Egypt turned for financial advice to one of Orange County’s top wealth managers—Pence Wealth Management co-founder Laila Pence.
When she attended a conference in July, she spoke with key ministers overseeing the capital markets, providing All-American advice, such as encouraging 401(k)-style plans and stock ownership for employees.
“People work a lot better when they are owners,” Pence said. “The ministers did want to know my views.”
The visit was one of several recent honors for the Egyptian-born investor, who received a Business Journal Women in Business award in 2012. Barron’s continues to rank her highly on a variety of lists, including as No. 10 on this year’s Top 100 Women Advisors in the U.S. Arabic lifestyle magazine Enigma this month gave her an excellence in business award during a ceremony in Beverly Hills.
Most importantly, her firm is growing its assets about 20% annually to $1.3 billion, which is more than double the $550 million it reported in 2010. It now has 30 employees and has expanded to offices in Torrance, Thousand Oaks and Livonia, Mich.
While compliance rules prevent her from advertising the rate of return, Pence noted that money inflows can be a proxy because customers are pleased with the results.
“We’ve had great returns.”
During an interview in its eighth floor office in Newport Beach, she and Dryden Pence, her husband and co-founder, discussed the company’s method for investing, how their advice has changed in recent years, and of course Egypt.
Home Bombed
Laila Pence fled Egypt at age 12 with her mother after her house was bombed during the 1967 Six-Day War. She arrived in New York, where she worked selling hot dogs on the Staten Island ferry and learned English well enough to attend the University of California-Los Angeles.
She began working independently as a planner in 1980, and her first client gave her $20,000 to invest when she was in her early 20s. “I was so excited that anyone could trust me with $20,000,” she recalled, saying she successfully invested the money in MFS Mutual Funds.
When she married Arkansas native Dryden in 1999, the couple founded their firm. He has a degree in economics from Harvard University and previously owned an Arkansas-based investment banking firm that participated in more than $1 billion in financial transactions. He had also served in the Army, where he specialized in psychological warfare and won many awards, including the Legion of Merit. He retired from the Army Reserve in 2015 as a colonel.
Millionaire Next Door
Most of the firm’s clients are 55 and older with wealth of $1 million to $50 million, the majority under $5 million.
“Our clients are frequently the millionaire next door,” Laila Pence said. “If we get the planning and investing right, we’re changing the trajectory of a family, not just for retirement, but for multiple generations.”
She urges clients to educate their children on how to manage money, because if they don’t, they may become like the winners of huge lotteries who go broke after a few years.
A significant change from prior years is that they now recommend clients hire professional trustees because they’ve seen too many legal fights erupt among children after a parent dies. Professional trustees are paid about 0.25% to 1% of assets, which Laila Pence called “a reasonable cost.”
“How much is it worth to keep your family intact after you’re gone?” Dryden Pence said. “A professional trustee gives a buffer. The kids may get mad at the trustee but not at each other.”
Amazing Hybrid Annuity
Another issue is how to manage long-term healthcare, which can start around $10,000 a month in OC, Laila Pence said. It’s so expensive that some children may feel the urge to do it themselves to save money, a strategy that can cause much stress. One option may be an “amazing hybrid plan” that combines an annuity with healthcare that can be paid using a method to save taxes.
“The worst thing is to have an annuity with a lot of ordinary income” that can be taxed, she said.
The company has ditched the standard 60%-equity-to-40%-bond ratio favored in prior years by many wealth managers. With the 30-year bond market rally over, the famous ratio could damage an investor who wants to withdraw 4% annually, they said. Instead, the firm recommends equity ratios from 70% to 90%.
While Laila Pence handles clients and bringing in new business, Dryden oversees the investing side. The firm is urging investments in “big things and chokepoints,” favoring sectors that will benefit from large U.S. infrastructure investments and companies like Amazon.com Inc., Boeing Co. and the Walt Disney Co. Dryden said he thinks about what consumers will be doing over the next five to 10 years.
“If you can figure out what 100 million people are going to do before they do it, you’ll probably make a lot of money,” he said. “We look for companies that will be the dominant providers of what human beings want.”
Egypt Beckons
The Pences are good friends with Mohamed El-Erian, the world-famous economist and investor who is of Egyptian descent and is on the Business Journal’s list of the 50 most influential people in the county.
During her visit in July, she attended the Egyptian Women Can conference that featured the achievements of 31 Egyptian expatriates, such as a naval commander in Australia, an award-winning scientist in Canada, and Google’s top female technologist from Germany. She was one of 13 from the U.S. The conference was carried live on Egyptian television and she, the only wealth manager represented in the group, said she was interviewed often by the Egyptian press.
Many Egyptians invest in real estate or stash their savings under their mattresses instead of investing in the market, she said. She advised Egyptian ministers that one of the keys to U.S. growth is the ability of companies to raise capital in the markets. She noted the Egyptian market has only 220 companies publicly traded and advised the ministers to encourage more listings. A good role model for a stock market is Turkey’s, which she said is the world’s fourth best-performing market this year.
She came away impressed with the progress of women in Egypt, noting that there are four female ministers in the government and 90 in the 600-seat Parliament.
“I feel for the first time that change is coming.”
