I have been successful because I listen. Although our actual returns vary by client, we have generally outperformed the broad equity market during the past five years," Winch says. "In 2007, an especially volatile year for stocks, we focused on managing risk and preserving value for our clients. Over the course of the year, investment performance was once again well ahead of the broad equity market."
To keep up with the constantly evolving financial planning industry, Winch Financial Services is launching its own alternative investment fund which aims to offer consistent, positive investment returns in most market environments with an emphasis on low volatility and preservation of capital. Although the fund will be capable of generating equity-like returns, its volatility will be tempered to be more consistent with the overall bond market.
Although Winch is in her office from early morning until late, she is far from one dimensional. A singer like her husband, Winch raised her children in a home filled with music. Each plays an instrument, writes music or is in a band, although their musical styles differ. Sam is an alternative folk musician and has written songs for television's Grey's Anatomy. Tanya is a country rock musician, while Adam creates new wave music. Even Thomasson, who was "adopted" into the family, is a jazz fusion artist who is producing an album.
In fact, Sam, now a Winch vice president, started as a songwriter and guitar player, but decided he needed something a little more stable, so he joined his mother's firm.
"I was attracted to the financial world, but I did not know what I was getting into at first," Sam Winch says. "Now I have been here for 10 years and I realize how unique my mother is. She has maintained her sovereignty and independence in the midst of wirehouses trying to gobble everyone up. What we are able to do with our internal analysts is develop portfolios with more subtlety.
"We generally use mutual funds, but we can get sector-specific," he continues. "When energy began leading the market, we put 5% or 10% of clients' portfolios in energy stocks. In a poor market like we currently face, we will go to utilities, which have less volatility than some other investments. We report back to every client a minimum of three or four times a year."
Some of Winch's clients do not really care whether they get frequent reports. Don and Kathy Krueger of Oshkosh, Wis., have a couple of million dollars invested with Winch. "I tell her everything is in her hands," Don Krueger says. "If she needs to make changes, she knows she does not need to ask me. I know we have three international funds that have done well, but I don't know a lot of details and I don't feel like I need to keep watch. I took a lump sum retirement from my utility company position because she said I would do better investing the money than having an annuity, and that has proven true."
Krueger has two daughters and six grandchildren who he anticipates will someday inherit a substantial amount of money from him and his wife, thanks in part to Winch and her associates. He says visiting her office is like meeting with extended family in a living room.