No. 13: Gregory Klenke
AUM: $1.368 billion
Note: This profile is part of a special series devoted to On Wall Street’s Top 40 Under 40 ranking for 2012. Every day we take a look at an advisor who made the list to find out the secrets of their success.
Greg Klenke’s clients are mostly corporate executives, and his practice tends to focus on their equity compensation programs. Those might include stock options, restricted stock, and stock purchase plans.
As might be expected, such clients often have highly concentrated positions, tilted heavily towards their employer’s stock. Thus, they might be vulnerable to a possible plunge in that stock price.
“We look at it as managing exposure, not reducing it,” Klenke says. “If a client is overweight in company stock, I try to find non-correlated asset groups to invest in.” This is an ongoing process, he points out, because such clients typically get company stock or options each year as part of their compensation package.
“Most of these clients need more exposure to bonds, so that’s usually part of their plan,” Klenke says. “I also look at other asset classes such as currencies and commodities, which are available through ETFs.”
Klenke notes that ETFs play a role in clients’ fixed income portfolios, which might include taxable and tax-exempt municipal issues. “There are many ETFs to choose from now, so I can select the ones that are right for particular clients,” he says. “ETFs are liquid and easily tradable, so tactical moves can be made, when that’s appropriate.”
Fully diversifying a client’s portfolio might not always immediately be possible. “We may have to wait until there are no longer restrictions on trading company stock,” he says. “That might be once clients are no longer employed at that company.” Managing a concentrated position by selling shares is often an emotional issue, according to Klenke, so he must be aware of how clients will react to such a recommendation.
The emotional attachment to company stock might wane after clients retire. “Risk may be reduced by cutting back on the concentrated position and investing in other assets,” says Klenke. “Income generation in retirement might be among a client’s goals, so clients may purchase dividend-paying stocks then.”
Selling shares from a long-held concentrated position can trigger tax consequences, so Klenke works closely with tax advisors. “UBS has set up a network of tax attorneys who are knowledgeable on these issues,” Klenke says, “and I work with some in the Houston area.”
For clients who have moved elsewhere, perhaps in retirement, Klenke will call UBS advisors in the new area for leads to local tax attorneys. “We consider ourselves to be experts at what we do,” Klenke says.