John “Jeff” Erdmann III, named by Forbes America’s No. 1 wealth advisor for 2017 and 2016, gives his prestigious ultra-high net worth clients everything they have a right to expect, and plenty more — and all at a highly competitive fee rate. The 33-year Merrill Lynch veteran reveals details of what makes his prized practice tick in an interview with ThinkAdvisor.

Erdmann, 55, who is also one of “America’s Top 1,200 Financial Advisors” 2009-2017, according to Barron’s, has spent his entire career at Merrill, starting there as a broker in 1984.

His 28-member team, The Erdmann Group, manages $7.5 billion in assets for about 168 super-wealthy families. Median investable assets: about $40 million.

A native of New Canaan, Connecticut, Erdmann is laser-focused on giving his multigenerational client families, headed chiefly by CEOs and presidents of public and private companies, “the ultimate client experience,” as he puts it. Coordinating all aspects of their financial affairs, he is dedicated to protecting assets and maintaining the families’ lifestyle.

As a boutique-like business inside a global financial services firm, Erdmann’s team provides clients with the intimacy of a small group together with the resources of a major bank.

There are four managing partners; and joining the conversation with ThinkAdvisor was the youngest, Tony Carpentieri, 33, private wealth manager and vice president. On Forbes’ 2017 list of “America’s Top Millennial Advisors,” he ranks No. 21. Carpentieri works with younger generations as well as alongside Erdmann in serving the family patriarchs.

Recruited from Merrill’s trust and estate team, Carpentieri was made a managing partner after just three years with the group.

ThinkAdvisor recently interviewed the two wealth advisors, on the phone from team offices in Greenwich, Connecticut. Discussing keys to his outstanding success, Erdmann revealed what it takes to make top-level executives and their offspring deeply loyal clients. Hint: His team motto is “Innovate. Motivate. Execute.” Here are excerpts from the interview:

THINKADVISOR: You’ve lived through severe market crashes in the 33 years as an advisor. What have you learned?

JEFF ERDMANN: To keep your humility and as an investor, to never get yourself in a situation that could put you out of business when the world blows up. We have the luxury of working with really wealthy people — so, as we often say, there’s no need to screw up a good thing.

How do you deal with noise, like what prognosticators have to say — things that often make investors nervous?

We’re in Greenwich, Connecticut, the hedge fund capital of the world, which means there are lots people walking up and down our streets who think they’re the smartest folks in the industry. Typically, anyone who thinks they’re the smartest person or is pontificating about what the markets or the world will do, you have to take with a grain of salt. So we don’t listen to the noise.

Who do you listen to, if anyone?  

Lots of smart people, and we try to make good level-headed decisions. Our job isn’t to make big bets for people. Our job is to make sure our clients maintain and grow their wealth — but they don’t need to be taking big, big risks. We have a very disciplined approach of meeting with two or three outside money managers per week and hearing what they have to say about the world or politics.

What about Merrill’s research?

Merrill Lynch has a tremendous research team that we talk to regularly, but we also have a client base that’s unbelievably smart and who helps us think about how we should be investing their money.

Those clients are highly successful in their own fields. Do they ever resist what you recommend because they’re used to running their own show?

Most successful people and leaders are yearning to have a relationship with someone they like and trust to give them wisdom. My experience is that you [should] have a level of humility and a keen interest in learning what your peers are doing.

How does that help you serve clients?

I think a lot of our clients find a huge benefit in talking to Tony and me and our other partners to get insight into what other successful people are doing. Sharing best practices with other CEOs and Type A’s and other families of similar wealth and complexity have ultimately led to better advice and better practices throughout all our families.

How do you start the investment process?

First and foremost we focus on protecting, maintaining and growing a family’s wealth and lifestyle. The planning always revolves around that. These are very interesting, diverse and successful folks, but they have the same concerns of most investors: to protect their lifestyle and make good decisions.

What does the actual planning involve?

We start the conversation and building the portfolio by first focusing on what matters in people’s lives and what we can control. We can control fees, taxes and cash flow to a large extent and to [some] extent, [the effects of] volatility in the market.

What’s the biggest challenge in serving ultra-high net worth people?

The biggest challenge is communicating with the family and making sure we understand what their needs are, but I don’t [really] consider that a challenge. It’s common sense and easy.

How much time do you give to long-term planning for your own business?

When I wake up in the middle of the night, I think about how we can continue to add value to our relationships. The minute anyone sits back and thinks they’ve got this thing figured out, they’ll crash. Our team motto is “Innovate, Motivate and Execute.” Every person is expected to be an innovator. So we’re constantly thinking: How do we get ahead of the curve in financial planning, portfolio management and cash-flow management so that our families are on the cutting edge?

You focus on providing what you call “the ultimate client experience.” What does that entail?

We have a bulletin board with over 100 letters from our clients. We just got one from a woman who wrote, “When I walk into your office or call, I feel like I’m your only client. Every person I deal with knows me, cares about me and has an interest in me.”

Please describe your leadership style.

It’s that we have a family business, and we’re all partners. I can’t stand when I hear people say someone “works for” them. My philosophy is that no one “works for” Jeff Erdmann. We all work for our clients and are all one unit with one common goal — to provide the ultimate client experience. If that sounds corny, I’m sorry.

What’s your philosophy about client fees and employees’ salaries?

I’ve been criticized by peers who say, “You pay all your employees more than the rest of us pay ours, but you charge your clients less.” Well, we’re very aggressive on prices — and it’s working pretty well: We don’t lose clients. We pay our employees extremely well because they’re partners and because it’s the right thing to do. They have ownership in the business.

What’s your fee structure?

An extremely competitive rate for all the service we give. Probably 95% of our industry thinks [an advisor’s] job is to pick stocks and mutual funds. That’s a very important part of being in the wealth management business; but all the other things, like financial planning, cash-flow model, helping with trusts and wills are equally, if not more, important. You need to be doing a lot more than [just] investment management. You certainly can’t do a good job investing people’s money unless you understand their purpose and have strategies in place to maintain and grow it.

Tony Carpentieri

Do you give clients behavioral coaching?

Knowing about people’s relationships with money and their financial literacy level makes [for] great advisors. One of the biggest risks is an investor’s emotions. We’ve been able to help clients take the emotion out of investing by having a discipline and process — which is one of the most important ingredients to getting good returns over long periods — and understanding markets. 

What aspects of understanding markets?

The market goes down 10% a year on average every year. So we spend a lot of time talking to investors to understand that we’re going to go through cycles and that markets will come down 20% or 30% in [various] cycles. Managing expectations, coaching and educating clients on how markets work is how you manage emotion and change their [self-defeating] behavior.

What’s your view on stocks and bonds long-term?

We’re first focused on cash flow that a portfolio generates and will generate going forward. We don’t think that stocks are overvalued. We’re overdue statistically for some sort of traditional pullback in the market, but we’re climbing a wall of worry. We feel that over the next three to five years high-quality global stocks from the U.S. and around the world will probably be one of the best total-return investments that a family can have. So we’re long-term investors in that space. We own bonds as a place to give security of principal and generate cash flow. [But] we own a smaller percentage today than we did three or five years ago.

Do you socialize with your clients?

Our families think of us as their family office because we coordinate all their financial affairs. Every partner on our team shares an expense account. Last week a partner — who, on another team would be considered an administrative assistant but on ours has a much deeper position — attended the theatre with a major client because they have that sort of relationship. So, it’s not just our financial advisors that have relationships with clients. We all do, and that’s part of our culture.

What’s your minimum account size?

We don’t have one. Certain partners on the team deal with certain types of families. All our business comes in through referrals. So if someone is referred, and we can help them, we’ll find the right fit. But if someone comes in and they’re a jerk who wants to trade pork bellies and options, that’s not what we do — and we’ll find a place for them to go.

You serve millennial clients within your multigenerational practice. Some advisors say millennials have totally different needs from older clients. What’s your experience?

TONY CARPENTIERI: In general, millennials have the same needs and wants. Some are slower to understand financial literacy; others want to speed up the process. But all of them just want great value. We’re delivering that by helping them with their banking, mortgages and getting them started with investing. There’s no minimum. It’s all about the right fit.

How does technology work into your thinking with respect to robo-advisors and digital advice?

ERDMANN: Technology is helping give our clients better outcomes and helping us do our jobs better. The risk of robo-advice is that you’re giving investors the ability to push a button to get in or out of the market — and that’s very dangerous. It’s not how you accumulate long-term wealth.

CARPENTIERI: Robo-investing is a great tool to start with; but as your asset makeup matures and you have more questions, there are going to be many that [robos] just can’t answer or things they can’t help with.

Tony, you’re on Merrill’s Millennial Advisory Council. What’s its mission?

CARPENTIERI: The Council is made up of advisors and people in administrative roles. Our effort is to determine how to make the firm a little bit more diverse; where to recruit talent from; and what younger advisors are doing that maybe some older advisors aren’t adopting to make their practices more efficient and seamless.

That last one could relate to technology. Does the Council evaluate it?

CARPENTIERI: As new technology becomes available, the firm’s job is to vet those ideas from the Council to see if there’s a way to incorporate it into the firm.  

Where does social media fit into your practice?

ERDMANN: We’re not advertising our team on social media, but we’re very conscious of its power and the power of branding. So it’s something we take very seriously. Anyone who’s ignoring it is probably making a mistake.

With your team’s culture of family, do you ever promote from within?

ERDMANN: No question. We encourage every person on the team to try different things. One of our managing partners started as a college intern, became an administrative assistant, then an investment associate and then a financial advisor. Now he’s a major high-ranking partner.

You have low employee turnover, I take it.

CARPENTIERI: Yes. Occasionally we’ll have to coach people off the team because they didn’t have the work ethic or it just wasn’t a right fit, but we’ve always helped them land. No one has ever voluntarily left the team.

What are your thoughts about the Labor Department’s fiduciary rule delay?

ERDMANN: The concept of advisors being fiduciaries is absolutely the way to go, and I embrace it 110%, though the government’s original take was probably more aggressive than it needed to be. But the concept of our being fiduciaries and doing what’s right for the client is the right direction to be heading. Our firm has embraced that, and our advisors are doing a better job than our competitors at understanding client needs.

What’s your advice to FAs?

ERDMANN: Make your practice about the clients and the people on your team. Be a culture builder. I really believe that the culture you create in your work space and for your clients will result in growth and a better practice.

You started your career at Merrill, and you’re still with the firm 33 years later. Ever had a yen to move?

ERDMANN: The reason I haven’t gone anywhere else is that I’m absolutely convinced that this is the best place for me to run my boutique business because of the resources that are available to me. We very closely watch what’s going on amongst our traditional competitors and in the independent advisor area — and [Merrill] is [still] the best model for our families.

In a nutshell, how would you sum up who you are as an advisor?

ERDMANN: There are a lot of advisors who switch firms every seven years. I haven’t seen that as being in clients’ best interest historically. It’s not about monetizing your business. It’s about the families.

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