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Technology > Investment Platforms > Turnkey Asset Management

Six-Word Strategy: Catching Up with Jeff Montgomery

By John Sullivan

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Jeff Montgomery, Al Frank Asset ManagementJust so we’re clear, AFAM stands for Al Frank Asset Management. Yes, that Al Frank; the guy who started his company in 1977 with a typewriter and a newsletter and built it to what it is today. Of course, Jeff Montgomery also had a little something to do with that. The former head of National Financial Partners took over at AFAM in 2008. His first orders of business were to buy Innealta Capital, increase his sales and marketing staff by 50% and grow assets under management by 800%. Competent doesn’t begin to describe him. It’s safe to say we like this guy.

You’ve said 2008 marked a new era for the company. How?

In 2008 we developed a strategy plan; just six words. It’s relatively rare that you come up with just six words for your strategic plan—diversify product, diversify distribution, add talent. That’s it. We want to be the best, not the biggest, but the best mid-sized asset management boutique providing specialty solutions to private clients. To financial advisors in the [United States], boutique means limited access. We don’t do business with all parties. Specialty products are all we have. We don’t have vanilla product here.

Where is your growth coming from?

It’s coming from the Innealta acquisition, which we’ve owned exactly two years. Tactical ETFs could not be a more growth-oriented market right now. It is a white-hot market. Advisors are seeking proven tactical solutions to deal with these tumultuous markets, so we’re growing in the Innealta division probably by about four to one.

Um…launched in 2008, are you nuts?

What a phenomenal question—that’s the best that’s been asked.

Let me just very pointedly answer that. I accepted the opportunity to take over AFAM, and I own a significant portion of it. There was one key factor about AFAM that made this possible. It had no debt and a very strong balance sheet. In 2008, as we watched the world end for value managers, we had plenty of cash in the bank. It was actually a wonderful time to go buy firms because you could get reasonable deals.

So where is the company finding alpha?

From our two divisions, the all-cap value and then the tactical ETF division. In value, we have really sought to pursue one niche in terms of providing alpha, and that is in dividends. Our whole story is dividends, and we’ve got some special screens that we run that are proprietary that put us in a better pond to fish for great dividend stocks. A more exciting answer is on the Innealta side, where we have the U.S. Sector Rotator. Volatility has been the friend of Innealta.

Assets are flowing back to the United States. Are you benefiting from that at all?

One-hundred percent. The [United States] remains the best house on a bad block; the cleanest shirt in the dirty closet. The [United States] has had all kinds of problems, but as we see the relative problems of even some of the emerging markets along with Europe start to exceed the U.S. situation. The safe haven trade is back to the [United States].

As a value guy, what do you think of Bill Miller’s retirement?

That guy made a great contribution to this industry. I was surprised that the change occurred. It’s going to be interesting for the industry to watch how the new leadership comes in, but my main thing is he did make a contribution to the industry.

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