Down in San Antonio, Jeanie Wyatt is making advances on both the investing and customer-services sides of her practice.
This article originally appeared in the April/May 2012 issue of MorningstarAdvisor magazine. To subscribe, please call 1-800-384-4000.
Jeanie Wyatt has been an investor for her entire career, but she has always considered herself more than just a stock-picker. Since the 1980s, she has focused on combining sound investment practices with a commitment to customer service.
“Helping people with their money is such an interesting profession. I’m not sure I could have ever worked in a mutual fund company, where you are managing portfolios, but you don’t have the direct client interface,” she says.
Her San Antonio-based firm, South Texas Money Management, which has nearly $1.9 billion under management and offices in Houston, Dallas, and Austin, boasts not only stock analysts and investment advisors but also client-relationship-management specialists and financial planners.
The Eventful Beginning
Wyatt almost had an altogether different career. She began her studies at the University of Texas, Austin, with a full scholarship as a drama major. Her sights were set on directing children’s theater.
That changed when she was recruited into a new actuarial sciences program at the university. Wyatt ended up switching majors and forfeiting her full scholarship, but she has no regrets about making that switch. She was introduced to investments while still a student, working in the trust department at American Bank in Austin. She then got her MBA at the University of Texas, San Antonio, and became a Chartered Financial Analyst— all while she was married with a small child. After completing her MBA, she hoped to land a job with an East Coast company and applied for a portfolio-management position advertised in The Wall Street Journal. “I knew it was with a bank, and the way it was worded, it sounded like it was in a big financial market,” she says. “So I applied, and to my surprise and disappointment, it was Frost Bank in San Antonio. That was not at all what I expected, and it was not my goal to stay in Texas.”
She went on the interview, got the job, and began a 23-year career at Frost. She quickly developed an appreciation for the bank’s culture and the opportunities she was given. “In less than one year, I started managing their largest common-stock fund,” she says. “I got to manage that with sole discretion, I got to hire people, buy software, and start some new initiatives, like their first hedging program, which was highly unusual for a bank.”
She enjoyed the work at Frost, but Wyatt always knew that she would someday go solo. That day arrived in 2000, after her son had graduated from college.
“This is a very competitive business, and there’s a kind of acceptance that you’ll compete with your former employer. But I worked very hard to make the transition a good one, for the bank and for myself,” she says.
She made it a strict policy never to call on any of Frost’s clients. The bank was supportive of Wyatt’s new firm, and she is its largest custodial client.
At South Texas Money Management, the functions of portfolio manager and client-relationship manager are separated. That results in investment performance numbers that are more consistent across the client base, she says.
“That’s how the firm was organized: the investment side, the relationship side, then, of course, the operations area. We don’t cross over. Our director of equity research, our fixed-income people, and our traders— they’re not doing anything other than working on the portfolio,” she says.
She also instituted standards for performance reporting, having been on the CFA Institute’s international board during development of the Global Investment Performance Standards.
“When I started this firm, I wanted it to be CFA-compliant for performance numbers,” she says. “It’s a big challenge for an investment firm, particularly a small firm, to get that accomplished. You have to include every single client you manage for.”
One Portfolio, Many Accounts Wyatt’s investment team manages one portfolio that’s allocated across separately managed accounts. Wyatt and her team review analysts’ recommendations and make portfolio decisions as a group. The analysts screen for individual stocks first, then narrow their choices by sector. “We can find a lot of stocks that we think are attractive individually, but we want a true balance between growth and value,” Wyatt says.
“Over time, we know that having the value with the growth helps us participate in all market cycles. Because the market cycles tend to be driven by one of those styles or another—usually it’s not both,” she says.
The firm uses Morningstar tools to determine sector allocation. Wyatt and her team build diverse portfolios that avoid big sector bets. “Even if you have the best stocks, when the sector goes out of favor, it’s brutal,” she says.
In 2008, the firm did a study, back-testing to see how sector control affected performance. “Bottom line, it added a great deal to riskadjusted performance,” Wyatt says. “It reduces your volatility and improves your return if you control sector risk. That’s something that the Morningstar tools help us with.”
She uses very few ETFs, making exceptions when a fund is the best way to achieve broad sector exposure. Recently, she used the Utilities Select Sector SPDR XLU because the analysts found that most of the top sector names were behaving in a similar fashion.
Wyatt’s company also includes Certified Financial Planners who manage client relationships. “What we have here is pretty unusual. There’s always been this tension between CFAs and CFPs. Which is more valuable? Well, here, I believe both are valuable, and they play different roles in the firm,” she says.
Clients at the Core
Every client receives no-cost financial-planning services. The firm sells no insurance or annuities; instead, it refers clients to outside providers if planners identify a need for those products. Plans are updated every couple of years, not just when a client signs on.
Clients tend to be individuals or families with an average of $2 million to $3 million in assets. Even among the high-net-worth crowd, Wyatt has many clients who need to manage their money carefully if it’s to last through their golden years. “Every story is different, and that makes it interesting,” she says.
It’s not unusual for Wyatt to work with three or even four generations of a single family.
“One thing that’s becoming more important to families: They want their children and grandchildren to be good stewards of money,” she says. “It makes me very happy when I’m working with a grandchild today, and maybe the grandparent is gone, but I know they are learning things that the grandparent would have been very proud of.”