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Planner Profile: All in the Family

By Bob Keane

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Although Shannon Eusey majored in psychology as an undergraduate at the University of California, Irvine (where she had been recruited to play volleyball), it’s really no surprise that she became a financial advisor. After all, it is the family business.

“I grew up with a father who loved the business and who would talk about it at the dinner table–the benefit he’s providing for clients, the passion for the business, and the passion for finance,” she recalls, noting that she went on to get a master’s degree in finance before beginning her financial career with Roxbury Capital Management, where she eventually became managing director and portfolio manager.

In 2002, Eusey and her father, Garth Flint, decided to pool their mutual passion for finance and formed Beacon Pointe Advisors, where she serves as president and he as CEO. The fee-only Newport Beach, California-based firm manages around $3.5 billion in assets for institutional and private clients.

Eusey’s father isn’t the only close family member at her firm. Her sister, Mollie Rosing, who holds both CPA and CFA credentials, is Beacon Pointe’s chief financial officer. She also has a brother who works in the financial services industry for another firm. There are also three more siblings, two of whom are only out of college a few years and could wind up in the family business as well.

“I came out of the investment management side of the business, although typically people go the other way in the business,” she says, “but I was at a large-cap growth firm and clients were coming in and saying, ‘I’ve got these assets’ and being a large-cap growth manager we could manage those assets, but I didn’t always feel that was in the best interests of the clients because we were not looking at the total picture. My father had founded Canterbury Capital here in Newport Beach and they had a different business model, where he had a broker/dealer, and his feeling has always been we shouldn’t have a broker/dealer associated with the investment advisory business. So the stars aligned,” Eusey explains about the genesis of Beacon Pointe.

Putting the Client First

Despite Eusey’s background in investment management, she stresses that is not where Beacon Pointe’s strengths lie. “We’re not an investment manager; we’re a manager of managers,” she explains. “We build customized portfolios of several–and what we believe are superior–investment managers to best accomplish our clients’ needs and goals, while assuming the least amount of risk possible.”

Many advisory firms would love to work with institutions, but have found it a difficult niche to crack, but Beacon Pointe has served such clients since day one and they currently account for about two-thirds of the firm’s assets. Eusey says the ability to serve those kinds of clients comes from her father, who has been working with institutions since the 1970s, and the team that he brought with him from his previous firm.

For Beacon Pointe’s private clients there are some distinct advantages that derive from the firm’s institutional business. “The benefit to the end private client of our having institutional exposure is two-fold,” Eusey explains. “First, it holds us to a higher standard because you’re definitely a fiduciary under those institutional boards. We hold ourselves out to be a fiduciary for private clients as well. It also allows us, for our private clients, to negotiate fees on their behalf that they might gain access to an investment manager or at a fee that might not have been available to them before.”

Although due to the size of its clients’ collective assets Beacon Pointe has access to some of the most sought-after money managers, Eusey says that when it comes to investments, the firm is more focused on the traditional side. “We have alternative exposure as well, but we absolutely believe that you can achieve what you need in a total portfolio with traditional managers,” she says. “So we’re not looking for the eclectic manager to give us outsized returns. We’re looking for managers who can give us consistent returns and protect clients’ capital in difficult market environments.”

As a manager of managers, Eusey says Beacon Pointe devotes a lot of energy to researching the managers with whom they place their clients’ money. “All of our advisors sit on our investment team,” she notes. “Every single one of the managers we approve has been vetted by our investment committee.”

The arsenal of investment weapons that Beacon Pointe utilizes includes separately managed accounts, mutual funds, and alternative vehicles–funds of funds, private equity, and real estate. “We don’t take a cookie-cutter approach to clients’ portfolios,” says Eusey, adding that this kind of approach means more work for the advisor, but it’s what she and her partners believe is best for the client.

An Educated Consumer Is the Best Client

Despite the stock market’s negative performance and the unending cascade of bad financial news throughout the last quarter of 2008, Eusey says there wasn’t a deluge of panicked calls from nervous investors. “We generally have done a very good job of educating our clients that these types of market environments will happen,” she says. “We’ll go through a best case and worst case situation with the client before we construct a portfolio to make sure that they’re comfortable with that volatility in the market. Obviously we saw an intense deviation in the market this last year, so people weren’t prepared for that, but I do think they were prepared for downward pressure in the market.”

Although client communication has always been a hallmark of Beacon Pointe’s approach, including quarterly meetings for its private clients as well as its institutional ones, the firm decided to turn it up a notch in the current environment.

Among recent e-mails it has sent to clients have been internal research papers with titles like “The Fear Bubble,” “Great Expectations,” “Three Steps Forward,” and “Half Empty/Half Full,” which are intended to provide some perspective on how the markets have behaved historically, what’s going on now, and what the current thinking is among the firm’s professionals.

Eusey says the firm has a client retention rate of about 99%, although “less than a handful” of clients couldn’t stand the stress and decided to move to all-cash positions. “They’re still clients,” she says. “They haven’t left us; they just can’t stomach the volatility.”

Like the legendary investor Warren Buffett, who is often quoted in Beacon Pointe e-mails, Eusey is a confident proponent of the markets and the financial system.

“I think having a diversified portfolio has helped clients–absolutely having an exposure to fixed income,” she says. “The big key is patience. If you’re a long-term investor, sit tight. It may be a bumpy ride, but you know the U.S. economy is resilient, it will come back. It may be a few years, but it will come back. If your time horizon is set appropriately to your asset allocation you should be fine over the long term.”

Although there may be some investment gems lurking among the debris of the market upheaval, Eusey is skeptical of some of the talk she’s heard. “When you look at returns that some people are projecting for certain asset classes, we would argue some are too good to be true,” she says. “And if it seems too good to be true, it likely is…We’re not trying to shoot the lights out. We’re trying to get a portfolio that’s not going to hurt somebody on the down side. There are definitely opportunities out there. Look at high-yield bonds, the corporate bond sector, municipal bonds. There are a lot of opportunities, but generally speaking we’re already allocated to those asset classes anyway.”

Many of the industry’s pundits have observed that the current market environment can be a great opportunity for advisors to add new clients. That’s certainly been the case for Beacon Pointe, according to Eusey, noting that the firm has recently received about 10 requests for proposals from different institutions. “We’ve also seen quite a few private clients come in the door. I don’t know if it’s related to the fact that folks are a little disenchanted with the brokerage model, but also people start to reassess,” she adds. “In a market that’s going up, people tend to think they can do it on their own, in difficult market environments, people start to reassess.”

As for the Beacon Pointe itself, however, Eusey says there’s been no need for reassessment.

“We set up the firm to avoid any real or perceived conflicts of interest,” she explains. “We only get paid directly by our clients, and in this type of market environment people are saying, ‘I really want independence. I really want somebody I can trust, somebody who’s not taking commissions from one place or another.’ We set up our firm to be a really ethical business because we saw there were problems out there and we want to make sure our clients were protected.”

Although as president and chief operating officer, Eusey has to deal with the all the day-to-day requirements of running a business, she makes sure she still has plenty of client contact. “The best thing is helping clients achieve their goals. It’s nice to be able to see a client, through their portfolio, be able to send their kids to school, or buy the boat, or buy the house, or see the foundation that’s able to meet their gifting needs because of the growth in the portfolio,” she says, with infectious enthusiasm. “But I love every aspect of what I do.”