Brightworth's partners want to take the firm to the next level-and they have a plan to do it.
To understand how the recently renamed advisory firm
Brightworth more than doubled its assets under management since 2000,
it helps to know the story of the prospective client who didn't want to
sit in the corner. The retired, sharply dressed gentleman came in for
an introductory meeting with Dave Polstra, the firm's founder, who
gestured for his guest to sit at the round table in the corner of his
office. The man hesitated, and then explained he couldn't sit in a
corner because he's claustrophobic. He hesitated again before saying he
was in a German P.O.W. camp during World War II, where he was confined
by barbed-wire fence and barking dogs.
Polstra let the man tell his story about the P.O.W. experience and how it affected his life, of how it made him wary of giving up control of things, including investments. The man's story provided Polstra with insights into his thinking and the best way to approach him from a financial perspective. "Getting to know our clients on a deeper level is our whole premise," says Polstra. "It's more than just the numbers."
The man has been a client for ten years, and he slowly learned to cede control of his finances. "He's a great client," says Polstra, "but it has taken years of patience and care from us to get to that level of trust. I tell my staff it takes years to earn a customer's trust and respect, but it takes only a second to lose it."
Based in the Atlanta suburb of Norcross, Brightworth is a fee-only firm with about 240 clients and roughly $525 million assets under management. Most clients are referrals either from existing clients or from Atlanta-area attorneys and other professionals in the business community. Their customer retention rate is 97%.
Brightworth wants to expand its assets under management to $2 billion in about five years, and solid client relationships will continue to be a cornerstone of the firm's success. In May, Brightworth plans to host another of its periodic client events. The venue is the newly opened Georgia Aquarium in Atlanta, billed as the world's largest, and will include a dinner (presumably, not seafood) in front of two large viewing windows.
But Brightworth's four partners know it takes more than just a good ear and warm fuzzies to grow and manage an advisory company. The firm laid out a ten-year strategic growth plan in 2002, and continually seeks ways to fine-tune their operations. They throw around wonky terms such as systematizing to describe how they create processes to manage everything from handling prospective clients to establishing employee bonus plans. This mix of art and science filters down to the beverage level-they keep track of their clients' soft drink preferences and what they take in their coffee so that they're properly provisioned during office visits.
Important to their strategy of taking the firm to the next level is providing the kinds of services needed by high-net-worth clients with complex and sophisticated issues. For example, among Brightworth's clients are a number of executives with large amounts of assets tied to company stock. They're reluctant to diversity because they don't want to pay a small fortune in capital gains taxes.
"We show them they've already paid the alternative minimum tax on a lot of these appreciated securities," Polstra says. Consequently, when they sell those stocks they can realize an AMT credit that reduces or eliminates their federal tax burden.
At the same time, these executives often have a large 401(k) plan heavily concentrated in appreciated company stock. "By pulling that out in-kind and coupling it with a charitable trust, we're able to integrate their tax, cash flow, charitable and estate planning all in one," says Polstra. "We think it takes a strong level of expertise to deliver that kind of planning."
The firm's partners often join a client when they meet with their estate attorney to help decipher the financial mumbo jumbo and to work with the attorney to make sure client objectives are met. After Chris Dardaman recently completed a financial plan for a top executive, he joined the man at the meeting with an estate planning attorney.
The man thought he'd be going alone, and was so pleased that Dardaman joined him that he left a message that night thanking him for going the extra mile. "It's always great to get that type of feedback from clients," he says.
Until recently, Brightworth was the firm formerly known as Polstra & Dardaman. Polstra, 48, is chairman and a nationally known speaker on such topics as IRAs and executive pre-retirement planning. As CEO and chief investment officer, Dardaman, 43, is the firm's big-picture guy whose easy-going, conversational manner and thick Rolodex keeps the firm plugged into the financial services business. "He knows so many key people in the industry," says Polstra, "and that helps add basis points to our clients' returns because he's connected to great financial people others don't know about."
The two met after Dardaman's in-laws hired Polstra as their financial advisor many years ago. As the day neared to go over the financial plan, they called to say they were bringing along their son-in-law. He had a finance background and had helped them with their finances, explained the father-in-law, and he wanted to observe the plan presentation. "I thought to myself, 'That's kind of weird,'" says Polstra, adding slyly, "I think he had an ulterior motive."
If so, it worked. Both were alumni of Arthur Andersen & Co. back in the days when it was the nation's most prestigious accounting firm and had developed a passion for financial planning there. They hit if off, and discussions over the next 18 months or so ultimately led to a partnership that began in 1992.
Business was fine and they were gaining a good reputation, but they had bigger goals in mind for their firm. Enter Alan Gotthardt, 35, a wunderkind on the fast track at Ernst & Young's Atlanta office, where he worked with some its wealthiest clients. The three came together in 1995 while working on the estate settlement for a mutual client who recently had passed away. One thing led to another and they realized they might be a good fit, but it took numerous breakfast meetings at a local IHOP restaurant to finalize the arrangement before Gotthardt signed up in 1997.
Gotthardt saw a firm on the rise that would allow him more personal interaction with clients beyond mainly tax work. Polstra & Dardaman saw Gotthardt as a sharp guy who could help take the firm to another level. As the firm's president, Gotthardt provides the firm's strategic direction and design, from its growth strategy to its name change. "After I joined we asked ourselves if the name should become Polstra, Dardaman & Gotthardt," Gotthardt says. "And we realized the answer was, heavens no."
The firm wanted a new name that would help rebrand it as an enterprise-level outfit. The partners also figured a generic name would make it easier to take on additional partners someday without worrying about putting people's name on the door and creating an unwieldy moniker. They hired a marketing consultant and looked at hundreds of possible names that they hoped would project the proper image.
None of the suggestions tickled their fancy, but they hit pay dirt during the second consulting session when somebody put together the words "bright" and "worth." They officially became Brightworth on January 1, and they say feedback so far is positive. "We had one long-time client tell us, 'I like the new name, heavy on the worth, please,'" Polstra says.
Even with a well-conceived growth plan, the three partners realized the management team needed another person to bring it all together from an operations perspective. Through a mutual friend they were introduced to Ray Padron, 49, who had served as chief financial officer at financial consultant Ronald Blue & Co.'s Atlanta-based national headquarters. Prior to that, Padron oversaw the creation of the company's Baltimore branch office, and had started another financial planning firm before joining Ronald Blue.
The three partners liked Padron's operational experience. Padron was impressed by the firm's mission statement and its growth strategy. "I realized my operational background and people management skills were a good personal fit for me," Padron says. After discussions that lasted more than a year, he came on board in 2004.
All four partners are certified public accountants and certified financial planners, and are also designated personal financial specialists and certified investment management analysts. Yet they all have specific fortes and different strategic roles that complement each other. As Polstra puts it, they seem to fit together like pieces in a jigsaw puzzle.
Dardaman is the idea man who's always talking to financial industry players, business gurus and others to brainstorm ideas to make the firm better. Gotthardt's job is to distill these ideas to find the golden nuggets he can build into their business strategy. Padron's role is to execute these strategies and make them reality. "The simplified version is Chris runs out of gas at the idea level, I run out of gas at the design level, and Ray takes it from there and gets people motivated to do it," Gotthardt explains.
Things aren't always that cut-and-dry, and the partners have enough overlapping skills to help out in each other's area of expertise. For example, Dardaman recently wanted to find a way to let employees share in the firm's success by replacing its semi-arbitrary bonus plan with a more formal system. He talked with lots of different outside people to get ideas.
Gotthardt ran with that and decided they needed to do more than simply throw money at employees. At that point, Gotthardt and Padron began discussions on formulating a workable plan. Eventually, it came up for a partner-level review. They agreed on a new system and recently implemented a new bonus plan with "ownership elements without actual ownership," Padron says.
Polstra spends a lot of time with clients and with mentoring the young planners on staff, who do a lot of the client work. And while all four partners speak publicly at conferences, "I probably do more than the others because I just love doing it," says Polstra. He speaks on financial topics at forums ranging from his son's high school to preretirement workshops at Coca-Cola.
One of Polstra's specialties is his expertise on handling IRAs for wealthy executives. "There are creative planning techniques with large IRAs that pass assets through certain trusts and allow you to coordinate the IRA distribution with the rest of the estate plan," he says. "A trust named as IRA beneficiary is a very unique thing that needs certain language to qualify. A lot of attorneys overlook that, and I guess that's why I speak all over the country on it."
It also provides exposure for Brightworth. "Whether it's getting our name out there or getting our newsletters to attorneys, we just want to be well known," Polstra says. "I think we're one of the best-kept secrets in town. Atlanta is a big place with a lot of wealthy folks, and we want to serve that growing base."
The message Brightworth wants to promulgate is this: It's an independent, fee-only and open-architecture firm with no agenda to push certain financial products. But even as Polstra feels the need to raise Brightworth's public profile, the firm has long been known within Atlanta's professional circles.
Ben White, a prominent estate-planning attorney in Atlanta, has seen Brightworth in action for years when they worked together with mutual clients. "In my practice I've worked with investment managers from around the country, and it's hard to find managers who provide consistent results," White says. "These guys have steady results, they listen to clients and they seem to have a clean, objective approach." When it came time to choose his own investment manager a couple of years ago, he went with Brightworth.
Dardaman says the firm's equity accounts gained roughly 12% in 2005, while most of its accounts gained 8% to 10% overall. The firm's client minimum is $1 million, but the typical newcomer is worth $4 million to $5 million. "Most of our clients want to grow their capital," he says, "but the first goal is to preserve it." Although reluctant to divulge long-term performance numbers, he says Brightworth has consistently topped its benchmarks by "several percentage points" over the years.
As chief investment officer, Dardaman employs a wide variety of domestic and global investment vehicles, ranging from equities and exchange-traded funds to separate accounts and alternative investments. He and his research staff work with roughly 30 different money managers across a wide spectrum. "We like managers that use flexible approaches rather than abiding by strict style boxes," he explains.
Brightworth's due diligence of money managers includes both quantitative and qualitative analysis. "The qualitative aspect is most important," Dardaman says. "We look for levels of excellence and integrity."
He cites an example from several years ago when they researched a mutual fund company and called someone they knew who used to work there. "He said he didn't trust them, and that's all we needed to know," Dardaman says, adding that that particular firm eventually got snagged in the mutual fund scandals a few years ago.
Another part of Brightworth's approach is philanthropy. They developed a proprietary process for interested clients, called the philanthropy portfolio, that builds a comprehensive charitable giving program into an overall financial plan. "It's like the next frontier," says Gotthardt. "Investing in others creates societal benefits and brings tremendous satisfaction for individuals."
Gotthardt is the author of The Eternity Profile, a book on the benefits of philanthropy. The four partners are all active in their local churches, and while they don't wear their religion on their sleeve, they say the basic values of their respective faiths are the firm's foundation.
It's one reason why they stress integrity as an important quality when choosing clients, money managers and new employees alike. "We're very particular about who we want working for us over the next 20 years," says Gotthardt. "We look for the sharpest people, but we also look for a certain presence. We can't quantify it, but we just sort of know it when we see it."
Brightworth employs four young planners who work closely with the four partners in developing financial plans and making presentations to their clients. "They're looking for highly committed people who enjoy a fast-paced environment," says Annika Ferris, a recently minted CFP who joined Brightworth in 2003. She says one of the biggest challenges to her job is juggling all of her different responsibilities. "We take time to do things right, and sometimes that takes awhile. It's definitely not a nine-to-five environment, but it's actually a fun atmosphere here."
Ferris loves the support and training she gets from the partners, and she's on a track to eventually become an advisor. She'll likely be joined by new colleagues in the future, as Brightworth hopes to expand its staff from 20 to 32 employees as it grows its business. "The average age of the partners is 44," says Polstra. "We'll be around a long time, but we're building something to last and we want to bring in qualified talent behind us to let the business last longer than we do."