The Top Wealth Managers 2012 Profiles: No. 7—Federal Street Advisors

“When I started business 20 years ago I had to explain to people what we did,” LaPann says when asked to define his firm. As a result, “It’s something we talk about all the time. The way the business describes itself is the way we conceptualized it 20 years ago.”

While “a lot of our competitors use exactly the same vocabulary—open architecture, best-of-breed managers,” he says, “it’s important for us to differentiate ourselves today.” One way the firm does that is in the size of the clients it serves: ultrahigh net worth, ranging from $50 million up to several hundred million. Another is in the type of client: individuals and families make up about 75% of the firm’s list, while midsize foundations and nonprofits and freestanding family foundations make up the other 25%. Another distinction is that every client works with one of the firm’s four principals, and that the people with knowledge and experience are the ones working directly with clients. “If they were with a larger institution,” he says, “[the principals] would be the boss of the person or the boss of the boss that works with the client, so [the principals] came here because they want to work directly with the client.”

Independence is also important, he says. Clients pay fees only; there are no hidden charges, and “every dime of revenue is paid to us directly by clients for advice and service. When a client comes here, they know what their costs are, and they know that our only incentive is to make the client happy.”

A refuge for employees

While senior management are the owners of the firm, LaPann says that the intention is to increase ownership among members of the firm. That said, he adds that the firm is “a refuge” for its employees; “the reason they come here is that they like to work in a place where there are no conflicts, and where the lion’s share of their time, virtually all of it, can be focused on working with clients—and where there’s a collegial environment.”

If the firm adds clients largely by word of mouth, it does the same for its staff. The key, says LaPann, is “to always be looking,” so that when an opening presents itself, the firm is already aware of potential candidates to fill it. The firm also promotes from within as much as possible. While there is no rigid hierarchy at the firm, a succession plan is in development.

Two late-night concerns

Because of the size of the clients Federal Street caters to, LaPann says, “we all get to see … the biggest, thorniest client issues.” So if sleep is slow in coming, he finds himself reviewing these issues—which, he adds, are of a “delightful level of complexity.”

The other issue on everyone’s mind is “how do we get better at what we do?” Pursuing the rate of return needed by the firm’s clients in a difficult environment that does not offer that rate of return is a challenge, but LaPann says, “we know that we have the depth and creative resources to attack that question”—and without bureaucratic or corporate restraints on what they can do. The quest is at the same time a challenge and a responsibility, but, says LaPann, “that’s what I love about this business.”

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