Peter Haack, Investment Growth Corp., Northbrook, Ill.
When Peter Haack set up his RIA firm, he chose to leave behind all of his clients--six years' worth of relationships with wealthy individuals and corporations. Haack had run a small brokerage and investment advisory as an affiliate of a law firm. The law firm partners wanted him to focus on commission business.
By 1990, Haack realized he couldn't handle the "internal moral conflict" of commission business anymore. He left to set up his own fee-only RIA firm, Investment Growth Corp. in Northbrook, Ill. "I felt if I couldn't do this from scratch, I didn't deserve to be in the investment advisory business," Haack says. His basement served as the first office.
Investment Growth Corp. now manages 60 million dollars for 80 clients. Two full-time staffers serve clients and develop portfolio reports.
Three years ago, Haack transitioned the business from managing no-load mutual fund portfolios to working with private money managers through an affiliation with Charles Schwab & Co. and Lockwood Financial.
Haack further specialized by helping clients with at least 1 million dollars in assets diversify out of concentrated stock positions while minimizing taxes. "With this approach, I'm successfully competing against players a lot larger than me, such as some of the wirehouses," he says.
Schwab's technology allows Haack to download daily data of every money manager's trades and call the manager directly to talk about changes that concern him. "We can customize client holdings now," Haack says.
Haack admits that he weathered some missteps along the way. In particular, he found that measuring annual asset growth gave him an inflated sense of success. "It's easy to grow assets 40 percent when the market is up 20 percent," he says. "I learned tracking the number of new client relationships and their average asset base gave me a better basis for goal setting."
He also underestimated technology costs. "You never know how many upgrades you're going to need," he says. He suffered, too, from failing to delegate. "I learned it's better to lose a few prospects and let someone else get experience," he says.
Haack is working with a consultant to systematize his business. "When new clients join, my staff runs a tracking system for every record that comes in and holds three client meetings at three-week intervals to make sure nothing falls through the cracks."
Bad marketing strategies also distracted Haack early on. "You get overzealous to build business early on and try anything to bring in anybody," he says. "You forget you need to focus on deepening relationships."