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Analytical and Independent

Jerry Slusiewicz depends on his own analysis and risk-management philosophy to keep client portfolios in order.

Kate Stalter, 01/31/2012

In his teenage years, Jerry Slusiewicz recognized the need for a better approach to managing clients’ money.

Slusiewicz, the founder of Pacific Financial Planners in Laguna Hills, Calif., has a vivid memory of accompanying his father, a General Motors employee, to a meeting with a stock broker. At the time, Slusiewicz was a Michigan high school student. He recalls the broker recommending that his father average down in a stock that had already lost half its value. “Well, my dad did it, and I still remember: That company went to zero. It went completely bankrupt. That hit me, as a kid,” he says.

Today, Slusiewicz manages $80 million for clients, using investing strategies to grow capital, protect capital, provide income when it’s needed, and manage risk.

The Stock Bug
Slusiewicz began tracking stocks in the local newspaper while he was in high school, but his interest in the market took hold in college. He studied engineering at Kettering University (the former General Motors Institute) but was intrigued by a friend’s successful stock trades. A chemistry professor allowed him to pursue independent study on the stock market, which only heightened his interest. He took a job with GM after graduation, though he already was unsure about pursuing engineering. After a short stint at GM, he made his move— to California. After arriving in Los Angeles in the mid-1980s, he didn’t immediately go into the brokerage business, instead opening a car wash with a college friend using some of his profits from investing. That lasted about 18 months, and then Slusiewicz’s finance career began. He joined a penny stock brokerage, then an institutional sales firm, and joined Shearson Lehman Hutton in 1989.

Early in his tenure, a more experienced broker began teaching him technical analysis, and technical analysis appealed to Slusiewicz’s engineering-trained mind and his sense of independence. “I was beginning to understand the importance of figuring things out for myself, rather than being a normal broker and doing what Wall Street tells you,” he says. In particular, he bristled at the idea of putting clients into investments because the brokerage’s analysts gave it favorable coverage.

He soon became a portfolio manager at Shearson. “I could pick among 300 or 400 different stocks and choose my own, and use stop-losses,” he says. The use of stop-loss orders led Slusiewicz to an intense focus on risk management, which is an emphasis at his practice today.

After working at Union Bank and later at Wachovia, Slusiewicz opened Pacific Financial Planners in 2004. Many Pacific clients are retirees who want Slusiewicz’s help managing investments for their children and grandchildren as well. “I deal with Mom and Pop,” he says, “not just the ultrawealthy.”

Actively Adding Value
His portfolios have three flavors: growth, ballast, and income; the emphasis varies by client. He spends up-front time on the planning process, but Slusiewicz believes that he adds the most value by actively managing client investments. "The growth side of my business is money management, and that’s where I spend the preponderance of my time," he says. "I care about my clients, and that’s where I can help them the most."

This emphasis leads directly to Slusiewicz’s philosophy of risk management. "When the market risks are higher, I want to lower the risk for my clients, especially someone who’s now retired," he explains. "I don’t want to make that call and say, 'Mr. Jones, I’ve got some bad news. The market went down 40%, and you’re going to have to go back to work.' "

Slusiewicz prefers to concentrate equity holdings in client portfolios, limiting his choices to 13–15 stocks. While many advisors prefer certain fund families, Slusiewicz remains fluid, using the investments most appropriate for the client and the market conditions.

“This business is very dynamic. It’s the same thing with these mutual fund families out there,” he says. “I am not opposed to using anybody out there, but it seems like it’s a migration. Because it’s a dynamic world and change happens in all parts of our lives, we have to be able to change and be dynamic with our portfolios as well.”

Slusiewicz uses mutual funds and closed-end funds, but he has developed an expertise in exchange-traded funds. He writes a daily column on ETFs and does extensive research into sectors, holdings, fees, and performance. He uses Morningstar.com’s ETF screener, along with the site’s articles, in his research. “It’s always been important to me to find the leading sectors,” he says, explaining how he scouts for ETFs. “That’s one of the things I use Morningstar for. The site has great resources not only for mutual funds but also ETFs, and you can look up what sectors have the best returns over different time periods.”

Slusiewicz prefers more-liquid ETFs, comparing fees and performance before making decisions. He recently invested in the iShares Nasdaq Biotechnology ETF IBB rather than the SPDR S&P Biotech ETF XBI. XBI had lower expenses, but IBB’s superior performance since the market low in August proved persuasive.

“Am I not fee-conscious? Of course I am, but it’s the forest for the trees,” he says. “I’m always going to look at fees, but the performance is a big factor, as well.”

To add alpha for clients with growth- or ballast-oriented portfolios, he’ll often determine the leading stock in a mutual fund or ETF and buy shares of that name. For clients more interested in preservation of capital or income, Slusiewicz will often set up a laddered bond portfolio. This strategy uses fixed-income securities with different maturity or call dates.

When it comes to stock-picking, Slusiewicz’s independent thinking again reveals itself. He doesn’t stick to any market cap or geographic region, preferring to invest in market leaders, regardless of capitalization, sector, or home country. He doesn’t shy away from small caps or even lower-priced equities to achieve growth. He adheres to strict exit rules, so he has more latitude to use volatile instruments than a buy-and-hold advisor may have. However, in the erratic market conditions toward the end of 2011, Slusiewicz gravitated toward stocks that paid a high dividend, or those with growing dividends.

Reader and Writer
Slusiewicz says that he’s constantly reading and tracking the market. “I tell people I read for a living,” he says. But writing and podcasting are also part of his routine. He does a weekly podcast that’s posted on his website, http://www.yourmoneytalks.com.

“The writing crystallizes my thoughts into actionable ideas and words. I lay out the logic behind what I’m doing. From my clients’ point of view, they know that it’s something that I’ve thought out and formalized in print before taking action,” he says.

He sums up his investing philosophy by emphasizing the need to think independently and manage risk. “If more advisors and more individuals focused on that, it would be a much better world for the investment community,” he says.

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