Package Deal

If Mindy Ying and Grace Lau spent any money advertising their business, their slogan might be “wealth management services at asset management prices.” The co-founders of PacWest Financial Management offer their 300 or so clients asset management of individually customized portfolios and charge a standard 1.25% or less of the AUM. Like many advisory firms transitioning into the wealth management field, PacWest also offers a full range of planning services–financial planning, tax planning, education planning, and estate planning–but doesn’t charge anything extra for them. “So far, all the planning that we do has been complimentary,” says company president Mindy Ying.

“That’s really a great value for our clients, because they get a customized portfolio and investment management as well as financial planning,” adds her partner Grace Lau, who holds the title of CEO.

The two women, who are first-generation Chinese immigrants and banking industry veterans, founded their firm, with offices in Phoenix and southern California, in 1997. “It was an interesting time back in the late 1990s, recalls Lau. “There were a lot of mergers going on. I was a money manager at that time and it felt like the banks were more focused on the bottom line than on clients.” She adds that both she and Ying wanted to provide a high level of service to their clients and came to the conclusion that the best way to do that was to take control of their own destinies and create their own company.

Although they had worked simultaneously in the same parts of the business for the same companies, Lau spent her entire career in Arizona, while Ying remained anchored in the Los Angeles area. When the pair decided to launch PacWest, it was only natural to continue the same arrangement. Today about half of the firm’s clients are in Arizona and served by Lau’s Phoenix office. The remainder, served by Ying’s San Marino, California, office, are mostly on the West Coast, although she says there are concentrations of clients in Texas and New York, as well as a number of offshore clients.

While acknowledging that the geographical separation presents the firm with some challenges, Ying sees it as a strategic advantage. “Because we have different locations, we can both serve local clients,” she says. “It’s expanding the company’s horizons.”

“We use a two-pronged approach,” explains Lau. “We conduct compliance meetings together and do investment research together and we also discuss hiring decisions and the general direction of the firm. Between Mindy and myself we come to agreement on those four very important areas. In terms of local markets, marketing, client service, relationship building, we cater to the needs of the local market. In L.A. it’s heavily Asian focused, in Phoenix it’s heavily mainstream focused, so the approach might be slightly different.”

PacWest also takes a team approach to client service. “For each client, we have a relationship manager [who is] the primary contact person, but they also have a backup,” says Ying. “In addition, you have a planner and the operations team to support a client. So a client is aware that when they come to the firm they do have a group of professionals to support them.”

Both partners stress that the company is built on two key values–adhering to the highest ethical standards and providing the highest level of customer service–that are shared by the entire staff. “We always do what’s best for the client first, sometimes at our disadvantage, because financial gains for us are not as important as creating a very ethical firm and protecting the interests of our clients at all times,” says Lau.

“I have this roadmap for our clients,” explains Ying of how the firm deals with a typical client. “A specific family besides investments may have a tax planning need or an estate planning need. We go through that roadmap, it could be quarterly, but the commitment we make is–as needed. Anytime they have issues that come to mind, they simply give us a call. Anytime we’re not in the office, the calls roll over to our cell phones, because we want to make sure clients get answers whenever they have questions.”

Planning to Give It Away

Among the wealth management services that PacWest offers its clients is philanthropic planning. “Clients want to know how to hand off money to nonprofits or create a private foundation or a charitable remainder trust, so the assets can do good for the community, not just pass on from one generation to another,” says Lau.

“When we help clients set up a foundation, we do the planning side and then an attorney or CPA can [establish] the foundation for the client,” adds Ying, noting that she recently helped a client who sold a highly-appreciated piece of property set up a foundation for $1.4 million. “When people sell any highly appreciated properties–it could be securities, too–we do the tax planning for them.”

Both the partners are actively involved with nonprofit groups themselves and are passionate about encouraging their clients’ impulses in that direction. Lau serves on the board of Arizona Community Foundation and uses that experience to help educate her clients. “I’m trying to get them involved in some of the nonprofit things I’m doing so they can be more comfortable with philanthropic planning,” she says. “I want to be a resource to them and guide them properly and get them to the right people in the right places.”

“This is very important for the society,” adds Ying, who serves on the board of the San Marino School Foundation, which raised, in the last year alone, according to Ying, $2 million for the community’s schools.

Although advertising is not the PacWest style, the firm does realize that no advertising sells better than the word of a satisfied client. Unlike some firms that may meet with their clients only annually, PacWest aims for a steady stream of contact. In addition to a quarterly newsletter and regular client review sessions, the firm also holds regular educational seminars, such as a recent gathering in Phoenix on long term care insurance. “Clients have been asking about it, so we’re bringing in an expert to talk about that, along with some investment updates,” explains Lau.

But that’s just the business side. The partners also stage client events simply for the fun of it. “We bring them to concerts, to performances, to excellent food,” says Lau, adding that the high-touch experience also includes birthday cards and holiday presents.

“Most of our clients become very good friends,” adds Ying. “And most of our referrals come from clients. We basically put our effort into our clients hoping that we can continue to insure that they feel comfortable about what we do and when they feel comfortable they refer their friends to us.”

Active Research, Not Active Trading

Since the only fees that PacWest charges are for asset management, a lot of attention is paid to portfolio management. The firms’ investment approach is dedicated to the idea that each client has unique needs and as a result look to created individualized portfolios for each client, rather than forcing the client into a predetermined model portfolio.

“We try to customize for individual clients,” explains Ying. “I know some firms, when they receive a portfolio, they may sell the whole thing and restack with whatever stocks and bonds they feel comfortable with.” Keeping stocks in a client’s portfolio for tax purposes adds more of a management burden, but sometimes that’s what the client needs.

Although PacWest tends to buy individual equities to gain large- and mid-cap exposure, the principals take a long-term approach to investing and are not active traders. Ying describes that approach as active research, not active trading, and says the firm’s annual turnover is in the 20% to 25% range. Although they’ve traditionally used mutual funds for international and small-cap exposure, about half of those types of investments are now handled through ETFs to keep costs down.

It’s time consuming, but the partners pride themselves on the firm’s in-house approach to research, which they conduct themselves with the other six members of the research team. “We have made some great discoveries but they’re all expensive now,” explains Lau. “We have identified about four or five fantastic companies in the healthcare segment that are growing at 35% or 40% a year, but the valuation is so high and in terms of preservation of wealth we don’t want to overpay. One way to preserve wealth is to just watch these companies, when they come into the valuation we want, we buy them and then there’s a margin of safety.”