It's hard to miss some of the more auspicious trappings of wealth that dominate the suburbs of northern Virginia, just a short drive north from the nation's capital. There are the 7,000-square-foot homes, the up-market boutiques and department stores, and the pricey cars that zoom around to soccer games, lush golf courses and trendy restaurants. But a few weeks ago, Marjorie Fox had other things on her mind as she drove out of the suburbs to visit some elderly clients who had just moved into a retirement community in rural Virginia.
It was time for the couple's annual meeting with their planner, and that was foremost in her thoughts. They were eager for Fox to see their new digs, so out of the suburbs and to their new home she drove. It would be a gross exaggeration to say that these retirees are the wealthiest clients that Rembert, D'Orazio & Fox work with. By and large, the firms' affluent clients can be described as "the Lexus crowd," as one partner puts it. Nor is traveling half the day to and from a client meeting the most efficient use of Fox's time. But hands-on service takes on a new dimension at a firm that the three partners have helped transform into a company that today manages $610 million for a little over 500 clients.
Service can mean many things. At Rembert, D'Orazio and Fox, it's meant leasing additional office space on the ground floor after staff noticed it was becoming difficult for a few elderly clients to walk up the stairs to the company's second-floor suite in Falls Church. When a widowed client became angst-ridden over whether to hang onto her older Mercedes Benz or buy a new car, Fox had her husband, a car buff, go to the mechanic with the client. "She decided to keep her older car for a few more years," Fox says.
Partner Joseph D'Orazio will even bring in a gemstone expert when clients decide to buy diamonds or other precious stones (though he is not above swinging a baseball bat he keeps in his office for shock value-his not-so-subtle way of stressing to high-income, but budget-challenged clients that they should save more and worry less about keeping up with the Joneses).
In essence, the firm does what it takes to keep all of its clients happy and on track. Its holistic approach to financial planning and its disciplined style of investment management benefited its clients throughout the bear market, and the good news continues today. In fact, the firm's portfolio has produced average annual returns of 11.25% over the past decade, handily beating many major indexes. With 30 years under its belt, 14 staff members, 22 computers and a new office in Leesburg, the firm has staying power-and its clients know it.
Donald Rembert, who founded the firm in 1974, attributes some of its recent success to a brochure they produced a few years back that underscores his approach to needs-based planning. In it, prospective clients will find four tightly worded pages entitled "What We'll Need to Know." The simplicity of the corporate piece belies its true intent: It forces prospects to understand that they'll have to hand over significant amounts of detailed financial paperwork if they want to work with Rembert, D'Orazio and Fox.
"Most people hate this, but it was one of the best things we ever did," says Rembert. "It improves the quality of clients we get. We have to understand everything about them, especially their lifestyle. It drives everything else we do, including retirement and estate planning."
D'Orazio says getting down to the nitty gritty is the firm's essential strength. "We break everything down and rebuild it, so the client gets a true sense of how they'll benefit from their plan with us. So many people have the trappings of wealth and not true wealth. We show them how they can change that."
The partners' willingness to take on such responsibilities illuminates the firm's insistence on being fiduciaries. "We want clients to have the proper legal, estate and insurance documents, and we're willing to take responsibility for that," says Rembert, (who virtually stood alone for years in his challenge of the Securities and Exchange Commission's interpretation of broker-dealer's exemption from such duties). "We have clients who come here after 40 years of marriage, four kids and eight grandkids. The vast majority of them are fragmented. They're going to worry more about a deductible on an insurance policy than the coverage itself. We're going to worry about the coverage."
To do that, the firm has built a deep and trustworthy team of estate planning attorneys and insurance experts who have worked with the firm's partners for years. The partners themselves aren't exactly lacking when it comes to credentials. All have Certified Financial Planner (CFP) designations; D'Orazio and Fox are both attorneys, and D'Orazio is a CPA.
Roy S. Bredder, an elder-law and estate-planning attorney since 1989, says Rembert, D'Orazio and Fox tries to "meet the client's needs, no matter what it takes." That work ethic has made him comfortable enough to refer clients to the firm for the past ten years. The firm has reciprocated, sending Bredder clients in need of estate documents. "I do the legal work and they do the financial and asset work. In more than a decade I never had a client anything but happy. To make referrals, I need a very high comfort level. I've worked with all of the partners there and they coordinate everything easily, so I'm instantly apprised of everything," Bredder says.
Professionals across financial fields in the greater Washington, D.C.-area give the firm and its partners high marks. Rembert, however, says such levels of service are the least that advisory firms owe clients. "I've buried clients, run schools and settled estates. Whatever they need me to do, we do," he adds.
That same attention to detail is evident in the portfolios the firm builds for clients. Its above-market returns underscore the disciplined approach Rembert and his team have mastered over the years using proprietary asset allocation models. The models allow the firm to sort through more than 8,000 mutual funds to find 64 vehicles the partners believe will give clients optimum returns for the least amount of risk. "We back-test and forward-test," says Rembert. "I think it's radical. Clients have been thrilled."
While the approach can sound conservative at first glance, nothing could be further from the truth. Right now, Rembert says, he likes real return assets like PIMCO Real Return, in addition to managed futures (Sequoia, High Sierra) and precious metals (First Eagle, Maple Leaf, Koala Bear). To manage costs, the firm uses institutional funds almost exclusively.
Rembert's business sense is as savvy as his investment approach. He's used an independent board of directors for years, and recently charged them with helping the partners understand what their options are as a firm in terms of growth and merger and acquisition potential. "I think we have a grand model, but my sense was it was important that we get an outsider's look at what we do well and what we can do better," he adds.
The future, he says, is "to give young people a career path, so they can run the firm and we can retire." At age 65, Rembert says he's still years away from that. But the model he has set up will give him that option when he chooses. So far, Rembert has brought on a number of associates, including his son, Charles, and Newton Pendleton, both of who have been made principals of the firm. Rembert's partners have followed a similar model, bringing on younger associates and grooming them.
Pendleton, 40, who joined the firm in 1990, says the way the firm is set up allows associates to learn the technical ropes of planning and investments without having to spend all of their time looking for new clients.
In many respects, while Rembert, D'Orazio and Fox fosters an all-for-one approach, its corporate flowchart still manages to fly in the face of conventional wisdom that touts ensemble firms and firm-owned clients. Each of the three partners courts and works with his or her own clients and is free to develop a team the way he or she sees fit. What they share is administration and investment selection and management. They also share the belief that the firm must have a life of its own after each of them decides to reduce his or her hours or retire.
Although each partner technically could take his or her team and clients and walk, they say the notion is unappealing if not downright silly. Fox has been with the firm for 19 years and D'Orazio for 18 years. Rembert made each a partner in 1990 after former partner Lynn Hopewell left the practice. Both D'Orazio and Fox wholeheartedly agree with Rembert's vision of the future and his attention to detail. They also stand by the structure of the firm and the not-mutually-exclusive collegiality and autonomy it affords them.
Each of the three teams at the firm gets to allocate 60% of its revenues as its team leaders (Rembert, D'Orazio and Fox) see fit. The other 40% goes to the common overhead of the firm. "We don't disagree with the team approach, but we have three teams instead of one," D'Orazio says. "It goes back to the relationship with the client," he says. "The closer the relationship, the more you retain clients."
All three partners have hired and trained junior associates over the years, and have brought on two to three associates in the past few years to handle the overflow of new clients. Many of D'Orazio's clients come from defense contractors and consultants like Northrop Gruman, Lockheed Martin and Booz Allen Hamilton. Of the 60 partners Booz Allen has in northern Virginia, 40 are clients of D'Orazio. "At some companies, as each new group of partners comes in, they're told 'Go see Joe,'" D'Orazio says. "We start with their benefits packages, which we know cold, and work from there."
"Business is just exploding," he adds. "I'd be afraid to look for referrals. The phone doesn't stop ringing." To help him leverage his time better, his goal is to begin handing clients off to his senior associates.
Fox hopes to do the same and has brought on two associates with that goal in mind. "I'd like to step back a little and work a 40-hour workweek," she laughs.
She has also been instrumental in meeting and firming up relationships with subadvisors like estate attorney Bredder (whom she met at an estate planning council meeting more than a decade ago). "I think it's critical to have a team of professionals to rely on," Fox says. "If you're providing business and not expecting business back, you can expect the best service, reasonable fees and control."
By having a team of professionals outside of the firm who each has their own area of expertise, clients receive the level of services they need and the partners at Rembert, D'Orazio & Fox have time to concentrate on their own specialties, often overseeing clients' complete financial and legal pictures. "These professionals will pick up the phone whenever one of our folks calls and go out of their way. It truly complements what we do."
To help more clients tackle the challenge of retirement and aging (if not for themselves, then for parents), the firm has been working with both a transition counselor and a geriatric care manager. The transition counselor works to help clients design a plan that enables them to retire to something, D'Orazio says. For some clients, that's meant setting up charitable foundations. Once they leave their work, they'll be able to run their foundations and disperse funds to those charities they find worthwhile.
The geriatric care managers help clients decide whether they or parents can age in place, in their current home or a new one they're considering. If the answer is no, the geriatric managers employ considerable resources to help clients find the best care facilities for their needs. "They have the inside story on facilities, which is terrific for clients and client families," Fox says.
The level of service the firm provides in estate planning also gives clients and families the type of peace of mind that is hard to buy. "One thing we do well is implement," D'Orazio says. "We help most clients set up a revocable living trust. We'll go to their bank or brokerage house and retitle assets and real estate. To take it to the most extreme, we'll even contact their human resources department with a standing letter so their last paycheck will avoid probate. Many of our clients could pass away today and not one stick of furniture would be probated."
While the firm's partners are busy practicing what they preach by growing a business that has built-in successors, so far none are expressing the desire to retire. "I can't imagine doing anything else, or building a business any other way," D'Orazio says.