Assets under management reach record highs.
In the 28 years that Steven Holwerda has worked at Portland investment advisory firm Ferguson Wellman Capital Management, 2017 will go down as a bumper year for the chief operating officer.
The firm’s assets under management – the market value of assets it manages on behalf of clients – is at a record high. The number of clients it manages money for is also at a new high. “This is a peak for us,” says Holwerda.
It is a time of unprecedented expansion in the financial planners’ sector. The run-up in the price of stocks and other financial securities has pushed up the value of assets that several financial planners surveyed by Oregon Business manage by approximately 10-15% year-on-year. For some firms, the value of assets they manage is at all-time highs.
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It is boom time for money managers, and the new wealth that is coming to Oregon is helping that expansion. Many of Oregon’s wealthy residents have moved here from areas such as California and New York. The population of Portland alone has grown around 10% from 2010, and stood around 640,000 in July 2016, according to US Census Bureau estimates.
Holwerda says Ferguson Wellman has added approximately one client a week with an average account size of $4 million. “We are a beneficiary of new people moving here,” said Holwerda.
Ferguson Wellman Capital Management reported $3.2 billion in Oregon assets under management as of September 30, 2017, a 10% increase on last year.
Around one-quarter of the assets Ferguson Wellman manages comes from wealthy entrepreneurs. Although a portion of these entrepreneurs made their money in tech, they also made money from consumer products, manufacturing, and other industries, he said.
Mark Corcoran*, investment portfolio manager for U.S. Bank Private Wealth Management in Portland, said that anecdotally he has seen more clients reach the peak of their asset values this year. The money manager’s Oregon assets under management reached $2.9 billion at the end of September, up 21% on last year.
The growing wealth in Oregon is evident in the jump in real estate prices in Portland and elsewhere in the state. The Portland area led the nation in rising home prices in 2016, and though the rate of house price appreciation has slowed this year, price increases are still amongst the highest in the country. The median price of Portland home was $380,000 in September.
“There are a lot of people coming in with cash to buy houses,” said Corcoran. “There is a lot of speculation – people are buying homes and flipping.”
The growth in retirees is an obvious boon for financial planners. Wealthy retirees tend to hire advisors to manage their wealth as they age. And Oregon has its fair share of a growing elderly population. The number of people between 65 and 74 is forecast to increase by 64% between 2010 and 2020, according to the U.S. Bureau of Census and Oregon Office of Economic Analysis. By comparison, the overall population is predicted to increase by 10.8%.
The stock market boom has supercharged asset values to record highs, leading some financial advisors to wonder how long can it last.
The current bull market, which has lasted nine years, is the third longest since 1921. The Dow Jones Industrial Average is up 20% year-to-date; the S&P 500 is up 17%. These kind of increases are unusual. Equity prices usually increase around 8-10% a year.
Keith Reiland, director of private client accounts at Jensen Investment Management in Lake Oswego, cautioned that nine years into the current bull market “investors should be more cognizant that volatility could increase.”
Jensen’s assets under management also reached a record this year. As of the end of September, the investment advisor reported that it managed $6.5 billion of assets in Oregon, a 10% increase on last year.
The run-up in values of financial securities has made it harder to find cheap investments. “The biggest challenge is investing in a market that keeps getting expensive,” said George Hosfield, chief investment officer at Ferguson Wellman Capital Management.
The firm plans to partially ease out of U.S. stocks into emerging market debt at some point. The difficult part is knowing when to do that, said Hosfield.
*CORRECTION: A previous version of this article misspelled Mark Corcoran's name.