From the May 2008 issue of Boomer Market Advisor • Subscribe!

2008 Boomer Advisor of the Year -- Peter Mallouk

Truth be told, choosing our annual Advisor of the Year is always a somewhat subjective process. We look at AUM and ask for a minimum of $100 million. We do extensive background checks. And we look at new ideas, strategies and boomer-specific focus. We also ask that advisors have a minimum of 10 years in the business. Peter Mallouk just squeaked past that 10-year mark, but far exceeded the $100 million AUM requirement.

Mallouk is at the top of the industry and has the trust of the high-net-worth set. The result? $700 million in assets under management (fee only).

We ask him for the keys to his success, which he is more than happy to provide. And for his role in significantly raising the bar in addressing needs of his boomer clients, we're proud to announce Mallouk as the 2008 Boomer Market Advisor of the Year. He had a lot to say, an excerpt of which is provided here. For the full interview, visit

Boomer Market Advisor: We'll be honest. We were skeptical of the AUM and experience claims you initially made, but after an extensive background check we found it to be accurate. We'll come right out and ask; how did you get so far so fast?

Peter Mallouk: I think almost all of the assets came in the last three years. There are a lot of successful people in this business because it's very easy to build a $30 million book and make $100,000 a year. I don't want to belittle that. I actually think it's not that easy, but you can become successful by doing it. But to really branch out you have to do things differently, and in a way that people perceive as valuable. Most people in our business are doing the same thing. If you talk to six or seven advisors the story will be pretty similar. If you differentiate yourself, you propel your success much quicker. That's the difference. That's why niche marketing works so well. You get somebody who only works with guys at the railroad and he gets known as that guy. He's going to blow past his competition, and it's because he knows that area inside out. People perceive he has value. As a result he doesn't grow by 10 percent more than his peers; He's going to grow 100 percent more.

BMA: So how do you separate yourself?

PM: Our key is we're problem solvers. I'm sure you hear that all the time. But if you're only talking to your client about their portfolio, then the relationship's not going to last. It might last five years; it might last 10 years. But eventually this market's going to change. Today, I have experts in every area of the advisory business. If a client calls us with a question about a contract or a question about a real estate deal, or how much leverage they should handle in a commercial real estate transaction, we have the ability to answer that. We have in house specialists that have a high level of expertise in each of the important areas.

BMA: Can you give us an example?

PM: Sure. I had a meeting with a physician this morning and he had a question about his disability coverage in relation to his retirement and whether or not he should buy into a surgical center. He wanted to know about the implications for his tax return. I got four people in the room and answered that question right there over the speaker phone. Not too many advisors can do that. I think the advisors that try to do it just get on the phone and call in a lot of favors.

BMA: How did you decide to be a financial advisor?

PM: I didn't even know that financial planning was a profession. I'm sort of the accidental wealth manager. I come from a family of physicians, and when I got out of school, that's where I started. But I really thought of it more as a consultative role. I heard physicians in my family talk about how the profession had changed over time and how complicated things had become. They couldn't keep up with all the legal and business issues and contracts and investments, pension plans and all that. So I thought, "That's what I'll do." But I didn't go in with that intention.

BMA: How do you think the advisory business is responding to the needs of boomer retirees?

PM: Right now, there are so many successful people because there's so much demand and so few people in this business. When I started, I didn't even know that financial planning was a profession. But everyone had a lawyer and a CPA. Now, here we are 10 years later and most people think they should have a financial planner. But our industry's going to change, I think radically, because advisors are going to either have to compete on price or compete on value. Superior service is a prerequisite. I think you get killed if you don't provide it. One thing I noticed being both a lawyer and financial advisor is that on the law end, clients always thank me for calling them back. They're so impressed when you're on time for a meeting or that you get something done in a week. They're really grateful about it, but on the financial advice side I never get that. That's a total expectation. The reason is because all advisors are service-oriented, and they better be because they're selling the same stocks and bonds as everybody else.

BMA: Is this superior service requirement driven by the skepticism boomers have for more traditional professions?

PM:That's a subset of it. Boomers are skeptical. But they're a big group, and some will say in fact say, "Here's my million dollars, manage it." I think that will change later as more people become more educated about how their advisors are paid and about their advisors' potential -- what they really bring to the table. I think the expertise we provide is unique right now. I don't think it's going to be unique in 10 years. I think it will be an absolute necessity in 20 years.

BMA: How are you addressing the longevity and income issues boomer clients are dealing with?

PM: This doesn't specifically answer your question, but I think boomers are overwhelmed. They're dealing with their parents, their dealing with their kids and they have huge economic responsibilities. They know they have a long life expectancy and they want that portfolio to last. Most importantly, they want to know if somebody has a grasp of what the heck is going on. They get a lot of comfort from that. In terms of making a portfolio last, we're not really big believers on getting too cute with the portfolio. A lot of it is just building the nuts and bolts portfolio that has a high probability getting through the allocation process. We create portfolios large enough so that even under the most improbable scenarios it would outlast the client and the spouse.

BMA: What about long term care insurance? Do you advocate for the product or are you more a proponent of self-funding?

PM: With all insurance, I'm a believer in self-insuring wherever you can -- except with long term care.

BMA: Really?

PM: What I've noticed that's different about long term care is that it's extremely stressful. I see people come in every week, and somebody has died and they're very upset about it. But there's finality to it and they can begin to cope. With long term care, they can't really begin to cope because they don't know what the outcome's going to be. Will it be one year of sickness, or ten years -- what's the financial implication? It could be Ronald Reagan all over again. If they don't have enough to self-insure, we strongly encourage long term care. For the people who can self insure, we still walk them through the pros and cons of it, especially the client who owns a business. In some scenarios, it's 100 percent deductible. They can deduct 100 percent of it and collect the benefits 100 percent tax free. The economics start to turn in their favor. I've also noticed that when people have it they just are more comfortable with it. So, on long term care, I'm a pretty big proponent.

BMA: You use National Financial (a Fidelity company), Schwab Institutional and TD Ameritrade. Which is really your primary clearing partner?

PM: TD Ameritrade by a landslide.

BMA: By a landslide, really? They've had some trouble lately on their operational side. Why TD Ameritrade?

PM: From my experience, their service is better. And their technology is better. I've heard about the problems, with their statements and such. All that stuff you heard about was true, but they addressed the problems and moved on. In terms of day-to-day operations, when we call them they call us back. They're much more proactive. I've had a much better experience at TD Ameritrade than I've had with the others.

BMA: For someone who didn't come from a wirehouse and didn't know the business when you started out, we thought you'd need the type of assistance a broker/dealer provides. Why go with directly to the clearing and custody firm, rather than partner with a broker /dealer?

PM: I had the benefit of not being smart enough to know how involved compliance was at the time. I'd love to tell you this was all plotted out, but it's kind of the accidental wealth manager. I did legal work because I had to. I think the broker model is good because I think it gives you all those other resources. I think the typical independent is somebody managing $30 million and has few resources. It might be okay now, but it will eventually be a little too competitive for that. And I think compliance has become a lot bigger barrier to entry now than it was five years ago. It's much more expensive and time consuming and seems like there's much more liability and exposure now than there were five years ago.

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