2013 Top 40 Under 40 Countdown: #11-#20
No. 20: Joshua Carter
Firm: Merrill Lynch
Location: San Francisco, CA
Production: $3.42 million
AUM: $747.06 million
A self-described "transplant to the wealth management industry," Joshua Carter is steering his practice toward an underserved segment of clients.
Carter, who joined Merrill in January 2009, is helping lead his group's expansion into the institutional market, handling investments for organizations like nonprofits, endowments and defined-benefit plans. Currently, about 40% of his clients are institutions. It’s a segment that is growing and has become Carter's primary area of focus.
"We fall into the category of really pursuing the ultra-high net worth client as well as institutions that look and feel a lot like ultra-high net worth clients in terms of their asset size," Carter says. "It's a relatively small, concentrated book of clients."
But an endowment of $100 million to $200 million might be too small to attract the attention of the large institutional consultancies that often cater to clients with assets in the billions. Some of those institutional clients, Carter says, are "looking for an outsourced CIO" in their financial advisor.
Carter cut his teeth at Goldman Sachs, beginning as a sell-side research analyst before moving to the proprietary trading desk, where he enjoyed considerable success. But as he emerged from the tumultuous period of 2007 and 2008, Carter concluded that he wanted to move from proprietary trading to a field where he could take "a longer-term approach to investment management and relationships."
"What I think really differentiates our approach is just the care and the focus that we're able to give to each individual client, really because we have a small number of clients," Carter says. "It's really sort of an intimate service model."
No. 19: Thomas Kane
Location: Chicago, IL
Production: $3.52 million
AUM: $748.92 million
There are many requirements to be a great financial advisor, but in Thomas Kane’s view, one rises above the rest: swagger. Swagger – or a “really high degree of confidence”- is the one characteristic all of his clients share, “so to work with them, you have to have a certain amount of swagger yourself,” he says. “If you’re more passive, clients can start to run over you and you’ll have performance problems because you’re being reactive instead of proactive.”
Kane and his two partners work with just 65 clients, most of whom are successful entrepreneurs with investable assets of $40 million and above. Twenty-five of those clients are family offices looking for select services; the other 40 hire Kane’s firm as a virtual family office, handling the full range of issues. “We take a lot of what we learn from working with our very sophisticated family offices and translate that down to families with one-tenth of the assets, giving them best-in-class services,” says Kane. Both he and a partner worked for family offices prior to starting their firm in 2003.
Within the team of three, which has a total AUM of $2.24 billion, Kane’s specialty is alternative investments, including real estate. He says he embraces open architecture to the point that only about 3% of their managed assets “are in anything even remotely related to UBS.” But his real passion is working with people, not investments. “You need someone who is happy to go out and have dinner and drinks with clients every single night – that’s me,” he says. Thankfully, one of his partners is just as happy to arrive at 6 am to begin trading.
No. 18: Matthew Fryar
Firm: Wells Fargo
Location: Des Moines, IA
Production: $3.55 million
AUM: $562.65 million
Matthew Fryar describes himself as “an early adopter,” who welcomed the shift from transaction-based compensation to asset-based fees. “I thought there had been some inherent conflict of interest. The fee-based model lined up better with my thinking,” he says. Now nearly all Fryar’s production comes from fees. His interests and his clients’ interests match directly and grow together, he says. His clients have agreed to have most of their accounts managed under Fryar’s discretion, he says, and he plays it straight. “I don’t make promises I can’t deliver. We take clients through the planning process and if they still want to buy and pick individual stocks,” separate from the investment he has recommended, Fryar tells them, “You can go somewhere else.” He tells them: “My job is to make decisions that aren’t emotional.”
Fryar, who works with a team of four, including a financial advisor and two assistants, started in the business before he had even completed his undergraduate degree. In the early days of his career, he says, his focus stuck on client development and he stayed disciplined. “My goal every week was to have 15 appointments on my calendar,” he recalls. Now, Fryar says, with his thriving client base, he never worries about how many appointments appear on his calendar, simply how he will manage to squeeze all the ones he has with existing clients into his work days.
No. 17: Ron Mencias
Firm: Merrill Lynch
Location: Carmel, IN
Production: $3.56 million
AUM: $435.92 million
Ron Mencias became an investment advisor because he was looking for a line of work with a personal touch. Mencias and his partner, Eric Payne (No. 3 on this year's 40 Under 40 list), are veterans of Ernst & Young, where they began as accountants working with corporate clients. But both felt pulled toward an industry where they could help individual clients achieve their financial goals.
The accounting background assisted Mencias and his partner (who together manage $1.2 billion) as they built their advisory practice. Adding credentials like the CFP certification helped them round out the services they offer.
"It's hard to find two CPAs and two CFPs working together, so I think the tax knowledge and the financial planning knowledge and our discretionary stock portfolios is what differentiates our team from other teams," Mencias says. "We always focus on tax planning, tax strategies. It's not what you make, it's what you keep after taxes that's important."
The client base includes local and regional business owners, along with area physicians, an affluent segment of investors who comprise about 70% of Mencias' personal accounts. And small wonder: Mencias -- whose mother, father, brother and aunt all became physicians -- speaks the language.
"Growing up with doctors in the family allows me to better relate than most people to physicians for sure," he says.
No. 16: James Fink
Firm: Deutsche Bank
Location: Greenwich, CT
Production: $3.6302 million
AUM: $600 million
Every day, James Fink reaches out to new prospective clients. “I’ve pretty much built my business from cold-calling,” Fink says. That’s because he didn’t have a group of friends and family with money who he could prospect. His father worked at the post office and his mother was a nurse. “I didn’t traffic in a network of wealthy individuals,” he says.
Fink says he became a cold-calling believer after using it to win one of his first big clients, the founder and CEO of a company. Before Fink telephoned the CEO, he noticed the company’s share price had climbed significantly. So when he got the CEO on the phone, Fink launched into a description of the services Deutsche Bank provides “that help concentrated equity holders.” Fink predicted correctly that the CEO would be looking for some way to respond to the sudden increase in the value of his own holdings of his company’s stock. The resulting trade, says Fink, was north of $10 million, and that CEO remains one of the bank’s largest customers.
“What I learned is you have to be on the phone. Timing is everything,” Fink says. This year, Fink has had to remind clients who have been anxiously watching the stock market indexes rise that, “we are not going to capture 100 percent of the upside,” he says. Many clients “feel a level of entitlement to returns” and forget that preventing volatility with diversification is a goal that sometimes means leaving some of the market-wide gains on the table, he says.
No. 15: Thomas Hutson
Firm: Merrill Lynch
Location: San Francisco, CA
Production: $3.6307 million
AUM: $3.57 billion
Thomas Hutson-Wiley is anything but a generalist. Hutson-Wiley's client base is exclusively private equity and venture capital general and limited partners with concentrated stock positions in the startup companies they fund. "It is as niche-y as you can get. It is a very specialized field," he says.
A Virginia native, Hutson-Wiley majored in environmental science then went to work for Booz Allen Hamilton, advising companies on how they could dispose of toxic waste. "It just depressed me to no end," he says.
At the same time, the dot-com boom was in full swing, so Hutson-Wiley went west, joining one of the banks underwriting the bulk of the tech IPOs. He landed at Merrill in 2002, where he built an advisory practice around his startup experience.
Life sciences startups are a major area where his clients invest, accounting for at least half of Hutson-Wiley's activities, though he also works with investors in tech, energy and infrastructure, among other industries. "I'm sector agnostic," he says.
Typically, his clients are major investors in early-stage companies. Prominent figures in their field, they commonly have seats on the board, and it falls to Hutson-Wiley to work with the investors to devise 10b5-1 plans outlining an exit strategy to sell out of the company after it goes public, typically in phases, without disrupting the markets or the firm, or arousing suspicion of insider trading. “If you're a bad actor -- in that, if you're not thoughtful about how your sale is going to affect the company -- you might get cut out [of future investment opportunities]," he says.
No. 14: Gregory Klenke
Location: Houston, TX
Production: $ 3.663 million
AUM: $1.53 billion
Eight days after he graduated from Notre Dame, Gregory Owen Klenke joined his brother and his cousin back in Texas in a relatively new and risky venture: starting a PaineWebber practice that specialized in offering equity compensation administration, including such services as cashless exercises for employee stock options. The main goal, of course, was to get in front of executives who were facing a new level of wealth and persuade them to accept some help in investing it.
That was nearly 18 years ago. Now, UBS (which bought PaineWebber in 2001) handles most of the stock option administration details, while the family trio plus a team of seven others handles relationships with all levels of corporate employees at more than 20 Fortune 500 companies. All told, they have 275,000 relationships through the corporate accounts, and about 5550 households that are financial planning clients. “We try to garner all ranges of managers in the companies we work with because the lower-level manager who is worth a quarter of $1 million today could end up becoming CEO,” Klenke says. The other benefit to casting a wide net is training for Klenke’s own employees. “Young guys cut their teeth with the smaller reinvestment clients, and then they work their way up, growing with their clients,” he says. That built-in progression means that hiring is fairly easy. “We have plenty of people who want to buy into that system.”
Stock options and related equity compensation has become more prevalent and more complex than anyone could have imagined two decades ago. None of that concerns Klenke. “The industry has changed significantly and I have no idea what it’s going to evolve to, but that’s not our job,” he says. “Our job is to make sure participants in these stock option plans – particularly the executives and people who administer them - are happy, because that makes it significantly easier to harvest assets from them.”
No. 13: Brian Petrauskas
Firm: Merrill Lynch
Location: The Woodlands, TX
Production: $3.667 million
AUM: $341.01 million
For Brian Petrauskas, the rush to retirement among the boomer generation has created a "sweet spot in the industry," he says. "You've got baby boomers retiring and there's a huge opportunity with literally trillions of dollars of money in motion," says Petrauskas, whose clients are primarily past the age of 50.
After a brief career in real estate, Petrauskas joined Merrill in 2000, developing the focus for his practice in consultation with more senior advisors at the firm. As he was building his business book, the stock market evaporated much of the gains associated with the dot-com boom. That experience, in part, helped instill in Petrauskas a commitment to goals-based investing, rather than chasing the hot stock or trying to time the market.
"The investment philosophy has always been planning-based," Petrauskas says. "One challenge in having this discussion with them is determining the goal of their investment dollars -- is it to have more money [in] 10 or 20 years or even five, or is it to have more money in the next six weeks?"
Particularly for his clients who are in or nearing retirement, Petrauskas strives to build portfolios that will generate sufficient cash flow so "that the ups and downs in the equity market don't bother them," he says. Still, a big part of Petrauskas' job is calming nerves and counseling clients not to react to the latest so-called crisis.
"If you look at everything in history, it all has passed," Petrauskas says. "There will be something else to worry about in a few years."
No. 12 Marc Kessler
Location: Beverly Hills, CA
Production: $ 3.67 million
AUM: $501.85 million
Marc Kessler has built his book on two things: relentless cold-calling, and an understanding that indebtedness is nearly universal. “I had the misconception that rich people don’t need to borrow money because they’re rich,” he says. “What I found out is that they borrow as much as anyone else, just not on their credit cards.” That realization allowed him to differentiate his cold calls by opening with the concept of liability management instead of asset management; bringing up ideas for how to optimally borrow against different types of investments a potential client might already have. And even when that angle didn’t ultimately pan out, it was often a way into a broader discussion that over time could lead to a new client. “It took years, but eventually I got some very large relationships from cold calling,” Kessler says, some of which have become major sources of referrals.
Kessler now specializes in investment grade and non-investment grade taxable and tax-exempt fixed income securities. That’s a good fit for his client base, which includes many professional real estate investors, he says, since both bonds and real estate have an income component. He has been studying the markets since he was 13, when he and his father, an attorney, began making some investments in stocks and bonds together. While he doesn’t hold any of his original positions, he retains a deep understanding of the concepts he learned then. “You have to make money and lose money before you understand what risk-adjusted returns mean and be good at getting them,” says Kessler.
No. 11: Keith Rowling
Firm: Morgan Stanley
Location: Troy, MI
Production: $3.9 million
AUM: $300 million
“It has been very difficult the last 15 years to be an investor, and the next 15 years probably aren’t going to be any easier,” says Keith Rowling. “The question for investors is, ‘I’ve accumulated my capital, now what do I do?’”
Rowling has been trying to answer that question since the age of 16. With an early passion for the markets, he started out running errands for a local advisor, Martha Adams, who played tennis with his mom. Adams eventually became his mentor.
“She showed me a whole different world,” Rowling says. “We were on the road five or six nights a week meeting with clients and raising money.”
He continued working for her through his senior year of high school, and was licensed during his freshman year of college at Notre Dame. He recruited two big clients before he graduated. His first stock purchase was Boeing at $48 per share. “I’m more like a 45 year-old now because I started so early,” Rowling says. “I have always been an old soul.”
When Rowling graduated with a degree in Finance, Adams presented with him with a full time offer. The two still share an office, along with another advisor and two administrative assistants on the team. Rowling has since become the lead on the majority of Adams’ clients, which have $5 million or more in investable assets.