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Practice Management > Building Your Business

The Right Way to Leave a Wirehouse

By John Sullivan

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“I’ll just say this, and it’s coming from someone who got his Ph.D. at age 26, John Haase is a very smart guy,” says entrepreneur David Lowe.

Lowe, co-founder of Stacy’s Pita Chip Company (along with his sister, Stacy) helped grow the company from $100,000 in annual sales to $65 million over an eight-year period, before selling the company to PepsiCo in 2006.

It’s safe to say if someone like Lowe calls you smart (and entrusts you with his money) he has to be taken seriously. Haase, a senior partner with Boston-based Fireman Capital Advisors, recently left Goldman Sachs for the independent world, and the manner in which he did so, as well as the wealth management model he’s employing, should serve as an example for other advisors contemplating the leap.

But it’s not to say he made the decision lightly, as an anecdote from his days as a Naval Academy midshipman illustrates. Upon graduation, Haase received a coveted slot as a Navy pilot, something many people want, but few achieve. But he quickly became disenfranchised with the repetitive flight maneuvers (that’s right, he was bored with death-defying stunts in multi-million dollar aircraft owned by Uncle Sam). Of course, Haase isn’t quite so flip when describing that time in his life.

“What I discovered was that I was supposed to become excellent at doing those same things over and over,” he says. “I didn’t have a whole lot of interaction with people, and a day-in-the-life wasn’t as dynamic as what I would have hoped for. That drove me to choose a different career path which led me to leave the Navy and go to Harvard Business School. But it wasn’t so odd; my roommate in flight school ended up in the same business school five years later.”

Was it tough for him to have made that commitment and then have to back out?
“Yeah, it was,” Haase says. “I can still vividly remember walking through the Squad Room and into the commanding officer’s office to let him know that I was making the decision. The only two things I’ve ever quit was flying planes and leaving Goldman Sachs almost a year ago.”

Not that the two can necessarily be tied together. As Haase notes, in the Navy he moved away from something negative; something he didn’t want to do. The move from Goldman was a movement towards a positive—and he would be hard-pressed to make the case that his time at Goldman was anything but positive.

Upon graduating from Harvard, he joined the firm to help open their Seattle office, where over the next few years he built a team of six people who managed $12 billion for 30 individuals and families. After just a few years, the firm asked if he would run the entire office (in addition to his money management duties).

“Goldman very much believes in a producer-manager type role, as opposed to strict manager role,” he says. “When my predecessor left to co-head the investment management position in Asia, they asked me to step in. At the time I had between two and three years of experience. When I looked up and down the West Coast, the people running the San Francisco and Los Angeles offices had 16 to 20 years of experience. The head of the investment management division called it a ‘battle field promotion,’ where he reached into the organization and grabbed me by my lapels and pulled me up to take on a more difficult assignment then I might have signed up for originally.”

That opportunity led him to run the Boston office, which the firm considered to be one of its finest. At the time he was told the promotion was a new “land speed record” and that few, if any, had made managing director that quickly.
It sounds like a pretty good gig, one to which he was well-suited and that few people in his position would relinquish. So why did he?

“I wanted the opportunity to build something on my own,” he responds matter-of-factly. “I didn’t want to reflect back later in life and regret not having attempted something around building a business in a specialty area, one in which I have a lot of skills.”

He says he wasn’t really looking around; he wasn’t talking to head hunters, or interviewing with independent wealth management firms. Rather, the catalyst for the move was when people he liked and respected came calling. He says it was a bit more of an entrepreneurial path than he otherwise might have taken, but it was the one he took nonetheless.

“One of my mentors at Goldman said to me ‘You only have one opportunity to leave, so when you do, make sure it’s for the right opportunity.’”

Feeling good about his time at Goldman meant he wanted to leave in a “first-class way.” He felt it was short-sighted of those who left before him in a less than stellar manner. Once the decision was made, he says he worked with the firm over the next three months to ensure a smooth and effective transition. And the firm was grateful, calling it among the best transitions they’d seen.  

Pre-existing business relationships lead him to Fireman Capital Advisors (FCA). The firm counts Paul Fireman, former Reebok International chairman and CEO, as one of its first clients and lead investors. FCA currently has 13 clients and $1 billion in assets under management, and focuses on working with entrepreneurs like Lowe.  

“When I sold my business and was looking to place my money, I quickly realized that wirehouse advisors were smart, friendly people, but I felt that what they do is too often set up in their favor,” Lowe says. “As an entrepreneur, I understand business models, and their business model didn’t fit with mine. The independent business model was much better suited to what I was looking to achieve.”

“The greatest value that we add is we invest assets for clients in a way that they couldn’t access or replicate, either on their own or through major brokerage houses,” Haase adds. “The bulk of the value we add is on the investing side. But because we only work with individuals, we think having a wealth planning component and a financial planning component is important. So we surround our investment infrastructure with a wealth planning wrap to ensure that from a tax efficiency, trust and estate planning perspective, we are building the best portfolios we can for our clients. We have a very specific focus; we’re not distracted.”

FCA has two senior partners leading the firm; one focused on the investing side and Haase, who is focused on everything related to client service. The investing team is made up of three other senior investment analysts who come either from the direct money management space or the endowment space. On the client side, the firm has senior relationship managers whose expertise is in advising clients.

FCA uses State Street Global Services as their custodian (and trades through State Street Global Markets), but retains control over the managers they hire and the due diligence they perform; something Haase calls “building that investing Pentium chip ourselves.” That chip consists of a tilt to alternative investments, specifically with hedged equity. With a focus in alternatives, why not charge a 1% management fee and take 20% of the profits for themselves?

“There’s real value in being an advisor to people who value and need advice,” he says. “We didn’t want to become a product. We wanted to be trusted advisors to which somebody could turn. We value relationships. We talk a lot about our clients and how we can do good work for them.”

As far as where the firm currently finds alpha, Haase identifies three areas: The first is in the enhanced yield category on the dividend, derivative or MLP side. Secondly, the firm continues to believe in the performance of emerging markets, and has recently moved from a passive strategy to more active management in the emerging markets space. Lastly, an overweight in natural resources and commodities performed well for the firm last year, and an overweight is again in the plan for 2011.

“But whether it be gold, silver, copper or coal, we need to be able to identify managers, take a look at their process and their track record, and then express our views through those managers,” Haase says. “We invest in long-only managers; we invest in private equity managers, we invest in hedge equity or long-short managers all to look at getting exposure to those sectors. We manage the managers. We take tactical views and will overlay them into the portfolios to add value to the relationship.”

It’s cliché to say it’s a relationship business; every business is a relationship business. But Haase ends with something of a twist.

“Every year we’re looking to initiate new relationships with four or five individuals and families, each averaging about $100 million dollars,” he says. “We want a relatively small business in terms of number of clients, but a meaningful-sized business in terms of the asset base. We just need to make sure we’re doing a superb job for those we engage with.”    

John Sullivan can be reached at [email protected].

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