Imagine Warren Buffett and Garrison Keillor fused into one person and you might catch a glimpse of Ross Levin.

As president and founding principal of Accredited Investors, Levin specializes in attracting high-net-worth clients through his unique blend of behavioral finance knowhow and homespun anecdotes. His firm, based in Edina, Minn., just a stone's throw from the mythical Lake Wobegon, has $700 million in assets under management (not counting certain qualified plans under advisement) and an average account size of $2.3 million. Not too shabby.

But that's only his day job. After he leaves the office, Levin moonlights as a financial columnist for the Minneapolis Star Tribune, a gig that has garnered numerous referrals to his firm, not to mention quite a few fans.

His Dec. 27, 2008 column opens: "In what turned out to be a metaphorically fitting end to the year, I accidentally dropped my cell phone in the toilet." After an erudite tour through the psychology of debt, he concludes: "If you stop focusing on your submerged portfolios, your payback will arrive much sooner than you can imagine... Next year [S&P 500 up 26.5%] is guaranteed to be different from this year [S&P 500 down 39.3%]." And so it was.

Despite his penchant for optimistic endings, though, Levin's approach to the financial markets is far from Pollyannaish. One of his favorite reads, Justin Fox's The Myth of the Rational Market, savages the efficient markets theory as one of the greatest errors in economic history.

Levin believes that the fear investors have been experiencing succumbs too much to the recency effect-the hypothesis that, when given a list of items to remember, we tend to remember the last few things more than those in the middle. We also tend to assume that items at the end of the list are of greater importance. In today's uncertain economy, Levin insists that investors believe that recent investment performance will dictate what will happen in the near future.

His cure for this irrational tendency? Strict asset allocation based on the statistical theory of regression to the mean. He preaches mean reversion to curb investor overreaction.

The theory dictates how he manages both client portfolios and client expectations. It also may explain why more than a quarter of his clients never even bothered to open their financial statements in 2008 or 2009 (somewhat to his chagrin, he muses).

DOWN TO BUSINESS

Accredited Investors, founded in 1987, now employees 35 staff members, including 20 CFPs, five CPAs, one CFA and two others currently pursuing their CFA designation. Two of the four principals in the firm came from large family offices, which means the practice focuses on comprehensive financial planning first, and asset management second.

While the firm doesn't do bill paying or actual tax returns, it assists clients with tax and estate planning, mortgage refinancing and even private business decisions. More than 30% of Levin's clients are physicians, for whom he helps manage the financial side of their medical practices.

The firm charges its clients a 1% fee on the first $5 million of assets under management and 75 basis points on the next $5 million. Fees on assets over $10 million are negotiable.

During the tumultuous past two years, Levin didn't lay off a single staff member, a decision he likens to his philosophical approach to his practice. "It's a little odd to tell clients things will get better and then lay off staff at the same time. If anything, clients need more service and more hand-holding during down times."

TOO BAD TO BE TRUE

While Levin acknowledges that we are in the midst of the worst economy in 80 years, he believes things today are simply too bad to be true.While things may get worse, he says, they won't stay that way.

He expects stocks to outperform bonds over the next decade near the traditional 2-to-1 ratio, just as they did for the 80 years prior to the recent market meltdown. After all, stocks need only return 7% to double the current 3.5% return on 10-year Treasuries.

He does not consider bonds an automatic safe haven for retirement portfolios. He reasons, "People who bought 10-year Treasuries at 5% may have avoided a gut-wrenching crash in the market, but now they must reinvest in Treasuries paying only 3.5%. That's a little more than a 30% drop in their income."

Levin is a strong believer in the detrimental effect human behavior can have on a portfolio. He counsels clients to measure their returns against their personal financial goals, not abstract market benchmarks. He keeps portfolio expenses low by using ETFs and no-load mutual funds.