Some clients don't. Since many have succeeded by building their own businesses, they have a bigger comfort zone in those business areas they know intimately rather than in the volatile global financial markets.
Major decisions to diversify aren't easy ones. In the end, it's the client's money. Sometimes a recommendation is made and put on the back burner. Oxford advisors like Davis won't badger a client, but they will raise the issue at subsequent meetings.
As the financial crisis turned tumultuous in 2008, Davis found himself on a steepening learning curve in what was suddenly a difficult profession. He's no stranger to financial crises; he recalls working at Sullivan & Cromwell in the fall of 1987. "This period [2008-2009] was distinguishable from others in that you began to wonder if the whole system was going to collapse," he says.
By fall 2008, clients who thought they knew better were nearing panic mode. More than a few wanted to go to 100% cash. "Clients were asking questions about bank accounts and custodians," Davis says. Even though they had established some relatively defensive positions, he spent time and energy "counseling clients against their own worst instincts."
Understandably, clients who have built wealth elsewhere want to conserve and protect what they have. After emerging from the crisis, clients have survived, but "they remain cautious and they put a higher premium on liquid investments than they did before," Davis says. "Illiquid investments have less appeal."
A Remarkable Relationship
Lockshin of Convergent Wealth Advisors met Thomasson at a Young President Organization meeting five years ago. When the two discovered they were not only in the same business, but also operating firms of a parallel scale with few peers, it was the beginning of a remarkable relationship.
Their business models differed significantly-Convergent has offices all over the nation while Oxford is in the Midwest and Dallas-but their approach to the client, with a heavy stress on asset allocation, estate planning and other esoteric issues affecting ultra-affluent individuals, was strikingly similar. Soon they were getting together every eight to ten months and running two-day, complete open book meetings. If dramatic disparities surfaced, their CFOs were called in to figure out why.
Lockshin says there are three attributes about Oxford that stand out. "Jeff is incredibly disciplined, and that benefits the company, employees and clients," he notes.
Service delivery is another component of Oxford's value proposition. "From a marketing standpoint, he puts together events for his clients that are only rivaled by places like JP Morgan and Goldman Sachs," Lockshin explains.
But the third attribute may be the most significant. "He has a tremendous commitment to remaining a 100% employee-owned company," Lockshin says. "That matters to clients."
Succession planning is a touchy subject throughout the profession. Only a handful of firms-like Oxford and Convergent (which is about 66% owned by City National Bank of Los Angeles)-might be accorded nine-figure valuations. A few months ago, Charles Schwab & Co. paid $150 million for Boston-based Windward Investment Management, which manages about $3.9 billion through a proprietary quantitative investment system. These valuations may not be comparable because Windward, Oxford and Convergent have different business models-Schwab wants to leverage Windward's investment platform and market it to other advisors and retail investors-but all are in a different league than most successful RIA firms.
Several years ago, Thomasson established a Delaware dynasty trust that lives on in perpetuity to ensure Oxford could remain private and independent indefinitely. Kara Talbott, a managing director at the firm, says the trust was established as a governance and succession structure, not a family wealth accumulation and transfer strategy. However, Oxford has recommended these same trust structures to clients for all the aforementioned reasons.