Jeff Montgomery has seen the advisory business from multiple angles in his career, which is serving him well at Al Frank Asset Management, where he became CEO last spring, Previously, he was CEO of National Financial Partners Securities, and of PrimeVest Securities. However, Montgomery points out that early in his career he was a "retail financial planner with an independent RIA, and I consider myself one of them." He spoke with Editorial Director Jamie Green in late February.
Why did you move to Al Frank Asset Management?
It had the drivers that I wanted in a company. Al Frank has for 32 years had the No. 1 investment newsletter, The Prudent Speculator. Al Frank the man launched a couple of mutual funds and managed accounts, and though he passed away in 2002, fifteen years prior he had hired John Buckingham [who] had been CIO for 10 years prior to Al Frank's death.
There were four reasons for the move: I was intrigued by the quality of the newsletter business and the research; we had a young (John is only 43), long-standing, high-performance chief investment officer; third, I've always been a value guy--I believe in Graham/Dodd, in the Buffett approach, in fundamental, bottom up, balance-sheet-focus stock picking; fourth was that we thought we could build a distribution network for advisors--for broker/dealers and RIAs. I have relationships with many thousands of financial planners who I respect, and dozens of broker/dealer CEOs. I identified a company that could bring value to them. We've been fortunate to establish some significant partnerships within the first six months. I'm having a lot of fun.
Are advisors looking for something different these days from their money managers?
There has been a noticeable shift. Having been a retail financial planner,and set up corporate RIAs where we offered money management platforms, from being now on the other side of the partnership table with broker/dealers and RIAs, you can see that the level of scrutiny, and appropriately so, on any money manager has gone up in an incredibly healthy way.
As long-only managers, we've always had more transparency [than hedge fund managers]. But the shock waves that went through the hedge fund industry last year, plus the market decline, forced everybody to double check three things.
One, it used to be all about track record. Now advisors want to know: 'Who are the principals running these firms? What is their level of ethics? Is there a relationship there that you can trust?
Two is risk management. I mean, there were municipal bond funds that went to zero last year--zero! The amount of due diligence done on risk management procedures and models that the money manager uses has increased exponentially.
Three, advisors have never benefited from just a product relationship, today more than ever. One of the focuses [now] is practice management--additional strategic assistance, even if it's market outlook information, or economic data.
In our case, myself and a couple others here who have built practice management divisions for broker/dealers are writing white papers for advisors on managing their businesses.