Morningstar Advisor - December/January 2010 - 15

Juli Erhart-Graves, CFP, president, Worley Erhart-Graves Financial Advisors, and partner Grace Worley Fund VCVSX. In addition, she thinks that inflation will become an issue for investors in coming years, so she added portions of the iShares Barclays TIPS Bond TIP as well. And she likes Loomis Sayles Global Bond LSGLX because it seeks out opportunities for bonds around the world. To construct a portfolio, Erhart-Graves maintains a short list of five or six funds in each section of the Morningstar Style Box. She says that she leans toward value, and the resulting portfolios reflect that bias. Then, using Morningstar Office, she digs deeper to make sure the funds have low fees and are tax-efficient. She uses exchange-traded funds when there are large lump sums to invest. She reviews client portfolios once a year. “We don’t do quarterly performance reporting,” she says. “Our philosophy is that what’s really needed is an annual rebalancing. The goal is to pick quality managers who make those decisions on a day-by-day basis.” Even then, most portfolio changes are for rebalancing purposes, not because of performance. “If I recommend a fund or an ETF to a client, that client is going to own it for years and years,” she says. Case in point is Templeton Foreign TEMFX, one of the oldest and most respected funds in the foreign-stock category. Earlier in the decade, the fund’s value orientation held it back from its peers. But Erhart-Graves believed in then-manager Jeff Everett’s ability to keep the fund on track for the long term. She has been rewarded: The fund is in the top 4% of foreign value stock funds over the past three years and continues to hold a respectable long-term performance record. “We knew it was a deep-value fund, and we expected it to be out of step with its peer categories from time to time,” she says. K Ilana Polyak is a New York-based freelance writer. How she caught our eye: Erhart-Graves and partner Grace Worley believe that most people need financial planning before investment management. Career path: Worked various positions at Worley Financial Advisors from 1995 to 2000 while attending Indiana University; from 2000 to 2002, worked as senior investment advisor at Conseco. Returned to Worley in 2002; bought firm in 2008. Personal: Age, 40; married with one daughter, age 15, and two step-daughters, ages 21 and 23. Hobbies revolve around animals. Erhart-Graves is president of the Spay and Neuter Services of Indiana and is the owner of three cats and three dogs. Favorite funds: Schwab Core Equity SWANX, Columbia Value & Restructuring UMBIX, Perkins Mid Cap Value JDPAX. eventually, her clients will transition to me.” This past year, as markets were in turmoil, Erhart-Graves’ warm fuzzies were tested as she had to soothe her nerves. The firm held regular client briefings, including a twohour event at which she and Worley dissected the history of stocks and bonds. They also reviewed the mutual funds they held to assure investors that, despite the market drop, their fund managers were doing better than average. About a third of their clients showed up to the meeting. “Clients went away from that with a much better feeling about the portfolios,” Erhart-Graves says. The firm also sent follow-up e-mails and letters to keep clients abreast of market developments. As a result, hardly any clients made dramatic changes to their portfolios, though a handful felt that they couldn’t stomach the volatility and sold their equities. “Our goal is to build good, all-weather portfolios that you won’t have to flee when times are tough,” ErhartGraves says. “You can tell me as much as you want that you have a high risk tolerance—I’m still not going to put you 90% in stocks.” Emphasis on Asset Allocation Just as she advised her clients to adopt a “stay the course” mentality, Erhart-Graves herself made few changes to her clients’ portfolios. She felt confident that she and Worley had made good upfront investment decisions. “Obviously we want to take advantage of the markets when there are opportune investments, but we’re not market-timers,” she says. She found those opportunities over the past year in convertible securities, mainly through the Vanguard Convertible Securities MorningstarAdvisor.com 15

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Morningstar Advisor - December/January 2010

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