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Practice Management > Succession Planning

Passive Disciplinarian

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When worldwide turmoil hits the financial markets, as was the case in the last week of February, many advisors shift into crisis management mode as they strive to reassure clients about their investments and financial futures. Charles Massimo says that for most of his clients, the recent scare was a nonevent.

“The clients who have been with me for a while do not panic at all,” says the president of Garden City, New York-based CJM Fiscal Management. “They know if they call me that I’m going to tell them that this has very little to do with our long-term approach. The worst thing to do is to get emotionally involved with what’s going on in the markets.”

Massimo says the reason his clients can remain so calm in times of upheaval is that he takes plenty of time to educate them about modern portfolio theory and the investment approach he favors. “We do comprehensive wealth management,” he explains, “but what I think sets us apart is that we have a disciplined approach to our investment management portion, which is a passive management approach. The clientele we have is looking for the most part to preserve their wealth in the most prudent manner possible and still get a fair amount of growth.”

It was Massimo’s desire to put a passive management philosophy into practice that led him to leave the safe confines of the wirehouse world, where he was VP of investments for Smith Barney, to strike out on his own as an independent advisor. He says he had read books and articles outlining the passive approach used by Dimensional Fund Advisors, and “a light bulb went off and I said, ‘Hey, this is the way to do it for my clients.’ And since DFA is not available in any wirehouses, I had to go off and become an independent.”

As an independent, Massimo aims to put as much of his time as possible into actually working with and for clients, which has led him to outsource as much of the other stuff as possible. In addition to solely using DFA funds to build his clients’ portfolios, he uses Loring Ward to provide backoffice services and his broker/dealer, Royal Alliance, for help with compliance.

“I decided when I started this firm that I wanted to spend all my time with my clients, not time doing the operational things that bog down advisors and keep them from seeing their clients,” he says, “so I outsource everything possible, and I’m just nurturing my relationships with my clients.”

Staying in Touch

The keystone of Massimo’s business is what he calls his “high-touch relationship,” with each client, which includes at least 40 “touches” a year. Included are quarterly face-to-face meeting with all clients, weekly e-mails, a quarterly newsletter, and four to six major client events. “Every client gets a call from us at least every 60 days. That’s clockwork for us,” he says with pride.

Maintaining such personalized contact obviously becomes more challenging as the client roster increases. “I always envisioned CJM as a small, exclusive club where clients are serviced exceptionally well,” says Massimo. “It’s always been about the quality of the clients, not the quantity. My goal is to be at double my size within three years, but without double the clients. I’m really looking to increase the amount of assets I bring on board or the type of client I bring on board.”

Although he’s a registered rep, Massimo’s practice is strictly fee-based and the only investment vehicle he uses are the DFA funds. “We take a comprehensive approach, but as we tell our clients, you pay one annual fee and with that fee you basically have us on retainer for everything that you need financially. We really want to be their go-to-person and we don’t want to charge a la carte for that.”

As his clients’ “go-to-person” Massimo makes sure he has a network of various professionals to whom he can turn for specific needs ranging from attorneys, insurance providers, and mortgage brokers to auto dealers and psychologists.

Although Massimo says the thing that sets his firm apart from the average advisor is his commitment to the client, he adds that the same is true for any good advisor. “Every client we bring on, we look at as an extension of our family and we’re going to treat them the same way. If you were to speak to our clients about what makes us different from everyone that they’ve worked with in the past, they’d probably say it’s that we are so committed to our discipline of this passively managed approach. We do not stray from the discipline regardless of market conditions. So I think that one of the biggest values we bring our clients is that we have a strategy that we stick to.”

Massimo feels that part of the reason that his firm has been successful is because his clients understand the investment philosophy used to construct their portfolios. DFA makes available to its advisors numerous white papers by academics such as Eugene Fama at the University of Chicago and Kenneth French from Dartmouth. “We send these white papers to our clients and spend a lot of time going through [the papers] and what this means to them and their portfolio. We also hold a seminar–probably three or four times a year–for all our clients and anyone they want to introduce to us. All those seminars are about is a refresher course on what we do. We don’t bring in outside speakers. We’ll bring in someone from DFA if need be, but other than that it’s all refresher. So we spend a lot of time in these seminars educating and re-educating our clients on what we do and why we think it’s one of the most prudent ways of growing a portfolio.”

Thinking of Succession Early

Unlike many advisors who put off succession planning until they near retirement age, Massimo has not only thought about succession but begun to put a plan into action, despite only being in his 40s. His 30-year old managing director, Peter Anastasian, is someone he “handpicked out of Smith Barney.” After they had been together for three years, Massimo gave Anastasian a larger role in the practice. “He’s really getting involved on a day-to-day basis with all my clients, and so unless someone comes along and decides to buy me out with a really great offer, which I don’t expect to happen, he’s my succession plan.”

Massimo also notes that succession was also part of the reason he allied himself with DFA and Loring Ward. “If something happened to me tomorrow, and even if Peter were not there, what’s going on in my clients’ portfolios would not be disrupted at all.”

The biggest challenge that Massimo sees for himself, and other independent advisors, is maintaining profitability. “How do you maintain a fair balance between what you charge a client and what your profitability is? We always want to increase the level of service we offer our clients and that takes people,” he says. While he notes that adding people can put a strain, at least short-term, on profits, he acknowledges that his firm has grown to the point where adding staff is inevitable.

“The second issue is growing the business. How do you achieve the growth you ultimately want to have one day? Is it through acquiring another practice? That’s a big concern. How do we maintain profitability and continue to grow at the pleasant clip?”

When asked what about the business still makes him want to do it every day, Massimo doesn’t talk about investment returns, but rather personal relationships. “When I have a client, like one who just came back Costa Rica who calls and says, ‘I could really enjoy my vacation with my granddaughter because of what you’re doing now.’ That’s what excites me all the time. When a client calls up and says, ‘I really want you to come over, we’re having a little get together and I want you to come over and meet my kids.’ I just get really excited when my clients want me involved in their lives on a different level than just on the investment side.”

Managing Editor Robert F. Keane regularly writes about wealth management firms. He can be reached at [email protected].


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