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Driven to Succeed for Clients and Family

Luke Wiley wants to write the book on helping clients reach their potential.

Kate Stalter, 04/16/2013

Don’t tell Luke Wiley something can’t be done. For the Cincinnati advisor, that would only be a challenge to help him achieve a new goal.

Wiley grew up in a military family. He credits his parents for instilling a sense of possibility in their three sons. “My parents never said, ‘Don’t do it,’ or ‘What if you fail?’ They always said, ‘Give it a shot.’ ”

That guidance propelled him to earn a soccer scholarship to the University of Cincinnati and triple-major in finance, accounting, and real estate. An accounting professor introduced him to a friend at Merrill Lynch in Cincinnati. Wiley joined the advisory in 1997, at age 22. He stayed there until early 2009, when he and his brother Zach joined UBS and formed Wiley Wealth Management. The firm has about $260 million in assets under management.

Focus on Client Service
During their years at Merrill, the brothers grew to appreciate the importance of client service. Today, their client base consists largely of Procter & Gamble employees, retirees, and their families. The firm uses what is called the Supernova client service model, pioneered at Merrill Lynch and detailed in the book The Supernova Advisor, by Rob Knapp.

Wiley acknowledges that getting up and running with the Supernova model is labor intensive, “but once you do, you have the whole year mapped out. My clients know the exact date and time I’m going to call them. It creates a tangibility of service. What we do is a little gray, so we wanted to take client service to a whole new level. That’s allowed us to build a special brand within the Procter & Gamble community.”

Ninety percent of Wiley’s clientele are P&G families, and he says the firm’s retention rate is nearly 100%. Every new client in 2012 was a P&G family. Referrals are a key component of Wiley’s marketing.

“I ask clients what they value the most about working with us, and then I talk with them, brainstorm with them, to identify other people who could benefit from the same value,” he says. “Thankfully, they don’t keep us a secret.”

Behavioral psychology is among Wiley’s interests. He says that people have beliefs and thought patterns that limit their potential. He strives to overcome them himself and to help his clients do the same. His study of psychology also applies to his research into investor and market behavior. Wiley cites the influence of writers such as Oaktree Capital Group chairman Howard Marks, Harvard Business School professor Michael Porter, and hedge fund manager Seth Klarman, author of a hard-to-find 1991 investing book called, Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.

Buying the Beaten Down
The Klarman book was instrumental in the development of Wiley’s trademarked “52-Week Low Formula” for identifying beaten-down stocks with good potential for price appreciation.

He appreciated Klarman’s view of stocks trading at new lows and began doing his own research into the potential for such companies. That led him to a proprietary five-step filter for uncovering small-, mid-, and large-cap stocks that showed particular strengths, but were trading at 52-week lows.

That research in turn led him to Morningstar and its ex-research director, Pat Dorsey. Dorsey, who is now director of reseach at the Sanibel Captiva Trust Co., and a group of researchers at Morningstar helped Wiley back-test his strategy. Satisfied with the results, Wiley began using the 52-Week Low Formula in client portfolios. Today, about one third of his clients’ equity positions are in the strategy.

Wiley is writing a book about the strategy. He is in discussions with publishers and expects the book to be released by year-end. Mary Buffett, author of Buffettology and other books about the investing methods of her former father-in-law, Warrren Buffett, is writing the foreword. Mary Buffett is a client of Wiley’s.

Wiley subscribes to Morningstar’s CPMS Advisor Edition software, which lets him use his own filters to screen for stocks meeting his criteria. “It tells me every morning which companies still fit the filter and which new ones have now hit it,” he says. Stocks currently meeting the criteria include Western Union WU, Coach COH, Dolby Laboratories DLB, Bed Bath & Beyond BBBY, and Intel INTC.

Wiley also uses low-expense index funds in client portfolios to capture upside when a value strategy is underperforming.

Most advisors “will put you mainly in mutual funds and hope for the best,” he says. “But I look at free cash flow yield, where you look at buying the whole business. Warren Buffett calls it ‘owner’s earnings.’ ”

Viewing the Inverse
Part of that analysis means drilling down beyond the usual glance at a price/earnings ratio. “Say a stock is worth $10, and it has $1 in earnings and a P/E of 10,” he says. “But what if that company has $90 in debt? So the enterprise value is worth $100. Now when you look at earnings of $1 divided by 100, the company’s free cash flow yield is 1%. Which is less than a 10-year Treasury.” That’s not necessarily conventional thinking, but Wiley doesn’t aspire to conformity. Another writer that has influenced his thinking is 19th century German mathematician Carl Gustav Jacob Jacobi, who often looked to solve a problem by viewing it from the inverse.

For Wiley, that means turning a typical question on its head. “Instead of asking, ‘What is the best way to build wealth,’ ask yourself, ‘What is the surest way to destroy my wealth?’ And that allows you to back into the right strategy,” he says.

While he doesn’t make investment decisions based on analyst ratings, Wiley does appreciate the independent in-house team at UBS, known as Wealth Management Research. “They are accessible, and we do quarterly conference calls with the P&G community and our Procter & Gamble analyst,” he says.

Wiley views that extra measure of service as an advantage he brings to the competitive market for P&G families. “Just like anything, do it a little differently, and provide insight and value,” he says.

Wiley currently serves about 230 families, and he is working to expand that client base. In 2012, he ranked No. 7 out of 7,000 UBS financial advisors, in terms of net new qualified client relationships that year.

One key to that level of success is being grateful for his clients’ business.

“It always comes back to client service,” he says. “We always tell them, ‘It’s absolutely my pleasure.’ And I remind my children: The stuffed animals and toys they like—those come from our clients. It’s why I work. To make sure I am keeping my clients happy.”

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