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February 22, 2012 at 07:00 AM
The boys at Sterling Global Strategies started their independent firm in late 2008; yes, 2008. You might call ‘em crazy for doing so at that time, but be sure to add “like a fox.”
Like many (or pretty much everyone), co-founders Greg Carroll, Mike Haig and Mark Eicker came from the wirehouse world, a financial planning “Band of Brothers” that moved as a tight-knit team to protect and grow clients’ assets while battling volatile markets and, sometimes, their own employers.
“These firms never wanted you to go to cash,” Carroll says. “They thought if you stayed allocated and rebalanced when necessary, over the long term you would come out fine. It worked in the past, but as things got more correlated, it wasn’t working liked it used to.”
When the bull run from 1982 to 2000 ended, he adds, you could rebalance, but you would still be losing ground.
“It was a brutal time trying to explain to your clients how, relative to the market, we were doing pretty well. But clients were getting very tired of that.”
As was Eicker, who took the loss of client assets so hard he decided to leave the team in early 2003. But the question of how to more efficiently and effectively grow client assets never left him. After spending time in Europe, he returned to the States to wholesale. But in his spare time, he wrestled with the question, eventually developing ideas and algorithms that brought the team together again in 2008.
“When that happened, we started checking out the independent RIA world and decided to start Sterling soon after,” Carroll says, before rightly adding that “it was probably the worst time you could ever try to transition away from a wirehouse with the world falling apart.”
As everyone knows, but few (wirehouse) reps admit, they are restricted to certain investment firms, mutual fund companies, annuity companies, etc. The open architecture Sterling now employs is what Carroll calls “a huge relief.”
And, he adds, they can use cash in a tactical manner to their clients’ benefit, to better protect in times of stress.
“The algorithms that Eicker developed drive our clients to cash in major market downturns,” Carroll explains. “We now have a core strategy that we began publishing on Bloomberg back in the middle of 2010. The reason is that it gives our clients a place to look and have confidence that they can compare it to other asset managers or mutual fund companies or something that might be going on at Fidelity or another wirehouse and see how well this index is doing.”
It’s a tactical strategy that they evaluate and trade as needed on a monthly basis.
