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Advisor Profile: Best of Both Worlds

Two advisors take different approaches in their portfolios to achieve the same goals: low risk and stability.

Kate Stalter, 03/07/2011

This article first appeared in the February/March 2011 issue of Morningstar Advisor magazine. Get your free subscription today!

From Stock-Picker to Passive Investor
Tom Posey was confident he was a good enough stock-picker to beat the market. So, when the Houston-based advisor opened his business in 2000, it followed that he chose actively managed mutual funds for his clients.

Before launching Posey Capital Management with his wife, Sarka, Posey had been an attorney and a chief financial officer in the oil industry. In the latter role, he had evaluated investments and acquisition opportunities, and he developed a knack for spotting prospects.

"I felt I could do pretty well as an active manager, and that's what I had in mind doing," he says.

Rather than choosing individual stocks, the fee-only advisor zeroed in on actively managed mutual funds to achieve more diversification for his clients. He was happy with the funds he chose, which included the Clipper Fund CFIMX and some from Dodge & Cox. These were funds with good track records and relatively low management fees. Posey was aware of research showing that indexed funds delivered better returns than actively managed funds. But he remained skeptical, convinced that he could beat the market by choosing the right actively managed instruments.

The Go-To Advisor
It's important to note that Posey's business doesn't center around money management as a stand-alone service. Instead, Posey emphasizes that his company offers comprehensive financial planning, which includes investing, among other services. He credits his background for shaping his approach. In addition to his earlier careers as attorney and CFO, he spent about 18 months at an advisory firm that specialized in insurance products.

"We do retirement cash-flow planning and complete risk management and asset protection," he says. For example, "even after a client has enough property and casualty insurance, we'll look at whether they should have legal vehicles to protect their assets beyond that."

Posey's firm also offers estate planning, charitable giving, and wealth transfer. Services include tax-loss harvesting, wherein a loss on paper can offset future taxable gains. Posey aims to be clients' go-to for all financial issues. If he doesn't have a staff expert in a specific legal or tax question, he refers clients to a network of trusted outside consultants.

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