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Directional Advisor

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Bob Whalen spent the first 16 years of his career in the American Express family, ending up as a group VP at Ameriprise Financial Services with more than 500 reps working under him. It all really happened because his parents became clients of an American Express advisor over 30 years ago. Whelan saw how that had helped his parents plan and save for retirement with modest means and he thought that helping people in that way would make a great career. Although his father is a firefighter and his mom “a domestic engineer,” they’ve been able to buy their dream home on Cape Cod and another in Florida to escape the New England winter.

Whalen attended Merrimack College in North Andover, Massachusetts, on the Carl Yastrzemski scholarship. The Red Sox legend endowed a four-year baseball scholarship at his alma mater and Whalen was the recipient of that largesse, but when he graduated he had the option of playing minor league ball or getting a real job. He opted for the latter and joined American Express. Starting as an advisor in Boston, he quickly moved up through the ranks to become a field VP in Michigan and Ohio. He took over the employee advisor channel in Dallas and built it to the largest group in the country. From there he moved to take over the Chicago operation in 2004.

His odyssey ended last year when he left Ameriprise and moved to the independent broker/dealer channel to become president of Brewer Financial Services. The Chicago-based firm is part of the Brewer Investment Group, which Whalen describes as “a conglomerate made up of six different businesses. Brewer Investment Advisors is an RIA and Brewer Financial Services is a broker/dealer,” he says. “Two of those circles are for our advisors, who are dually registered.”

The other circles comprise a futures group, a foreign exchange group, an insurance group, and Advisor Resources, which Whalen says is set up to wholesale financial products that Brewer creates to other entities. “They’re all complementary,” he explains. Clients have access to traditional investments through the B/D and RIA and to a number of alternative investments through the futures and forex groups, Whalen points out.

“The company started in 2000 as a commodities brokerage house and it needed some forex, and some futures, and, really, more alternative investments,” he says. “What attracted me to this firm is that the company started with more of an institutional, high-net-worth DNA with alternative investments and then it decided to build out a broker/dealer in 2005. Most firms started out as independent broker/dealers and they really can’t get to the depth that we have on the alternative side.”

The depth of product offering and complete open architecture are among the chief reasons why Whalen thinks Brewer’s growth has been so strong. When he joined last April the number of advisors in the firm was about 50, a year later it had grown to 81, with a commensurate growth in assets under management. “The amazing thing is that right now we have about 40 advisors with about $5 billion in assets in our pipeline,” he says. “Our target is between 12 and 15 new advisors per quarter, and I think that’s a reasonable number for growth. We want to be sure that we provide a really good transition for the advisor and that we can deliver on the commitment to service that we have. We want to make sure we have controlled growth.”

Over the next five years, Whalen expects Brewer to max out at between 700 and 1,000 advisors with growth accelerating as the firm is able to take advantage of scale, “but we really have a great ratio of advisor-to-home-office employee and we want to maintain that ratio and a very high level of service for our advisors. So we will be turning it up to a number higher than that, but we feel pretty confident with that number right now.”

Investing However the Markets Go

Being different from other broker/dealers is the primary driver of Brewer’s growth, according to Whalen. He says that the firm’s devotion to directional investing can really help advisors “when the markets are going sideways or have a lot of volatility.”

The second area that Whalen points to is insurance. “I’ve spent a lot of time building out our insurance platform,” he says. In addition to the usual general insurance and annuities products that most broker/dealers make available to their reps, he’s also brought in some “specialized high-end insurance partners” to help with tax and estate-planning strategies for high-net-worth clients using insurance products.

“Think about it as three building blocks,” Whalen explains. “The foundation building block is a true independent broker/dealer. We clear through Fidelity and National Financial and we have some of the best technology out there by leveraging their chassis. What really sets us apart are the other two pieces”–open architecture and depth of selection in alternative investments and the ability to complement the traditional and alternative investments with specialized insurance solutions.

For the ultra-high-net-worth client, access to the best investment opportunities has never really been a problem but for the investor with less than eight digits worth of assets to invest, the options have been more limited.

As for alternative investments, Whalen says Brewer can offer advisors several different levels. “There are some good general public managed-future products out there and we offer some. We also have the ability with the other parts of our business to dive a little deeper in the currency and futures space,” Whalen says. “For example, let’s say you have a client who has currency risk because they have international businesses that they’re involved in. We have the ability to work very closely with them on the currency side to help hedge their risk there. It’s the same thing for futures or a commodity.”

In the current market environment, Whalen says that Brewer’s directional investing approach has given advisors and their clients options beyond the traditional buy-and-hold model. “We look at something like managed futures as a very important asset category that needs to be introduced to advisors’ portfolios, so that clients don’t have to be stuck in that abyss of buy-and-hold-and-pray. They can actually be offered products that can help them make money whether the market goes up or goes down,” he says.

“One way to help our advisors is to always introduce good products that are solution-based to help clients lower their volatility and their correlation to the stock market. We definitely believe in the concept of directional investing, meaning that if the market goes up or goes down, the client can make money. Most of the big institutional dollars have gone into that space for many years and most advisors don’t have access to those types of products because the minimums are so high. Our goal is to offer those products with lower minimums,” he says.

“When we introduce product in the managed future space, our goal is to find products that typically have very, very high minimums. Sometimes it might be $5 million, $10 million, $20 million, up to $70 million to get access, but together with some of our partners, we can bring those minimums down to $10,000 to $50,000 to get in. That’s where a lot of advisors come to us.”

Products and Training

Whalen stresses that about 80% of Brewer’s individual clients are traditional investors investing in traditional ways, but that for the other 20%, who are usually the highest net-worth clients and looking for investments not correlated to the stock markets, his goal is to introduce products to meet their needs. “Clearly, managed futures are an area we’ve been focusing on,” he says. Private equity is also an option that Brewer offers to advisors who have clients for whom it’s appropriate; Whalen says the firm has put some clients into private equity alternative energy and distressed real estate deals.

“The ability to offer products that aren’t correlated to the stock market but are in areas that have a lot of growth potential–alternative energy, distressed real estate–is one of the things we offer,” he explains.

Because managed futures, currency exchange, and specialized insurance are not areas where most advisors have expertise, Whalen says that Brewer offers a lot of training to get advisors up to speed, including online monthly macro training sessions. “The micro side to it is one-on-one portfolio reviews with people from our home office who can work with advisors on case analysis and design,” he says.

“Our goal is to work with advisors to design portfolios to give their clients a better chance.”

Like most industry veterans, Whalen expects to see some changes in the wake of the worldwide financial meltdown, but he expects the basics to remain. “I still believe in the foundation of the principles of proper asset allocation. I do believe that won’t go away, because you do need to be properly diversified among different asset categories and also different time frames,” he says. “Some of that will stay the same, but if you do not have proper access to directional investing and a complete open architecture, you won’t be competitive. You’re going to be in a situation where your clients may not have the best products available to them…It’s a new diversification that I see out there.”

The financial crisis has also had a slight upside for Brewer, and not just from a recruiting standpoint. “The shakeup and the need for directional investing in someone’s portfolio has been a good thing for us, because that’s something we’ve always believed in,” he concludes with conviction.