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Whom Do You (Trust)

The brokerage business is good or better, at least. The market is climbing slowly, firms are showing a profit and hiring again (albeit after massive layoffs), and, according to industry studies, affluent investors are in search of advice. The bad news is that the mutual fund fiasco and impropriety at many firms have thrown the money industry into ill repute. Studies show that many affluent investors

The brokerage business is good — or better, at least. The market is climbing slowly, firms are showing a profit and hiring again (albeit after massive layoffs), and, according to industry studies, affluent investors are in search of advice.

The bad news is that the mutual fund fiasco and impropriety at many firms have thrown the money industry into ill repute. Studies show that many affluent investors do not trust the integrity or knowledge of financial advisors. Regulators are constructing hurdles out of stacks of disclosure documents and threatening to trim broker paychecks by restricting or banning 12b-1 fees, revenue sharing and soft dollars.

It promises to get worse. The Senate Banking Committee recently heard from a panel of angry — and powerful — consumer advocates, including Barbara Roper, director of investor protection at the Consumer Federation of America. In her comments before the Committee, Roper highlighted the problem of brokers “representing themselves as advisors, when, in reality, they are salesmen,” pushing product.

Given this climate, this year's Outstanding Broker Awards are a refreshing reminder that there are still exceptional reps working in the industry. The nominees and winners of the 24th annual awards by and large belong to a class of reps likely to avoid the probing eye of regulators, because, simply, they have nothing to hide.

The 10 winners have years of experience building their practices, and they know what it takes to retain clients and how to push a practice through the rough spots.

With an average of nearly $300 million dollars in assets under management, the winners as a group place among the top 5 percent of the industry, according to Cerulli Associates, a Boston-based research firm.

Mixed Bag

The business models and backgrounds of each of the awards recipients vary widely. Some are wirehouse, born and bred; others are proud independents. Some favor financial planning and in-house investment management; others lean on third-party research and independent management. Some started their careers with the stated goal of becoming a financial advisor; others backed into the industry.

Whatever their specialties or unique histories, all have practices with one thing in common: clients who stick with them through thick and thin. The reason for this is simple. The clients trust these advisors.

“Good financial advisors share their insight and expertise with their clients, but truly outstanding brokers do more,” says James Donley, the president of Wachovia Securities' private client group. “In helping their clients achieve their financial and life aspirations with professional, objective advice, great brokers strengthen the bond of trust that is the underpinning of client relationships and indeed, professional success.”

One of the best ways to measure the trust placed in an advisor is by the number of referrals. A referral, after all, is a double vote of confidence: Not only do I trust this advisor enough to keep my money with him, I'm also comfortable recommending him to my friends.

According to a study done in December 2003 by the Spectrem Group, a Chicago-based consulting group, a rep's character might be the ultimate predictor of skill. In a Spectrem survey, 41 percent of ultra-high-net-worth investors said trustworthiness — not investment performance (19 percent) — was the most important factor in deciding whether to stay with an advisor or not. (Keep in mind, this survey came on the heels of three years of sustained market declines that caused untold number of portfolio implosions.)

With advisors struggling to provide value-added investment council in the bear market, other components of the relationship may have suffered, says Stephen Gresham, executive vice president of Phoenix Investment Partners' private client group. Gresham says advisor alpha — that unexpected value an advisor brings to an investor — has to be a balance between investment council, wealth advice and relationship value.

“If you can't prove your investment alpha, you better be trying to strengthen those other two legs of the stool,” says Gresham.

Unfortunately, brokers are fighting an uphill battle. Stories of heroic, altruistic brokers, while they exist, simply don't make the front pages of newspapers and magazines (except this one, of course). While most brokers run ethical, client-focused businesses, the industry's conflicts of interest (directed brokerage, soft dollars, investment suitability) and its failings (missed breakpoints) have created a crisis of the very thing that investors value most: trust.

Slow Ride

According to Golin/Harris, an international public relations firm, trust develops gradually, so the results of the firm's 2002 Trust Survey mean the brokerage industry has some work to do.

Using a random sample of 700 Americans, Golin/Harris compiled a “trust score” for 24 different industries. The Brokerage/Wall Street category ranked 21st — third from the bottom on the trust scale and a very long way from the average score. By contrast, banks received a trust score nearly 10 times higher, and three times better than the average. The oil business and insurance industries rated only slightly worse than Brokerage/Wall Street.

Fortunately, firms seem to be aware of the problem, and are taking steps to rectify it.

Bob Sabelhaus, director of Legg Mason's private client group, agrees with the findings in these studies for one reason — he did his own and found similar results. As director of the firm's elite group of rainmakers, he knows the importance of trust, especially when it comes to the wealthiest clients, who don't need to see a pointed dorsal fin to know when sharks are circling.

In order to improve client service and relationships among its big producers, Legg Mason — which recently won JD Power and Associates award for client satisfaction — hired a consultant last September to determine what million-dollar clients desired most in an advisor.

“Overwhelmingly,” says Sabelhaus, “the response was ‘I just want to find someone I can trust.’”

If an advisor can earn a client's trust, he or she will earn their assets, and perhaps their friend's assets too. When asked how they wanted to be introduced to an advisor, respondents said “Through a satisfied client,” echoing other studies' findings.

So what can brokers do to earn a client's trust? Doug Schultz, an RIA, former stockbroker and co-author of the book Brokerage Fraud (Dearborn Trade Publishing, 2001) says brokers who want to establish trust must walk the walk.

“Because the honest broker is going to say the same things to prospective clients as the dishonest broker, his actions have to differentiate him,” he says. “Simple as that.”

Schultz says brokers have to make sure investments are suitable, while resisting easy compensation kickers.

“Class B shares are a good example. And flat-fee equity accounts — if a client doesn't trade often, they simply shouldn't be in this type of account,” says Schultz. “You might make less money following this model, but you'll be building a business of clients that will stick with you if you leave, bring you more money and introduce you to their friends. Trust is the building block.”

From there, say industry experts, the business that is built on top of that trust is easier to grow if it has a narrowly focused clientele.

Focus Pocus

The top brokers generally carve out a specialty born of comfort. Ted Ridlehuber of Cannon Financial Institute in Athens, Ga., says, “The most common reason for not effectively building a business is a lack of niches.”

But developing one isn't a walk in the park. “It's easier to teach investment management than it is to build niches,” says Ridlehuber.

But any niche can be profitable if you plug away at it — even one made up of nonprofits.

Outstanding Broker Michael Hull, a Smith Barney rep, has fashioned a thriving managed account business in Madison, Wis., out of charitable institutions and religious based nonprofit organizations. The private-client culture of stocks and bonds didn't gel with Hull when he came to Smith Barney's Madison, Wis. office in 1995, so he took his mathematical and medical background, combined them with his affinity for health care and charity, and picked up the phone.

“When I came there was no natural market for me,” he says. “I knew a couple of doctors, but I mainly had to just start dialing.”

He set to work contacting organizations and offering to review mission statements and spending objectives. While most of his clients are local, their programs reach across the nation.

His clients are unique not only because of their abundance of goodwill. “They have to spend everything they make each year,” he says.

And with health care costs rising 6 percent and 7 percent per year, it's a challenge producing sufficient operating money for a nonprofit medical clinic. For Hull, this is a point of pride — responsibility for the continued success of dozens of charitable programs that affect thousands of lives around the country.

For a lot of people, not just brokers, matching Hull's contributions to community within the setting of work is a tall order.

And that's fine, says Dennis Ceru, director of retail brokerage and investing at TowerGroup. When clients walk in the door they're primarily looking for something much simpler. “They want honest answers to complicated wealth questions they can't get their arms around,” he says.

They're vulnerable, so they want what he calls the “peace-of-mind quotient”: Goal-oriented advice, such as “How can I finance my children's education?” and a step-by-step plan of how you're going to get them there.

Scoring a Goal

“Getting them there” is a huge part of what makes a broker outstanding. Put another way, there aren't any brokers out there achieving wild success by just being really trustworthy.

According to the Spectrem Group's survey, few ultra-high-net-worth investors believe in their brokers' investment skills. Among those who reported not using a financial advisor at all, 41 percent said the biggest reason was they felt “more knowledgeable than an advisor.”

Still, if this doubtful segment can be converted, the industry could really make a killing. According to Smith Barney's 2003 Affluent Investor Survey, 51 percent of the affluent do not have a financial advisor, even though 80 percent have brokerage accounts. And though 80 percent of investors lost money over the past three years, 25 percent are in search of more advice — a sentiment most strongly exhibited at full-service brokerages according to the study.

Unfortunately, other numbers in the study are less buoying. For instance, even though 50 percent of respondents said they didn't have an advisor, 49 percent of those felt they didn't need one. Another 41 percent were under the impression that “advisors just recommend what they get paid to recommend.”

This all suggests that building out your value is the first step to achieving that balanced alpha. One increasingly common way for brokers to optimize their value quotient is by creating a team, says Sabelhaus.

“Running millions of dollars effectively isn't a job for one person if you're trying to provide the highest level of service to a client,” he says.

Dick Gottfred of William Blair & Co., and an Outstanding Broker Awards winner, would agree. He hired his daughter Lindsey in 1999 to help handle the workload he'd inherited when Blair chose him to temporarily manage their high-net-worth private investor group.

Gottfred said getting the group firing on all cylinders and truly working as a team took a couple years. “It's like a marriage; you go slowly and work out the kinks as they appear,” he says. “Walk before you run.”

Gottfred's team is comprised of throwbacks — discretionary stock-pickers who manage nearly all of their own money and provide customized portfolios relying largely on in-house research. The group uses William Blair's research.

Gottfred says a majority of his clients are of the long-term, growth-oriented variety, but some occasionally demand short-term performance. The diversity doesn't bother him at all.

“We urge our customers to call whenever they want — that's the nature of the business,” he says. “You have to make people comfortable. After all, it's their money.”

2004 Registered Rep. Outstanding Broker Awards

Sponsored By Pioneer Investments

Michael Hull
{Charitably Inclined}

Firm: Smith Barney

City: White River, Wis.

Age: 36

Years as a Rep: 9

Years with Current Firm: 9

Production: N/A

AUM: $262 million

Mix: 93% managed accounts, 3% bonds, 1% stocks, 3% funds

Specialty: Charitable institutions and religious based nonprofits

Touched: Private client stocks and bonds didn't fit the son of a public service guru. Maybe there wasn't enough pressure. “These organizations touch lives…I must not lose their money.”

As a financial consultant devoted to keeping the programs of charitable institutions fully funded, Michael Hull's clients might very well consider him an angel.

Hull's consulting work directly affects the continuing operations of programs in mission work, health care, education and others. Lending a hand is a family tradition — his father Grafton is a living legend in the development of several national social work initiatives.

Building houses and landscaping as a volunteer for one of his father's projects in hometown White River, Wis., got Hull hooked on charitable organizations. It was also where Hull learned to appreciate building things from the ground up. Now he helps his clients create their yearly operating budgets by developing mission statements, building portfolios and selecting asset managers.

“We were concerned about our whole situation,” says satisfied client Paula John, the director of the supporting fund for the Archdiocese of Milwaukee. “Michael did an incredible review of everything. I'm always amazed at his wisdom — and he's only 36!” She says her understanding of investments is much clearer after knowing Michael. Hull may be young, but in his nine years of financial planning, he's learned what's most important to his business — building relationships.

One key to success: Hull clearly communicates his work to his clients, making sure they understand his decisions. Maureen O'Toole, the director of Citigroup Alternative Investments, says Michael's knowledge of alternative investments is particularly strong. “He has done a great job explaining to clients the reasons for diversification [in the alternative asset class],” says O'Toole.

Hull only uses third-party managers — and not Citigroup or Smith Barney managers, a choice he said is no reflection on his firm (and a decision which Smith Barney has never challenged). And long before Spitzer began ranting about fees and costs, says John, “Michael was tailoring all of our investments to decrease expenses.” With these kinds of client relationships and more than $260 million in assets under management, he's not worried about his own money — just his clients'.
John Churchill

Mary Ellen Garrett
{A Mother of an Advisor}

Firm: Merrill Lynch

City: Atlanta

Age: 44

Years as a Rep: 13

Years with Current Firm: 22

Production: About $1.6 million

AUM: $300 million

Mix: Approximately 60% managed money; 33% mortgages, lines of credit and other liabilities; 7% miscellaneous

Clients: Approximately 350

Baby cookies forced Mary Ellen Garrett to become a financial advisor. The Merrill Lynch vet, who traveled frequently as an internal wholesaler, saw the writing on the wall 13 years ago, when all three of her children were younger than two. Her husband, who owns an advertising agency, arrived at a pitch late and asked an attendee giving him quizzical looks, “What are you staring at?”

“‘You have a cookie stuck to the back of your jacket’,” the man responded.

“That day, my husband said, ‘We have to do something different’,” Garrett recalls. “I went into my managers' office the next day and said, ‘Can I have a booth?’ And I started as an advisor right then.”

After spending the first few days in a panic — having no clients will do that to a person — Garrett said she “put her head down” and started to lean on personal contacts in her home community of Atlanta.

Eschewing cold-calling, she sent announcements to just about everyone she knew, announcing that she was a financial advisor — and she wouldn't be traveling anymore. It's been 13 years, and Garrett now works with a team of five women in a $300 million business, while still finding time to chair the Women's Legacy of the United Way of Greater Atlanta. She chairs events and fundraisers for women's shelters, child-care and various other endeavors.

Garrett's experience in philanthropy has enhanced her ability as a mentor for the client associates she's worked with for many years. Leslie Haefeli, who has worked for Garrett as an assistant for 18 years, says she's helped her professional growth, to the point where Haefeli is now the chief troubleshooter for client problems. “She's helped me learn to take over a lot of daily business,” Haefeli says.
David A. Gaffen

Bob Burke
{Keeping It Simple}

Firm: Morgan Stanley

City: Walnut Creek, Calif.

Age: 53

Years as a Rep: 26

Years with Current Firm: 26

Production: $2 million

AUM: $400 million

Mix: 75% managed accounts, 15% fixed income, 10% stocks

Specialty: Retirement for Chevron employees

Bob Burke freely admits that three-quarters of his job is preventing his clients from doing, well, something really silly. Burke, who manages more than $400 million for Morgan Stanley's Walnut Creek, Calif., office, recognizes the capital markets as a treacherous graveyard for the arrogant.

“It's the classic salesman's goal of ‘win-win’,” Burke says. “I get to grow my business and still have time to live my life.”

Like many successful advisors, Burke, who started with Dean Witter in 1977, focuses on a particular niche — in his case, retirees from the Chevron Products Co., based in nearby San Ramon. Of his 900 clients, 600 are either former or current Chevron employees. (He built the Chevron franchise, not from some official Chevron blessing, but because he won a few employees' accounts and word spread.)

His business is three-quarters fee-based, and he is militantly against stock-picking. “It is rare to find a broker who can outperform a good money manager in the long run,” he says. “I have never had a call saying ‘my mutual fund is up 25 percent, let's sell.’ I have moderate investors, and being conservative works.”

Despite the size of his practice, Burke — who has no team members and only two sales assistants — has found the time to indulge in his charity and family work. He holds a yearly Morgan Stanley golf tournament to benefit the Cystic Fibrosis Foundation and gleefully attended the Oakland A's home opener with his son, whom he also coaches in Little League.

“If I'm out there actively trading stocks, I don't have time to coach my kid's basketball and baseball teams and do my charity work,” Burke says. “You have to remain involved, and keep your perspective. There are things out there that are bigger than you.”
Will Leitch

Bob Fragasso
{Walking the Walk}

Firm: Fragasso Group affiliated with LPL

City: Pittsburgh

Age: 58

Years as a Rep: 32

Years with Current Firm: 8

Production: $2.9 million

AUM: $400 million

Mix: 100% managed accounts

Specialty: Long-term financial planning

Pro bono: Fragasso's financial services for the Pittsburgh Action Against Rape earned him the honor of being the first male on the organization's board.

When the firm Bob Fragasso was working for was bought by another in 1995, he felt the new, combined entity was not good for him or his clients, so he did what many brokers only talk about — he left.

Now in charge of his own firm, the Fragasso Group, affiliated with Linsco/Private Ledger, Fragasso refers to himself as “chief cultural officer”; that is, he gets to call the shots as he feels best serves the interest of his clients, himself and his employees — no matter how unconventional. For example, Fragasso pays his employees with salaries instead of commissions (to quell internal competition) and holds weekly roundtable discussions among the group around a stack of pepperoni pizzas.

Fragasso doesn't stray from his long-term ideology, even if it means losing big money. “I had clients in the late 90s complaining that they were getting only 29 percent when their friends were getting 60 percent somewhere else.” Needless to say, they soon understood why many of their friends lost their shirts — imprudent asset allocation.

“We don't take hot-dot seekers. My clients get a businesslike approach with businesslike returns,” says Fragasso. By businesslike he doesn't mean minuscule returns, as one happy customer relates. “Bob and his group helped me diversify my whole portfolio — my children graduated from college debt-free and I'm going to retire when and how I want,” says Bob King, a client for 20 years.

Fragasso clients understand that prudence beats sex appeal in the long run, because he teaches clients to understand market history and the simple, but oft overlooked, concept of mean reversion.

Fragasso migrated his book to a discretionary, fee-based operation three years ago. And the proof of his talent is in the results. Nondiscretionary accounts heavily underperformed the discretionary ones. His client's know what kind of service they're getting and it shows — Fragasso and his team have a 99 percent client retention rate through bull and bear markets.
John Churchill

Bob Harris
{Answering the Wakeup Call}

Firm: Harris Financial Group (affiliated with Mutual Service Corp.)

City: Colonial Heights, Va.

Age: 57

Years as a Rep: 22

Years with Current Firm: 18

Production: $1.5 million

AUM: $300 million

Mix: 99% mutual funds

Specialty: Retirement planning, such as 401(k) and lump-sum pension rollovers

Bob Harris never intended to go into the financial advisory business.

When his second son was born, Harris — then a math teacher and high school football and baseball coach — realized he could not provide for his family and still sock away money for retirement.

“I was holding down three or four jobs at a time [in the summer],” Harris recalls. “I was striping parking lots, tutoring and working in a men's clothing store.” During basketball season, Harris would make perhaps $20 a night reffing games.

Then one day Harris had a realization that put his financial circumstance in stark reality: His kids qualified for Virginia's free lunch program.

Soon thereafter, he noticed an ad from a financial services firm in the paper. He applied, got a Series 6 and set to work building a practice. After just a year or two, in March 1985 and with less than $1 million under management, Harris remortgaged his house and struck out on his own.

Today, Harris' practice revolves around retiring phone company employees, whose nest eggs typically sit in the $300,000 to $500,000 range. He's helped approximately 2,500 Communications Workers of America retire since 1992 — clients gained by referrals.

“For most of these people, this is the first major financial decision they've ever made,” says Jack Dotson, a Harris client and a retired regional director for the Communications Workers of America. “You've got to trust somebody to turn over something you've been saving your whole life.”
David Geracioti

Kevin Queally
{Steady Hand}

Firm: Merrill Lynch

City: Wellesley Hills, Mass.

Age: 43 years

Years as a Rep: 18

Years with Current Firm: 18

Production: $1.1 million

AUM: $300 million

Mix: stocks 5%; bonds 13%; funds 10%; insurance 2%; managed accounts 55%; Other 15%

Specialty: Family financial planning

Merrill Lynch rep Kevin Queally wants to make “raving fans” out of his clients, but he landed at least one by annoying him first.

The client, Jim Patrick, worked as a wholesaler in the Northeast area several years ago, and found his sales calls to Queally arduous ordeals.

“He wasn't swayed easily — he wanted to hear an investment thesis, and wanted it to bear out,” Patrick says. “I was impressed, because he wasn't easily sold — and he was a real client advocate.”

Patrick decided the only thing for him to do was become one of Queally's clients himself. No longer wholesaling, he's been a Queally client for six years now, one of about 125 families Queally serves from his Merrill office in Wellesley Hills, Mass. Viewing his clients as families is important for him, in part because children are so much of his focus in Queally's spare time.

He has four kids himself and works with the New England chapter of Garth Brooks' Teammates for Kids Foundation, as well as with the Families First Parenting Program. “Merrill was one of the founding co-sponsors for Teammates for Kids,” Queally says. “They truly help underprivileged children; it fit what I was looking for in a charity.” Queally and his wife have raised more than $200,000 for those two charities in the last year.

In the office, Queally and his six-person team get a wide variety of opinions to improve the $300 million practice, working with a couple of client advisory boards and consulting groups to grow the business.

“You need an outside influence to educate you on what's changing,” he says. “You're reinventing yourself every day in this business.”
David A. Gaffen

Dick Gottfred & Co.
{Teamwork, Teamwork, That's What Counts}

Firm: William Blair & Co.

City: Chicago

Combined Years as Reps: 59

Years Together at Current Firm: 5

Production: $3.9 million

AUM: $340 million

Mix: 80% equities; 10% bonds; 5% funds; 5% managed accounts

Specialty: Sharing responsibility for keeping in contact with its 150 accounts.

Open 24/7: The team shares responsibility for keeping in contact with its roughly 150 household accounts. Clients call “whenever they want to talk,” says Gottfred.

Dick Gottfred's best investment in the last five years has been the three other members of his team. With a combined 59 years of industry experience, each member has earned an important role in picking and managing the team's winning portfolios. But — and let this be a lesson to those thinking of partnering with others — team cohesion didn't happen overnight. Although it may sound trite, Gottfred says that to build a successful team communication skills are of utmost importance — that and a keen understanding of personality differences. Carlette McMullan, the current manager, attests to the strength of their bond. She describes the individuals in the group as “real stars at the firm.”

David Pardun, a client for two years, “can't say enough” about the team's talent. Pardun says he left his prior broker because he made Pardun feel unimportant — like second-class. Communication? Pardun says he never heard about his portfolio unless he called his broker first. “I came to Blair because of the firm's reputation, and Dick's team immediately made me feel like a priority,” Pardun says. Another plus: The Gottfred team clearly explained their individual roles, what to expect with fees, costs and the money management process, says Pardun.

“He's a customer's man, for sure. His heart is in the business,” says McMullan of Gottfred. However, client relationships with the team have varying reasons for existing, and Gottfred is quick to heap praise on the other members. After all, while each member has his specialty, many of the duties are spread around, such as client relationship maintenance and investment research.

“Dick's team is in at 7 a.m. — they never miss a 7:30 [a.m.] research call,” says McMullan. That's because while Gottfred's team, growth-at-a-reasonable-price devotes, does trust Blair & Co.'s 30 or so analysts — ultimately, buy and sell decisions rest with the team. Thus, the team does its own number crunching as well.

Of course, no stock-picker is perfect. Harry Gains, a veteran client, says he trusts them because they inform him when things don't go as planned or when a losing stock has to be dumped. “The hardest thing to get from a broker is trust. They've got most of my money and all of my trust,” says Gains.
John Churchill

Raymond J.Lucia
{Radio Friendly}

Firm: Securities America — Raymond J. Lucia Cos.

City: San Diego

Age: 54

Years as a Rep: 30

Years with Current Firm: 30

Production: $10.1 million

AUM: $110 million

Mix: 10% stocks; 3% bonds; 20% funds; 35% insurance; 10% managed accounts; 22% real estate investment trusts

Specialty: Financial advice via radio.

Since the early 1990s, radio broadcasting has played an important role in Ray Lucia's financial practice, but nothing has been more central to his professional success than self-confidence.

Lucia, who grew up a “poor Italian kid in south Philly” before migrating west for college, was drawn to the brokerage industry by the prospect of “getting paid exactly what you're worth. I liked that because I figured I was worth quite a bit.”

He obtained a CFP designation in the early 1980s, and began working as a financial planner. Ten years later, the entertainment itch that remained dormant since his days as a rock guitarist in the 1970s acted up again. He scratched it with a financial radio program on KFMB in San Diego. Now The Ray Lucia Show is syndicated nationally, broadcasting in over 60 markets.

Lucia's “brain trust” sidekicks on the show are “unstumpable,” he says, when it comes to financial quandaries, and the confidence that breeds in his audience has helped the firm attract a nationwide client base. The firm now has 11 offices nationwide.

The show draws upon the conservative investment philosophy put forth in Lucia's Buckets of Money book and monthly newsletters. His focus lies in “bullet-proofing” client portfolios — that is, placing capital preservation as the top investment priority.

“You don't want to be the richest guy in the cemetery,” goes one Lucia mantra, and with the memory of the bear market still fresh, it's not surprising that many retiring clients — 3,000 and counting, he says — are eager to embrace his close-to-the vest style.
Matt Barthel

Paul Sheldon
{Ladies Man}

Firm: Wachovia Securities

City: Westport, Conn.

Age: 58

Years as a Rep: 29

Years with Current Firm: 29

Production: $770,000

AUM: $170 million

Mix: 30% stocks; 40% bonds; 30% funds

Specialty: Investing for women.

Paul Sheldon does well with women.

Early in his career, while at the Wachovia predecessor Bache & Co., a struggling Sheldon was handed an opportunity to teach a class on investing specifically geared to the fairer sex. The engagement netted him checks worth over $1 million combined from three attendees. More importantly, it handed him the niche that would come to define his successful practice. Now, over three-quarters of Sheldon's 500 clients are female, and his lectures and seminars to women's groups form the foundation of his prospecting efforts.

His investment philosophy — applicable even to “prideful and spiteful” male investors — is straightforward: Protect your capital.

“It's the most important thing in investing, but it's easily and frequently forgotten,” Sheldon says. “I'm not afraid of going to cash when the situation demands it — and sometimes the situation does demand it.”

Perhaps the most interesting aspect of Sheldon's practice, though, is its focus on transactional business in an era in which fee-based business is all the rage. He estimates that 80 percent of his business is transactional, and the decision to skew his practice in this direction is a conscious one that affords him more control over client portfolios.

“Fee-based business is appropriate for some people, but it's not a cure-all,” Sheldon says.
Matt Barthel

Sheryl Stephens
{Climbing the Ladder}

Firm: Stephens & Winton, affiliate of Raymond James Financial Services

City: Flint, Mich.

Age: 47

Years as a Rep: 24

Years With Current Firm: 29

Production: $1.5 million

AUM: $260 million

Mix: 77% managed accounts, 18% funds, 5% insurance

Specialty: Retirement planning, pension plans

Hot For Teacher: When Stephens started as a secretary with her firm in the late ‘70s, she had no intensions of becoming a rep. “I was headed toward teaching,” she says. “I was just doing this as a job while going to school.” She says that she still feels like a teacher sometimes. “A lot of this job is explaining things to people.”

File Sheryl Stephens under “Accidental Broker.”

As a student at the University of Michigan in 1976, Stephens took a receptionist job at Winton & Associates (a Raymond James affiliate). She was studying to be a teacher at the time and had no experience — or interest — in the financial industry.

“Fortunately, I started attending client meetings and realized that this was something I had a passion for,” Stephens says. “Under Mr. Winton [the firm's founder], I was able to learn the business the right way.”

Seventeen years after first joining the firm, Stephens had climbed the corporate ladder to the top — the presidency.

Since Stephens took over (Winton died in 1994), the firm has more than tripled its assets under management, thanks to a strict focus on fee-based accounts for high-net-worth clients. Stephens has been named to Raymond James' Chairman's Council as one of its top 10 producers nationwide.

“Most of our clients have known us, and me, for more than 30 years,” Stephens says. “Our business, being fee-based, doesn't really work unless you have long-term relationships with your clients.”

Under Stephens' direction, the firm — which has seven employees — has amassed nearly 400 clients.

“We're taking care of retirement plans, and trustees of pension plans, we make sure everyone is looking at the big picture,” Stephens says. “In the bull market, people didn't want to buy bonds. But now our clients are glad they did.”
Will Leitch

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