While outsourcing remains thebuzzword among practice management aficionados these days, Timothy E. Johnson, PhD, president and chief executive officer of Johnson Investment Counsel in Cincinnati, is in-sourcing every service he can. "In-sourcing is cheaper if you have good staff and are detail oriented," quips this professor of finance at the University of Cincinnati.

So far, his tactic is working. Johnson runs the largest independent wealth management firm in Ohio. His trusted staff of 91 employees manages more than $4.8 billion in assets and consults on the management of another $8 billion. The plethora of services offered at the firm-which has become something of a behemoth over the years-has grown organically from the needs and requests of Johnson's clients.

FILLING A NEED

In 1993, some of Johnson's smaller clients expressed a need for broader diversification. These clients-most of whom were children of his bigger clients-wanted more options for their portfolios, though they had only relatively small amounts of money to invest. As a way to create diversification for these clients, he launched the Johnson Mutual Funds.

Today a staff of five oversees the management of 14 mutual funds that have no redemption, sales charge, exchange or 12b(1) fees. Johnson's employees handle all of the fund accounting, shareholder servicing and administration for funds worth approximately $550 million in aggregate. The funds include everything from large and small caps to municipal income funds, REIT funds and international funds.

Five years later, Johnson noticed that his clients had grown concerned about allowing anonymous bank departments to act as trustee to their family assets. This led him to create the Johnson Trust Co., a venture of which he is particularly proud.

The trust company is a single- purpose non-depository bank (trust powers only) and a wholly owned subsidiary of Johnson Investment Counsel. A separately incorporated entity with its own board of directors, the firm is one of only two independent trust companies in the state of Ohio that are state chartered. The customer service is staff intensive, with eight employees working for the trust company, including two in-house attorneys.

Admitting that trust companies do not make much money, Johnson understands why most advisory firms avoid them. But despite the headaches, he sees several advantages to running a trust company, including the steady stream of multigenerational clients it brings to the firm. It also allows him to provide complex trust services that other banks do not provide, such as defective grantor trusts with closely held stock and complex charitable gift vehicles.

In 2004, Johnson noticed another growing demand within his firm. Clients were calling his office and asking to have several shares of one stock and several shares of another sent to their favorite charities-and in many cases, several different stocks to several different charities. Completing these requests with clients' highly appreciated stocks became an administrative nightmare for the firm.

And so he created the Johnson Charitable Gift Fund, into which clients could put large amounts of appreciated stock that would then be managed before being distributed to charity. The fund operates like a community foundation. Clients establish donor-advised accounts through the gift fund that allow them to take an immediate tax deduction on their gift, but make grant recommendations on their own timetable.

Two full-time employees in the Johnson Charitable Gift Fund manage the contributions in four different investment pools (stocks, bonds, balanced and short term). They also handle the paperwork associated with the gifting process.

ATTRIBUTING GROWTH

How can one person have developed a one-stop shop that is still thriving at a time when the rest of the financial advisory industry is downsizing? (In the first four months of 2010, Johnson added $225 million in net new client money to his assets under management.) Johnson credits the firm's success to the people he has chosen to help him run it.
 
"This whole business is about hiring good people," Johnson explains. "In my 44 years as a financial planner I have never lost a portfolio manager to another firm. They stay here or they retire."
 
To ensure the faith of his 2,100- plus clients in the future of his firm ("We're never going to sell out!" he says), in 2001, Johnson sold the company to his employees, which include 11 CFPs and 24 CFAs. Today the 100% employee-owned firm has 26 shareholders with no one, including Johnson, owning more than 20%.
 
Johnson Investment Counsel has four major divisions and numerous support services:
 
1. The Institutional Division: Six employees manage $1.6 billion in foundations, endowments, pension plans and municipal portfolios.