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Q & A by Sunny Nunan and RGT’s Tim Weber

03.29.12

What inspired you to join RGT after a 19-year career with Goldman Sachs?

Wall Street firms are generally filled with very entrepreneurial people, very hard working and quite creative. It's that entrepreneurial spirit that always has you wondering if there is a "better way" to do your job or a better platform from which to do your work. Then at some point the lines cross and it becomes clear that it’s time to be someplace else. I have known Mark Griege for 18 or 19 years. Interestingly, after I left Goldman, RGT was the first firm I met with before looking around at a number of other shops. I knew I wanted to stay in a direct, client-facing role, offering independent un-conflicted advice. Quite frankly, no other firm was the "bulls-eye" for me as was RGT. I have watched RGT grow over the last two decades into one of the nation’s leading independent firms. I came to the place where I knew this would be the best platform from which to continue serving clients, some of whom I have worked with for as long as 18 years. The opportunity to be an owner of a terrific, steadily growing business, in the company of wonderful partners, created the perfect storm that lead to an easy decision. I also saw the full slate of Family Office services provided by RGT as a real competitive advantage. Every aspect of a family’s financial life gets a big assist from that part of our firm, which is a service typically only available to families with very significant net worth.

What changes or consistencies have you seen in the area of wealth management over the past 2 decades?

The business has evolved significantly over the past 20 years. When I first got into the "high net worth" world, there were only a few Wall Street firms that focused exclusively on the very high end. Independent firms tended to be quite small, very boutique-like and typically under-resourced. The biggest changes have involved the access to information, the improvement in technology and the leveling of the world in terms of access. What has NOT changed is that this continues to be a very client-focused service business. People entrust their financial world only to someone they whole-heartedly trust. Initially, that trust is mostly given by the client and the money management firm increasingly earns into that trust over time. This is what really separates the individual business versus the institutional business. The other interesting fact is that the independent world, the RIA community (registered investment advisors), is the fastest growing segment of the wealth management business. Big banks and Wall Street firms have been the subject of tremendous public scrutiny over the past 4 or 5 years, and through direct client feedback we have all come to realize the trust level of those firms is not what it used to be.

How does hiring an advisor that acts as a fiduciary offer better investor protection versus a broker-dealer model?

That’s a very important question. It's a really a question of "standard of care". Brokerage firms are agents and their standard of care is essentially the test of "does your client understand what they are doing or asking for?" and if you, as a broker, can answer yes to that, you can help a client execute a trade or a strategy. If you are a fiduciary for your clients (the RIA model), your standard of care is much higher and the question is "are you acting in the best interest of your client?" This is a much higher hurdle. Banks and Street firms often have imbedded RIA's. They also manufacture products themselves, which begs the question: “How do you choose a product when you have options that fall on both sides of the fence -- your company’s products versus an alternative brand?” This is essentially a question of incentives (how do you, the RIA, make money?) The conflict is there, so the question is “how does your wealth manager work through that inherent conflict?” When you have entrepreneurial people evaluating incentives, your trust level of the decision maker needs to be very, very high. The better alternative, in our view here at RGT, is to eliminate the conflict altogether and not be a product factory at all.

Does every high net worth individual need a wealth management firm? Can’t some just manage their money themselves?

Great question. It’s really a question of allocation of resources. Almost everyone would say that one of their most precious resources is their time. Probably two-thirds of what a firm like RGT does can be accomplished directly, by the client, with no need for assistance. It just comes down to the clients time, and how they want to spend it. Do they want to spend their time learning the intricacies of managing wealth and executing that portion of their financial life? The other one third of what we do would be enormously difficult for a client to execute without a firm like ours. Said another way, how much is financial peace of mind worth to a high-net worth individual? Or anyone for that matter? Is paying a firm you’ve come to trust worth getting your time back? Is it worth paying a reasonable fee to gain peace of mind in knowing you have world-class professionals at the helm managing your money every day of the year? People pay folks to mow their lawn, change their oil, rotate their tires, re-roof their home, perform their surgery and fly them everywhere they go. You see the point. Some of those items are easily accomplished should you choose to do them yourself. Others, not so much. Having a dedicated professional makes terrific sense. I often ask clients to think of their balance sheet as a business. And then to ask themselves if they bought a business for that amount of money, what would it cost to run that company everyday? To hire the best management team available? This is very important stuff, and making sure you have the very best management team possible on the field everyday is the best move a client can make.



posted by Rachel Meador on 03.29.12 • comments (0) •