Wealth manager Debra Wetherby, CEO of Wetherby Asset Management, didn’t dream of founding her own firm when she entered the financial advisory business nearly 30 years ago at Morgan Stanley. But in 1990, just as the emerging profession’s fee-only model was starting to surface, it began to sound like a good option.

“What I knew was that I wanted to serve clients in a certain way,” she says, and “I could work for myself and do it in a way that I believed in.” This included being paid for offering objective advice instead of selling products, and providing customization based on individuals’ needs. “It was really about having a practice that centered around the client,” she says.

Today, her 24-year-old independent firm manages approximately $4 billion in assets for 500 clients nationwide. Based in San Francisco with another office in New York, it’s one of the largest employee-owned advisory firms in the U.S. Most of its clients are individuals and families. It also manages some institutional assets.

Wetherby, who goes by “Deb,” is a CPA (inactive), CFA and CFP. Given her friendly, engaged and unhurried manner—and her wealth of investment knowledge—it’s easy to see why some clients have chosen to remain with her for decades.

Cultivating a mega-size firm wasn’t a top priority for Wetherby, 56. “We never focused on sales or size; we always have focused on service,” she says. “When we’ve talked about growth, we’ve always talked about it from the perspective of, how do we make sure we are not growing at the expense of our clients.”

Each year, the firm’s shareholders do an annual business plan and look at what is needed to maintain what they refer to as the five pillars of their business—superior client service; executing superbly on the investment side; operational excellence; maintaining, developing and growing human capital; and overall business health and growth. The big question, she says, is, “How much do we feel we can digest in terms of growth?”

An effective strategy has been expanding the team in advance of growth. “You really have to have the talent in place in order to serve additional clients,” she says.  Today, the firm has 56 employees and 15 shareholders, most of whom are also employees. There is no shortage of young people at her firm—41 of its employees are under the age of 40.

The firm’s youth culture is built around the concept that any individual willing to learn and work can become a shareholder. “People can start at an entry level position and work their way up to shareholder if they are committed to building their knowledge, skills and abilities over time and are passionate about work,” she says. In fact, two of the firm’s current shareholders have done exactly that.

Over time, Wetherby Asset Management has also raised its minimum investment in order to take on a smaller number of larger clients. That minimum, just $100,000 at the firm’s outset, now stands at $10 million.

According to Wetherby, many of her first-generation clients created their wealth by working for a business. Being located in the Bay Area, a center of innovation, business and wealth creation, has absolutely helped.

The business comes from recommendations by existing clients, their accountants and their attorneys. “We don’t cold call,” she says. “We don’t embed ourselves in pre-public companies, so we’re there when a liquidity event takes place.”

The majority of clients range in age from 40 to 70. The most common attribute among new clients, she says, is they often come to her in the midst of a transition—such as a change in career or relationship or an intergenerational shift in assets.

The firm often works with two or three generations and is even serving four generations of one family. “We view the family as the client, not just the generation we might start working with,” says Wetherby. The firm develops relationships with newer generations once a family sets up structures for them.  

Team Building
Wetherby, who holds a BS in commerce from the University of Virginia and an MBA from the University of California, Berkeley, is a very team-oriented manager. Sharing equity with her associates has never given her second thoughts. There have been only two months in her firm’s history when she was the sole owner. “I’ve always believed in sharing ownership and always wanted partners and people who acted like owners,” she says.

“Over the years, I’ve found that we’ve made better decisions as a group than I would have made individually,” she added. Today, no single shareholder owns more than 23% of the firm and two other partners have at least 10%, according to the firm’s ADV.
Wetherby says this has helped her attract and retain great people who serve clients exceptionally well. Indeed, her shareholders include well-educated types who face no shortage of employment opportunities in the Bay area.

“Our clients and our existing employees have been a wonderful source of talented people over time,” says Wetherby. “We’ve also gotten some great referrals from other firms we interact with (accountants and attorneys) as well as other RIA firms in other geographies who have sent people our way. We do also post at colleges, on job sites and on our own Web site.”

Wetherby Asset Management is structured with client service teams that include wealth managers, investment associates and operations associates. Team members hold complementary skill sets and diverse specializations in such areas as trust and estate law, investments, insurance, investment banking, private banking and technology, says Wetherby.

Each team holds a weekly meeting to discuss ideas and share client stories that could be relevant or beneficial to others, says Graeme Agate, the firm’s business development associate.  “This structure encourages a sense of belonging and team spirit,” he says. “We have found that having multiple contact points on client relationships and accounts leads to enhanced efficiency and client satisfaction.”

One of the biggest challenges, Wetherby says, is when an employee is not a good cultural fit for the firm. “It’s like being in a small tent with a mosquito,” she says. “There’s this buzzing and you can’t identify it, and it’s causing you to be unsettled all the time. Until you open the tent and do something about it, it’s pretty miserable.”

Shareholder Chris Hauswirth, a wealth manager and the director of alternative investments, joined Wetherby Asset Management in 1998. The firm has a designated in-house research team of six and complements its internal research efforts through relationships with Portland, Ore.-based CTC Consulting, and with San Francisco-based Imprint Capital for impact investments, says Hauswirth.

In non-impact investments, Wetherby Asset Management uses a manager-of-managers approach. It actively works with 40 to 50 managers in some capacity and also tracks many more because it inherits positions from clients. The firm doesn’t necessarily have a bias toward active or passive managers, he says.

“We’re willing to invest with active managers if we can find a manager or an investment team that can exhibit that they do something exceptional,” he says. The firm might use a very talented active manager to complement a passively implemented core holding, such as large-cap equity.

It seeks managers who have been able to protect assets in difficult periods in the market and perform well over full market cycles. “The ‘protect first, grow second’ mentality is very much baked into our investment selection process,” he says.

One of the firm’s longtime holdings is the IVA International Fund. “They are very good stewards of capital,” says Hauswirth, and “they’re quite eclectic in their investment approach.” The fund may hold a company’s equity or debt in its portfolio, as well as gold and cash. “We wouldn’t want to give that flexibility to just any manager,” he says. Another investment is the FPA Crescent Fund.

The firm emphasizes long-term investing over short term and embraces the “price matters” bias, says Wetherby. “There are investors that feel like you get on the train and if it’s moving in the right direction, as long as you get off at the right spot you’re fine,” she says. But it’s not just your exit point that matters, your entry point matters, too, she adds.

The firm’s investment committee looks at the relative value of asset classes and applies those views and themes across clients’ customized portfolios. If the firm makes its case and a client still doesn’t want to be invested in a particular asset class, “They win, it’s their money,” she says. “Our job isn’t to overrule them, it’s really to serve them.” Part of this, she says, is having clients be comfortable with what they own.

Making An Impact
While managing clients’ money is important to Wetherby, “We also want to connect the money to its purpose in their lives and have it be a bigger conversation,” she says. Her firm spends a lot of time talking to clients about their goals and objectives.

Nearly a decade ago, after some philanthropic clients expressed interest in impact investing, the firm made its initial venture into the area. “I picked up and pursued it because of my own personal belief of harnessing the capital markets for social good,” she says. Impact investments aim to generate environmental or social impact and generate financial returns.

According to Taylor Jordan, managing director of Imprint Capital, Wetherby Asset Management was one of the early adopters of impact investing for a firm its size. Its wealth management services and impact focus combine “the best of both worlds,” he says. Imprint performs the impact due diligence on investments while Wetherby’s firm performs the financial due diligence. Investments must pass muster on both fronts, she says.

Although only 3% to 4% of Wetherby Asset Management’s overall assets are allocated to impact investments, she estimates that about one-third of its new business inquiries result from its expertise in impact investing and sustainability.

“It probably is one of the biggest interest areas that we see, even among existing clients,” she says. She notes that some second and third generation clients really want their portfolios to reflect their values and beliefs. Approximately 10% of her firm’s clients incorporate impact investments in their portfolios. On average, they are allocating about 15% of a portfolio to these investments.

Wetherby expects this will become a bigger part of clients’ objectives over time as industry offerings expand. “It’s a little bit of a chicken and egg thing,” she says. “The universe of impact investing, while it’s growing, is still not that big.”  Clients’ impact investments are based on their individual interests.

She is personally interested in the alleviation of poverty and the empowerment of women and girls. She sits on the board of BRAC USA, an affiliate of a Bangladesh-based development organization. She has also been very involved in City of Joy, a women’s leadership center in Bukavu, in the Democratic Republic of Congo.

Client Connections
Saul Feldman, 84, former chairman and CEO of U.S. Behavioral Health, became a client when Wetherby started her firm. Over the years, she has helped him with retirement planning and estate planning. For example, she helped him understand estate taxes and invest in grantor retained annuity trusts (GRATs), he says.  She has also evaluated his insurance coverage, set up an educational savings plan for his granddaughter and assists his sons with their financial planning, he notes.

“She listens to her clients and interacts, is always accessible, has high integrity and is totally trustworthy,” he says. But it’s more than her ability to evaluate and introduce investment ideas that impresses him. “From my own experience as an executive, it’s not only what [qualifications] they have but the kind of organization they build,” he says. “Her organization reflects her values,” he says, and her colleagues are “universally helpful and enormously positive.”

Another loyal client is Maggie Kaplan, a lawyer by training and the founder and executive director of the nonprofit Invoking the Pause, an environmental small grants program that cultivates innovative ideas to address climate change.

“It has been quite a gift to work with Deb for the last 11 years,” she says. “We share a passion for social change in the world.” A member of a philanthropic board on which Kaplan served introduced them.

Wetherby has assisted Kaplan, now in her early 60s, with retirement planning and other investment needs. She helped her diversify her father’s estate and set up a family limited partnership. When Kaplan’s father died, Wetherby helped her research and negotiate a Graegin loan to fund the estate taxes. And when the IRS audited his estate, Wetherby and her team “were in the trenches with me,” she says.

Wetherby has also introduced her to various impact investments, which now account for about 50% of her family portfolio. “We set about a multiyear ramp-up,” says Kaplan. “It wasn’t a slam dunk.”

Her impact investments arranged through Wetherby include Root Capital, a nonprofit social investment fund that helps bring agricultural opportunities to economically challenged rural communities in the developing world, and the Media Development Investment Fund, which brings affordable financing and technical assistance to independent news and information businesses in countries with a history of media oppression.

She likes the transparency of the reporting that Wetherby provides and how Wetherby helps her review personal goals each year. She is also pleased that Wetherby fosters long-term relationships within her firm. “They’re all part of my team,” says Kaplan.

Wetherby’s perspective may have been shaped by her position as the fourth of five children in a close-knit family. She is also the mother of three young adults and a grandmother of three.

Of course, even a successful wealth manager needs breaks. One of Wetherby’s favorite hobbies is to throw pottery on a wheel, a skill she learned in 1980. She belongs to a pottery co-op where she shares a kiln and glazes with other members.

“It’s an alternative to the intensity of the markets,” she says. “It’s totally a creative, meditative thing for me.”

At 56, Wetherby is at an age when many advisors are just starting to think about how their firms will transition to the next generation.  But she and her firm already have a succession plan in place. “Most importantly, we also have several talented people on the team who could step into my responsibilities,” she says. But at this point, she still loves what she does.