The Blue Chip Advisor

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The Blue Chip Advisor
By Cindy Winchester, Marketing Manager

With recent market volatility born of unstable and less transparent global economies, many advisors and clients will recommit to (or breathe a sigh of relief for) the predictability of U.S. blue chip stocks. While values and perhaps even earnings for these reliable large cap companies may be adversely affected by the correction underway, history shows that stock prices for their equities may be expected to recover faster and continue to yield dividends to their investors.

For that reason, blue chip investors are some of the most loyal shareholders in the market. What investment manager has not been forced to build a client portfolio around the blue chip holdings passed down from a parent or grandparent, the IBM stock that was given as a graduation gift, or the Exxon shares accumulated since childhood?

So, are you a “Blue Chip Advisor”? Is there correlation between the defining characteristics of these mammoth organizations and our more modest sized firms? Are you the dependable resource clients turn to when financial issues are at hand? Do your clients recommend you to their friends and “pass you down” to their heirs? What else can we learn from these admired companies? We believe that the parallels abound between blue chip companies and the best-of-the-best advisors and, with that in mind, begin to examine the traits to emulate as your advisory firm prepares for the future.

Blue Chip Defined

Interestingly, there is no formal list of blue chip stocks with clearly defined requirements for inclusion, but they are generally thought of as being represented by the 30 stocks found in the Dow Jones Industrial Average (DJIA) – the equity shares of the highest quality companies in America. Blue chip firms are giant companies with solid reputations. In fact, Oliver Gingold of Dow Jones is credited with coining the phrase in 1923 in reference to high-priced and high-quality stocks.1 Most sources attribute his use of the term as being a reference to the highest value chips used in the game of poker.

Today, the term is widely accepted to describe a well-established, financially sound firm with a long history of stable or rising dividends. Many of these companies have become household names by offering high-quality, widely accepted products. Their market reputations are solid, and they are typically market leaders – within the top 3 companies in their market sector. Blue chip companies tend to “stick around,” weathering downturns and operating profitably in the face of adverse economic conditions, and most exhibit the potential for long-term growth.

Because these companies are publicly-traded, statistics are widely available to support their financial history, and much has been written about the strategies that have led them into the spotlight. It is not our intent to provide a detailed profile of any one of these corporate giants but to examine the parallels that might be made between these solid firms and the privately held advisory practice of today.

Over the course of this series, we will outline steps that advisory firms can take to model these admirable characteristics and maximize their proprietary value. As our industry sector prepares for a massive shift of client wealth, we are simultaneously preparing for the transfer of advisory businesses from one generation to another. If current advisors expect to benefit from the sale of their private – and often very personal – firms, valuations may be enhanced by ensuring that the company has blue chip qualities.

Are you a Blue Chip Advisor? Have a great example for us? I would love to hear your ideas and incorporate them in future stories. Give me a call (ext. 356) or send me an e-mail at

To learn more about The Blue Chip Advisor click here to download the white paper.

If you have questions please email Cindy Winchester at

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