Rob Isbitts' Declaration of Independence

For Rob Isbitts, the road to independence has been a smooth one. Tired of the New York wirehouse scene, he moved his family to Florida in 1997. In no time, he hooked up with Emerald Planning in Weston. And when Emerald's partners decided in 1998 to launch a new firm, Emerald Asset Advisors, aimed at high-net-worth investors, they named Isbitts president and chief investment officer. We didn't want

For Rob Isbitts, the road to independence has been a smooth one. Tired of the New York wirehouse scene, he moved his family to Florida in 1997. In no time, he hooked up with Emerald Planning in Weston. And when Emerald's partners decided in 1998 to launch a new firm, Emerald Asset Advisors, aimed at high-net-worth investors, they named Isbitts president and chief investment officer.

“We didn't want a stockbroker in a shiny suit. We wanted a Brooks Brothers kind of guy, someone who could solve clients' needs without a product in his back pocket,” says Bruce Levy, who founded Emerald Planning as a high-net-wealth practice with Scot Hunter. Isbitts, who had worked for Morgan Stanley and Donaldson, Lufkin & Jenrette, fit the bill.

It was a good match. In the four years since Emerald Asset Advisors got off the ground, assets under management have quadrupled to $160 million. And Isbitts got exactly what he wanted: independence without having to wear all the hats.

So to what does he attribute his success? Specialization. “You can't be all things to all people,” he says. “To have maximum credibility, find your specialty and be the top person in your firm.”

His specialty is tracking, analyzing and managing portfolios, and monitoring money managers. But instead of doing this behind the opaque walls of a large corporation, he is tailoring portfolios for individual investors.

His interest in finance dates to his teen years, when he watched his father chart stocks. He took a summer job doing office work at a small firm pushing penny stocks, where he realized the “sell-at-all-costs” environment wasn't for him. “I knew I had to create something positive,” he says. “I wanted to make money for people.”

Armed with an MBA from SUNY-Albany, he went to work on Wall Street in 1986. Technology was primitive; portfolio managers were still using ledgers. Isbitts designed a spreadsheet tracking system. At another job he consulted with fund managers at such firms as Invesco and Fidelity. Then he was put in charge of client relationships for a trust company where he got to know money managers.

But he wanted to work for retail investors. Equipped with a Certified Fund Specialist credential, he trained with Morgan Stanley in New York in 1993 and built his book with strategic cold calling. He targeted entrepreneurs, in particular those selling their businesses and those selling shares in a public offering. After a couple years, he moved to DLJ. All the while, he was growing a client base in South Florida, where his parents and in-laws live.

“The reasons for staying in New York dwindled and the reasons for moving to Florida piled up,” he says. Among those reasons was the birth of his first child in 1996, along with his conviction that Florida was a good place to raise kids. He and his wife, Dana, now have three children.

Reasons for going independent piled up, too, and South Florida, with its growing population, seemed like a good place to do it. He wanted to offer clients a wider range of choices in financial products, money managers and resources. But being your own boss can also mean being your own staff and that's what he didn't want.

While still at DLJ, he met Levy and Hunter, who had previously operated an independent office of Equitable Insurance, a sister company of DLJ, and had started up their own firm specializing in estate, retirement and benefits planning for corporations.

“We were impressed with Rob's background and the expertise he could bring to serving high-net-worth clients,” says Hunter.

The firm now has a director of business development, whose focus is marketing, as well as an extensive support staff. Isbitts hasn't donned any extra hats and has even managed to shed a few.

He devotes his time to what he does best: Managing portfolios for clients with $1 million and up. (An associate handles smaller accounts.) He relishes the chance to write his own client letters instead of using canned materials. He still works with business owners, but shifting demographics in the area have brought in more retired and pre-retirement clients as well as wealthy people from Latin American countries. He has a few sports celebrities, too.

“There is no average client,” he says, but notes that more than a few are “refugees from brokerage firms and trust companies.”

To achieve the return that clients need while preserving capital, a portfolio typically consists of stocks, bonds, cash and hybrid investments, which may be mutual funds, hedge fund partnerships or individually managed accounts. The goal of hybrid strategies is to provide stock-like returns with bond-like risks. His approach is multidisciplinary, achieving a balance among money managers to meet the needs of each client.

“We don't just turn over clients' investments to money managers,” he says.

He currently works with only about a dozen managers. “That number is shrinking. We find fewer firms that can deliver performance and communicate effectively with us and our clients. A lot of money in wrap business has gone to just a few managers, some good and some not.”

He works with traditional money management firms such as Brandes Investment Partners, Calamos Asset Management, Baird Investment Management. In addition, he uses Tremont Advisors, a hedge fund of funds; Gateway Fund, which uses a hedging strategy and Principal Protection Fund from ING, which guarantees, at minimum, the return of principal at the end of a five-year period.

“Our clients want to be treated as more than a number. If there's some wrinkle that a client wants, we work with firms that provide it,” he says.

“We educate clients and they ask detailed questions — ‘Why did they buy this stock?’ or ‘Why are they still holding that one?’ If I don't have a good sense of what's going on in the market and with the individual managers, I'm not doing my job,” he says.

Communication with clients, he believes, is key. “When there's been a significant event in a portfolio, a sale or a new theme developing, I send an e-mail to clients. It's not the flowery sales type a money manager typically sends. I put it in bottom-line terms: Here's what's really going on. I get warm responses from clients. They say, ‘This is why I'm with you. Thanks for continuing my education.’”

Clients also have reason to be pleased with performance. He explains that in the growth portion of a portfolio, he strives for an absolute return (i.e. making money) year after year, not just beating the index or achieving a return relative to an index. He did his own study, looking at the S&P from the 1920s until the present, then what he calls the “90/60 approach.” He explains that the goal is to capture at least 90 percent of the market's advance in up cycles, and no more than 60 percent of the decline in down cycles. The proportion may vary, depending upon the needs of the investor, he says, noting that for a retired individual, it might be more like 70/30.

He studies the goals and strategies of each money manager as well as monitoring their past performance in up markets and down markets. To achieve an individual client's goals, he then balances growth or traditional managers with asset protection or hedging strategies, which minimize volatility even in down markets.

The firm serves about 100 families. “We add them one at a time,” he says.

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