As a certified financial planner and chartered financial analyst, Sam Huszczo, founder of SGH Wealth Management LLC in the Detroit suburb of Southfield, Mich., builds his own model portfolios to meet his clients’ wealth management needs. He says he would be fine with picking stocks for the equity portion of his portfolios, but why do that when exchange-traded funds make the job easier? That said, he puts his CFA background to use when parsing and selecting funds.
Schlegel: Tell us about your practice.
Huszczo: Here in Detroit we have a lot of blue-collar people. My firm works with blue-collar and white-collar people who are great savers. If a client is a great saver regardless of their economic position, we feel we can take that piece and get them on the most efficient path to achieving their goals. We lead with retirement planning. Given my CFA background and experience, I run five model portfolios ranging from conservative to aggressive, so all of my clients have the exact same investments, but the percentage of those investments change based on their risk tolerance. By leading with comprehensive retirement planning, it lets us understand their goals and the risk they’re willing to take to reach those goals. We focus on the risk.
I was a lone-wolf shop during the first 10 years of my career, and in the past five years I’ve started the process of taking a wider firm approach. We have three employees now. The most important thing I’ve come across is the systemization of things that enable me to scale the business and take on more clients than I can serve just by myself.
Schlegel: Describe a little more about your clientele.
Huszczo: I started this business from scratch and had to build it through networking. General Motors is a huge company in our area, and fortunately I was able to find a few people from there when I was 23 or 25 years old and looked like I was 16. They remain my clients, and I met more people through them and my business grew from there. My primary client base is General Motors employees, at this point mainly senior management, VPs and C-level folks. I also have a huge foothold in Federal-Mogul (an automotive parts maker and distributor), Ally Financial, Lear, Chrysler, Ford, etc. But GM has been my primary driver. And I have worked with professional athletes in the past, but found I didn’t enjoy that space as much because it’s a lot more budgeting and hand-holding, and I enjoy the investment aspects more. But I still work with NBA executives and sports agents.
Schlegel: What role do ETFs play in your client portfolios?
Huszczo: Currently, I’m completely in ETFs for the stock side of my portfolios. I still use active mutual funds for fixed income because they’re still more competitive from an expense ratio standpoint, and I think you can outperform in the bond space with active management. On the stock side, I believe in the market’s long-term trends and that the large-cap market is efficiently priced. In that area we’re trying to give clients exposure at the lowest possible cost.
I believe there are price inefficiencies in the mid, small and international spaces, and in these areas we use factor-based ETFs. For example, we use ETFs with low-volatility factors to hopefully reduce some of the risk within equities without getting out of equities.
Schlegel: Which ETF providers do you tend to use?