Investment Firm's Secret To Success: Leave No Client Behind

The Hartford Courant

WINDSOR — Fiduciary Investment Advisors is a small firm that helps employers manage retirement plans and helps charitable organizations and wealthy people manage their investments. In recent years, it's added an average of 29 clients annually.

But while the company, owned by eight partners, aims to increase its revenues by 12 percent a year, the first bullet point on the business goals at every retreat is: "Don't lose any clients."

Company President Mark Wetzel said, "It's the first and most important measure." When your clients are happy with you, you get good referrals, and the business grows.

Over the past five years, the business has grown 19 percent on average annually.

Wetzel and 13 others left UBS in Hartford, where they also did investment advising, to start FIA in 2006. "While we worked under a fiduciary contract [at UBS], prospects did not like that we were part of a brokerage firm."

Fiduciary, in plain English, means the workers at FIA promise to give advice that serves the clients, not themselves.

You might think that it would be in a firm's interest to put its clients' interests first, to get repeat business, but the cautionary tale of Jefferson County, Alabama, suggests otherwise. The county went into bankruptcy as a result of converting fixed-rate bonds into floating-rate bonds, and then buying derivatives to hedge the interest rate risk. Politicians were convicted of taking bribes from an intermediary. JPMorgan paid to get the deal done, and the Wall Street bank charged $120 million in fees for the transaction.

In addition to its fiduciary promise, FIA doesn't get more money for putting clients into certain types of investments, or placing their 401(k)s with certain providers. Generally, the firm charges for the amount of time it thinks each task will take.

By the time FIA had been open 20 months, it had 106 clients. At the end of 2013, it had 280. In its seven-year-plus history, it has lost eight or nine accounts, mostly because of mergers, Wetzel said. Not only has it increased its client count by more than 2.5 times since the end of its first full year of business, it has quadrupled the assets under management over those six years.

Maureen Cooper, chief operating officer and one of the founding partners, said about 60 percent of their clients are in Connecticut, and about 20 percent are in Massachusetts.

About 37 percent of the $31 billion in assets that it gives guidance on are in 401(k)s, and about 20 percent are in endowments or foundations, The fastest growing category in the past three years has been the equivalent of 401(k)s for employees of private colleges and universities. Until four years ago, those plans were not subject to the same federal regulations as company plans.

"In the last three years we added 60 colleges and universities," Wetzel said. "All of them all of a sudden needed assistance."

The amount of assets FIA handles for wealthy families is a small part of the total, but, Wetzel said, "We expect that to grow significantly. We're just building out that team to service it."

Wetzel gave an example of one family, where five young adults have each inherited $12 million. He said FIA looks at how to diversify the investment, and, taking each person's risk appetite into account, makes a recommendation. He said it's very similar to managing an endowment, except "you overlay a tax sensitivity."

FIA expects to hire five people this year, which would result in a staff of 47. That's 30 more than worked at the firm at the end of 2007.

For jobs below the consultant level, COO Maureen Cooper said she interviews 40 to 50 people and receives about 80 resumes. Hiring ahead of demand and hiring people who fit in the firm's culture are crucial, Wetzel said. "It's about service, it's about attention to detail."

The most complicated jobs for FIA are when a company decides to get rid of its pension. About 34 percent of the assets it handles are in pensions. While some companies just stop putting money into the pension but still intend to pay truncated benefits when its workers retire, others want to exit entirely, either by moving the assets to an insurance company or by distributing lump sums.

Leonard Bibbo, chief financial officer of Stamford's Boardroom Inc., said FIA was invaluable when Boardroom decided, after months of trepidation, to terminate the pension that had covered its 55 employees.

Traditionally, the company had put about 5 percent of payroll into the pension, but as the market dived, the company would have had to put in 10 percent to 15 percent for several years to get the plan properly funded.

Bibbo said his consultant from FIA gave him all the facts to present to the management team. The consultant convinced them "we could implement a 401(k) plan with really good benefits and free up the company from this drain."

There were so many things to decide: what providers to choose, whether to use an opt-out sign-up for employees, whether to implement automatic escalation. In the end, they chose opt-out, and just one employee isn't saving for retirement.

The company match was the decision that matters most to the bottom line.

"I actually wanted 6 percent," Bibbo said. The FIA consultant "educated me why 3 percent during the year and 3 percent at the end of the year" would be better for the company. The end-of-year contribution is discretionary, not promised, and goes to all workers no matter how much they contribute. The 3 percent during the year is a 50 percent match for a worker's contribution of 6 percent of pay.

Bibbo said he had wanted a 6 percent match because "I wanted to make sure I gave enough to the employees, because we just took away a pension plan."

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