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Far From Retired

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When Tony Purpero decided to sell his book of business after close to 30 years in the wirehouse world and move from Medford, Oregon, back to southern California, where he’d grown up and his nonagenarian parents still live, he thought he was heading into semi-retirement. Life however, threw him a curveball and today he’s a senior financial advisor and one of five primary owners of Partnervest Financial Group, LLC, a seven-year-old, privately owned firm based in Santa Barbara, with broker/dealer, SEC-registered RIA, and corporate insurance subsidiaries.

Purpero finds it somewhat ironic that after moving into what he thought would be semi-retirement, he now spends much of his time not only working, but working on other people’s retirements–both for individual clients and participants in 401(k) plans.

“We’ve developed a 401(k) format where we can do it in-house for smaller accounts,” he says. “I ended up learning about 401(k)s and now I work with several small corporations.”

Back to the Future

Purpero became a broker in 1978 with a firm that eventually was subsumed into Smith Barney, but in 2002 he started selling his book, a process that took three years, moving his offices in 2003 to the brokerage firm’s Santa Barbara office. That same year he also married Sharon Clenet, a widow with four children.

Prior to meeting him, Purpero says his wife was smart enough and lucky enough to have found some good people to help her with her finances, but as is the case with many affluent individuals, she had numerous advisors but no coordinated plan.

“In reviewing my wife’s accounts we discovered there was duplication in her portfolios and some mistakes had been made in her overall estate planning, potentially costing her additional estate taxes,” Purpero notes. “Just one example of this was the purchase of a life insurance policy recommended by an attorney for the benefit of her children. She paid the premiums out of her personal account; no irrevocable insurance trusts were recommended. It appeared the advisors were unsure or unaware of the direction the other advisors were taking. Everyone assumed Sharon was getting the proper advice and that she knew the right questions to ask. There was a need to have someone become the team captain to bring all of these different specialists together.”

Purpero, the new husband, became that team captain who made sure all the players knew their assignments. “Going forward, our objective was to coordinate all aspects of the estate. We needed to make certain all advisors knew the goals and objectives, what the tax consequences would be, what insurance was needed, and the appropriate trust documents.”

The problems faced by his wife, Purpero says, are not that uncommon. “When a financial plan is put together the advisor should always assume that the client does not know all the right questions to ask,” he points out. “If you call yourself a financial advisor I believe you should have contact with all the pertinent professionals–accountants, tax specialists, insurance specialists, attorney specialists–that would fulfill the needs and the objectives of the client.”

Even though he no longer had a full roster of clients, Purpero still had assets of his own to manage, as well as those of his wife, and a group of doctors, some of whom he had known since he attended medical school with them and were among his original clients, not to mention family members. Since he still had a hand in the financial world through those connections, Purpero was willing to listen when he was approached by a local headhunter on behalf of Marcy Burton, Partnervest’s chief marketing officer.

Purpero says he had no desire to get back into the wirehouse environment from which he had just escaped but was very impressed with the way Partnervest was structured as well as with its business platform and the fact that he could continue to use the same money managers he had been working with for years.

“We have an in-house program we call STAR with six different styles of management of no-load mutual funds and institutional funds, and an advisory team of money managers that manage the portfolios for our clients. I hadn’t seen that anywhere else,” he says. “I didn’t know that such a corporation existed and I didn’t know that they could compete at an even more sophisticated level than the wirehouses.”

When Purpero came on board he decided to put both his personal assets and those of the doctors whose accounts he managed into the STAR program. To smooth the transition, Partnervest’s CIO flew with him to several different states to meet with those clients and explain the program. “I have fiduciary responsibility for my clients, but the STAR team here is actively managing the asset classes, more so than I could ever do myself,” he explains.

Taking On a New Role

Purpero’s background for most of his more than three decades in the industry was in asset management. He was involved early on in the wrap business and came to manage the portfolios of a number of different clients, which began his transition from commissions to fees. During this time, he says, he was one of only about 3% of portfolio managers in Smith Barney who qualified as senior portfolio managers, which required meeting certain educational, asset management, and track record benchmarks. “When I say ‘managed,’” he clarifies, “I hired the managers, but I also was one. I never [actively managed] more than 25% of an account because my style was growth.”

At Partnervest, however, due to the success of the STAR program, he’s taken on a different role. While all of the firm’s 60 or so other advisors are independent reps, Purpero works out of the corporate office with most of his time devoted to working on corporate 401(k) plans and with wealthy people who are at or near retirement age and want to preserve their capital. Purpero also spends time working with Partnervest’s reps in areas where his 30 years of asset management expertise can come into play. “Because I’m the corporate advisor, I’m the advisor’s advisor,” he says.

Although that aspect of his role at Partnervest wasn’t something that he had envisioned when he joined the firm as an employee, he says it’s growing. “It began about two years ago–developing relationships with other advisors–and it’s just now starting to blossom,” he says.

Being the firm’s corporate advisor doesn’t put him in a position of competition with the independent reps, Purpero notes, it makes him more of a teammate. “I have specialties, but I’m a team advisor, I’m actually an advisor and team coordinator, and I see that whatever needs you have are taken care of,” he says.

“I actually like not being the only advisor in the program for a client, unless it’s one of the clients I already had,” he continues. “Even then I bring in my team. When it comes to working with people locally, or advisors locally, I like to develop a team.”

A Different World

In his new life, as an advisor within the framework of a broker/dealer, Purpero has access to accountants, attorneys, mortgage brokers, insurance brokers, experts on 1031 exchanges, and any other professionals he needs to serve the client, something he says was just never available to him in the wirehouse world.

As a portfolio manager within a wirehouse (he started in 1978 with the Seattle brokerage Foster & Marshall, which was acquired by Shearson/American Express in 1982, and stuck with that firm’s various permutations until it eventually became Smith Barney), Purpero says he would be paid a portion of what the client paid as the wrap fee, but he really wasn’t the one doing the advising. “I was the one recommending the money managers, but it was the money managers who were making the decisions and were getting paid for the advisoryship,” he says. “I didn’t own the clients. At the large wirehouses, the clients are always owned by the corporation. In our position here, we are direct fiduciaries for the account. It’s an obligation for me to follow the prudent man rule of investing in making decisions for the client. When I charge an advisory fee, whether I’m the money manager or I hire the money manager, I’m the final decision maker. I’m the one who has the fiduciary responsibility in-house to see that it’s done correctly.”

Purpero is both an employee and an owner of Partnervest, but when he’s assembling a team to assist a client, he casts his net wide to pull in the best talent. For example, his wife hosted an educational high tea where Purpero and a local CPA, who is a real estate and tax specialist, gave presentations on investing. One of the attendees called him a few months later for advice and now he and the CPA are sharing her as a client.

Almost all of Purpero’s compensation (about 95%) as an advisor is fee-based and some of that comes as fees from other advisors. He explains that, if for example, he helps an advisor structure a client’s portfolio, “I might get a portion of that fee, whether it be five basis points or 50 basis points, depending on the depth I’m going to be involved with the account. So I can get piecemeal of fees from other advisors by assisting other advisors in various ways.”

How the fees are charged depends, he says, on what’s best for the client. “What we want to do is provide the best service at the best price available to the client,” he explains, noting that it could be an advisory fee as a percentage of the assets the firm has under management or planning on an hourly basis. “What we don’t want to do is take advantage of our clients and charge fees where they shouldn’t be charged, and this is where I come in,” he says.

“An advisor can say to a client, all I’m going to charge you is 1% of any assets you bring to me to manage, but on top of that 1% there may be hidden costs.” He notes for example, that if an advisor has a client with $1 million and puts $500,000 of that into a variable annuity, the advisor is not really managing that money, the insurance company is. The annuity provider is also going to pay the advisor a commission, which means that there will be some expenses and hidden costs that the client won’t see, but which will enrich the advisor. If the client is charged the usual 1% asset management fee on that portion of his account, because the advisor “says he’ll look at it every year with you,” in Purpero’s mind that’s an excessive cost.

“We’ve seen in our own industry where people can take advantage of the client by charging advisory fees and then get paid by the insurance company on top of that. That’s double-dipping, if you ask me. I don’t believe in that.”

Not Going Anywhere

Five years ago, Purpero saw himself moving into at least semi-retirement, but these days he’s working harder than ever and has no desire to call it quits. “I enjoy this,” he says with infectious enthusiasm. “I have to say I’d be bored going golfing every day.’

Although hitting the links on a daily basis isn’t for Purpero, he still works out regularly. A former athlete who played football on scholarship at the University of Utah, he dreamed of a career in the NFL, but instead has two artificial knees, an artificial hip and needs to have a shoulder repaired.

Part of his renewed excitement about his profession comes from the fact that he has the opportunity to learn about areas, such as 1031 exchanges, related to his own assets, of which he was previously ignorant. “So I’m working harder, but it’s more for my personal needs, and it’s also good for the client.”

Eventually, Purpero acknowledges, he will probably retire, and sees his ownership stake in Partnervest as helping to make that possible. He says he’s also enjoying things these days because using Partnervest’s STAR program he doesn’t have to worry about the day-to-day management of his assets. “I don’t want to do that anymore and my wife doesn’t either,” he says. With that aspect of his life simplified, Purpero sees no reason not to keep on doing what he’s doing–helping “younger people who are trying to make money and to save money, to do that” and helping “older people that have already got the money to keep their money and maintain what they have.”

Managing Editor Robert F. Keane can be reached at [email protected].