Whenever Louis Masry's phone rings, it could be another client headed to the hospital. Not long ago, Masry and his associate, Annaliese Blinn, stood by the bedside of a client who'd just had a tumor removed from his face so large that surgeons had to fit him with a prosthetic forehead.
Most of Masry's clients are victims of toxic water poisoning. Masry left behind a five-year wirehouse career--and all his clients--in 1996 to manage the money they received as compensation. The film "Erin Brockovich" told the victims' stories. Masry's father is attorney Ed Masry, Brockovich's boss. Brockovich is the brassy, scrappy legal secretary who championed the case.
In 1993, Ed Masry filed a lawsuit against Pacific Gas & Electric on behalf of 650 plaintiffs living in Hinkley, Calif. The suit charged that PG&E had dumped chromium in the farming town's drinking water, which caused various types of cancer and digestive disorders.
When Ed Masry began arbitrating the claims in Los Angeles in early 1996, Masry was working at Prudential Securities down the street from the hotel where some of the plaintiffs were staying.
"I'd meet my dad at the hotel and got to know about 10 of his clients," Masry says. "When PG&E settled, they asked dad if they could talk to me about investing their money." The 333 million dollar settlement gave the plaintiffs lump sums ranging from a few hundred thousand dollars to 1 million dollars each.
Masry left Prudential, set up his own investment advisory firm, Sunrise Financial Services, then drove up to Hinkley.
Starting From Ground Zero "I walked door to door with my laptop, 15-inch monitor and PowerPoint presentation on the basics of investing," Masry says. "I'd sit in their kitchens or living rooms for two to three hours each, two to three appointments a day." With the start-up costs of a new firm, he couldn't afford to stay in a hotel. At one point, Masry drove back and forth between Hinkley and Los Angeles--about six hours round trip--18 straight days.
"I found people to be very personable, but I didn't find any celebrations," Masry says. "They felt there was never enough money to pay them for what PG&E had done."
Within three months Masry opened 100 accounts.
Masry moved slowly to convert the assets to customized individual stock and bond portfolios. The Hinkley clients were anything but equities investors. More than half of those receiving settlements already had health problems. They needed to be sure money would be there for a lifetime of escalating medical costs, Masry says. His first job was to counsel clients to keep their jobs so they wouldn't lose their health insurance.
Next, Masry advised most to take a portion of the money as monthly income. "If a client received 1 million dollars, I'd assume a 10 percent annual return, then take 5 percent of the account value and have it paid as monthly income," he says. "Prior to the settlement, they typically earned 2,000 dollars to 3,000 dollars a month."
Other than upgrading their homes and cars, most clients didn't change their lives much. "We can work with the money now that they've developed their spending patterns," Masry says.
Masry crafts portfolios from a group of about 60 large-cap stocks he's researched. Thirty are selected for rising dividends, the other half for growth potential. He owns no Internet companies, focusing only on companies that show consistent earnings and revenue growth. His worst quarter so far: down 5 percent to 7 percent.
Few clients had portfolios with more than 40 percent in stocks early on. "It was important to give up performance a bit for a year or two as they got used to market fluctuations," Masry says. Now most portfolios have 70 percent in stocks.
By moving slowly, Masry feels he created interest in the market with a realistic view of risk. "Now they watch CNBC and Bloomberg, but when the Nasdaq was down over 500 points my phone hardly rang," he says. "It's better clients understand risk and earn 10 percent than not understand risk and earn 40 percent. You're only a temporary hero if you do highfliers and your clients aren't educated about the market."
Planning for the Future Sunrise, in Westlake Village, Calif., is affiliated with broker/dealer GBS Financial. Hinkley clients now make up three-quarters of Sunrise's more than 75 million dollars in assets, but only about 30 percent of annual revenues. Masry brought in a broker this year to handle small accounts and build his own business. Blinn also recently began building her own business.
Masry is developing the firm's first marketing brochure to delve into the nearby high-net-worth community. One client already on board: Erin Brockovich. Flush with moneys related to the eponymous film, her portfolio is doing quite nicely, Masry says. And yes, the spunk that fueled her charge agai nst PG&E means she has little trouble taking on the risks of stock investing.
Even so, Masry expects Sunrise to specialize in toxic waste settlements for some time. His father has at least seven pending lawsuits against PG&E in other California towns.
"When these clients call, the talk turns to personal things right away," Masry says. "We share in the new babies and the graduations. We drive up when they have surgeries. It's hard to take sometimes."