Roy Ballentine and Alice Finn lead a unique planning
firm that serves some of America's wealthiest families.
In its day-to-day dealings with clients, Ballentine,
Finn & Company Inc. makes a habit of finishing conversations by
asking how clients are doing and if there's anything the wealth
management firm can do to improve their service.
Clients often say all is well. Sometimes, says firm co-founder Roy Ballentine, they'll offer constructive criticism or suggestions that lead to the firm refining its operations.
Once, however, it led to a response that Ballentine calls the proudest moment of his entire career.
It happened several years ago when Ballentine was speaking to one of the firm's largest clients-a member of one of Europe's most prominent families. The firm had been working for the family for more than a year at that point, helping it run worldwide holdings that included homes in five separate countries, business interests across Europe and the U.S. and total assets of about $1 billion-all managed by a personal staff of about 35 employees throughout the world. Among other things, Ballentine, Finn & Co. helped the family streamline operations, not to mention uncover $2.5 million of unaccounted for expenditures.
On this particular day, after Ballentine asked if there was anything the firm could do to make things better, there was a long pause on the other end of the line. Then, the head of the family-Ballentine prefers to keep his name anonymous- finally said, "You know, it's really quite remarkable. You are what you say you are. In my life, that's quite rare."
Coming from a client whose projects were among the firm's most significant undertakings, the response was naturally a fulfilling one for Ballentine. But it struck him on another level, he says, because it addressed the philosophy the entire firm is built on.
"Ballentine, Finn & Company is designed around a very simple question: How would we want to be treated if we were the client?" Ballentine says.
A "Virtual" Family Office
In terms of size and reputation, Ballentine, Finn's achievements are notable. The firm's assets under discretionary management were more than $1.5 billion as of March, while assets under advisement were at about $4.5 billion. The firm is strictly fee-only and calls itself a "virtual" family office that is designed to provide an array of wealth management services for clients with assets of $20 million or more.
The firm's assets and revenues have been growing at a pace of more than 20% in recent years, and it has had to put more focus on "managed" growth because of the increased flow of potential clients knocking on their door, according to co-founder Alice Finn. This has been partly due to increased awareness about the firm. In 2004, and each year since, Worth magazine chose Ballentine and Finn as among the nation's 100 "Most Exclusive Wealth Advisors." "We're proud of the fact that we get referrals from people we don't even know," Finn says.
The precursor of the firm was Ballentine & Co., a financial planning firm founded by Ballentine in 1984. Ballentine, Finn sprang into existence in 1997 when Ballentine and Finn became partners. The firm currently has 43 employees about evenly split between offices in Wolfeboro, N.H., where Ballentine is based, and Waltham, Mass, where Finn has her office. Together they serve a client base consisting of about 70 client families, some with two or even three generations that use the firm's services.
The wealth of the firm's clients can range up to more than $1 billion, according to Finn. About two-thirds of clients, she says, are entrepreneurs with assets heavily concentrated in their own private businesses. The stable of clients also includes a substantial number of corporate executives whose wealth is concentrated in the stocks of their public companies.
Diversifying concentrated, illiquid assets is among the firm's most frequently requested services, Finn says. "They come to us in part because they want to get more liquid," she says.
Ballentine says the firm places a heavy emphasis on employee retention, and has recently instituted a program that allows employees to work toward an ownership interest. Kyle Schaffer, who has been at Ballentine, Finn for four years, recently became the first employee to become a shareholder of the firm. Other shareholders are expected to be named later this year.
Finn says the high value the firm places on employee retention is an outgrowth of its selective hiring process. Many who work at the firm graduated college with high honors-Ballentine and Finn graduated from Yale and Harvard, respectively-and were chosen from a hiring process that focuses on intellectual and mathematical skill and the ability to communicate.
Finn notes that a significant number of the firm's clients are investment professionals themselves, which can be intimidating to someone new in the financial advisory field.
It's one of the reasons the firm typically looks for intellectual and communication skills, before experience in financial planning, when hiring its client senior client advisors-the employees who act as team leaders when dealing with clients. "What we learned was hire the right personality first," Ballentine says. "You can always get a CFP. But if you are not analytical, not good at managing projects and if you can't think on your feet-that's much harder to develop."
The needs of Ballentine, Finn's clients usually extend beyond just financial planning and investment management. The firm's clients, for example, operate 15 private foundations, all of which are run with the help of Ballentine, Finn, which recently started a division devoted exclusively to dealing with nonprofit organization investment issues. The firm does not have its own legal or accounting department, but it will provide clients with the due diligence for selecting tax and estate planning professionals, and typically acts as the lead advisor in tax and estate planning.
Len Schlesinger, vice chairman and chief operating officer of Limited Brands Inc., has been a client of Ballentine's for about ten years, first hiring him when he was a professor at Harvard Business School. Schlesinger says he was initially impressed by Ballentine's thoroughness and his belief in an investment strategy grounded in no-load index funds with rigorous asset allocation. He also valued the way he pulled together other professionals such as attorneys and accountants, as his needs demanded them.
"He did not oversell his capabilities in terms of direct support and was clear about the fact that a large part of the role he played was in the integration of their service providers," Schlesinger says.
Now, he says, no potential transaction goes by without it being analyzed by Ballentine, Finn. In addition to tax planning and investment management, Ballentine also routinely monitors his cash flow on a quarterly basis, directs all his estate planning and handles the investments of his three daughters and his mother. "At the end of the day, I do nothing without his active involvement," Schlesinger says.
A Client's-Eye View
There may be a reason Ballentine, Finn makes an effort to zero in on client satisfaction: The firm's precursor operation was founded, you might say, by a client.
That's what Ballentine was in the 1980s, anyway, as he and other family members scrambled to settle his father's estate, which included a family real estate business. As Ballentine remembers it, the settlement process was messy, confusing and sorely lacking in a master plan-despite the fact that Ballentine and his relatives were surrounded by professionals.
"The business itself wasn't all that complicated," he recalls. "What was complicated were the tax issues, the family partnership and trust structure and the family dynamics."
The professionals involved in the process acted like individual "silos," he says, who each went in their own direction. None of them viewed the family's situation as a whole, so Ballentine found himself taking on that role, even though he had no qualifications to do so.
"I remember walking out of meetings with lawyers and accountants muttering to myself," Ballentine says. "If I hadn't asked a question at a critical point, we would have actually wound up doing the wrong thing."
The experience impacted him deeply enough to set him on course to making financial planning a career. A graduate of Yale University, where he earned a bachelor's degree in administrative science and a master's in management, Ballentine had spent six years as a marketing rep with IBM in Boston before joining his family's business in 1980.
He started the financial planning business, Ballentine & Co., in 1984 as a one-man operation in Wolfeboro. As is often the case with start-ups, Ballentine made use of contacts from his prior career, forging relationships with software companies that were IBM resellers. Promising clients objective advice, he started the firm as a fee-only business-at a time when the fee structure was "practically unheard of" in planning-that charged by the hour.
From there, Ballentine says his work with clients was intertwined with a lot of reading and a lot of trips to conferences to gain the experience he needed to handle more complex cases. Soon, he says, he was giving conferences as well as attending them. "The thing just sort of grew organically until the early 1990s, when I was ready to go looking for a partner," he says.
The search for a partner led him to Boston University, where he wrote a letter to the head of the financial planning department explaining the type of candidate he was looking for.
At the time, Finn was in the program taking a case study course-an effort on her part to gain experience in the financial planning field. Up to then, Finn's work was concentrated in investment management. An honors graduate of Harvard College and Harvard Law School, she served as vice president of Kinder Financial Services Inc. and prior to that, practiced corporate law, specializing in mergers, acquisitions and taking companies public, as an attorney at the Hale and Dorr law firm in Boston. Earlier in her career, Finn worked for NASA, negotiating international contracts for the Space Shuttle and International Space Station projects.
When her professor at Boston University, where she was taking a graduate class, posted the letter by Ballentine, Finn was immediately impressed-partly due to the fact that it was a painstakingly detailed document that listed three pages of what job candidates needed to know, including corporate law. "It said to me that they must be doing some sophisticated work," Finn says.
As Ballentine remembers it, he knew Finn was the right person for the job about three minutes into her interview. Besides the fact that her background was exactly what he was looking for, Ballentine says, "I could see she was a really nice person who cared a lot about the quality of what she is involved in."
Finn joined the firm in 1996. Married and pregnant, Finn started out at Ballentine & Co. working two days out of the week at her home in Lincoln, Mass., and spending the other three days in Wolfeboro, which was a two-hour drive away.
Her arrival marked an important transition period for both her and Ballentine. Until then, Ballentine & Co. had no investment management division of its own and utilized investment management was largely handled by a group of money managers who were selected and overseen by the firm. Ballentine and Finn, however, decided they wanted to provide a full-service operation that offered in-house investment management. The expertise brought by Finn provided the nucleus around which Ballentine, Finn was able to set up its own investment strategy group, according to the partners.
It's a strategy that then and now is predicated on combining management products with index funds-particularly Dimensional Fund Advisors vehicles and ETFs-for clients' public equity portfolios. "We decided to do in-house only those things where there wasn't an outsourcing alternative," Ballentine says. "We are still using a lot of outside managers."
Getting More Comprehensive
By 1997, Ballentine and Finn felt the need to structure their firm to provide a more comprehensive level of service was crucial for strengthening their relationships with clients. Up until then, Finn notes, it was hard for the firm to say exactly how many clients they had since their work was project based.
"We would work for someone and then they would go away" if or when the next issue arose, Finn says.
One of their first steps in the process was doing away with their hourly fees and creating an annual fee structure based on a client's assets. The hourly fee, they found, often compelled clients to try to implement financial and investment management plans on their own-sometimes unsuccessfully. A flat fee, they decided, would enable the firm to guide clients through the planning and implementation process, while in the process strengthening their client relationships.
"As a fee-only planner, unless you do something to put yourself in the implementation process, you run the risk of seeing a well-designed plan implemented in a suboptimal way," Ballentine says. "Many times the plans were not implemented at all or haphazardly."
But the change went even deeper than investment implementation. By switching from an hourly to a flat annual fee, Ballentine and Finn say they were changing the underlying dynamic of the firm from passive to active. Instead of waiting for clients to request service, the firm decided it would initiate action whenever they felt it was needed. "Instead of telling staff to react when a client calls, we tell them you're supposed to drive the process, anticipate and initiate interaction," Ballentine says. "This was a huge change."
The firm built a team structure to facilitate the new approach. Under the system, each client of Ballentine, Finn is assigned a team of five to seven employees, with each group consisting of the lead senior client advisor and subgroups of analysts and planners that handle the investment management and financial planning duties.
In some areas of expertise, such as estate planning, the firm will recommend outside professionals to clients. But, Finn notes, the relationship manager oversees their work, and sits in on all outside meetings. "We collaborate with the outside experts, but we are actually driving the process and the lawyer is working in partnership with us," Finn says.
In recent years, the firm has continued to evolve. The firm's investment strategy group, for example, places a greater emphasis on utilizing alternative investments for generating alpha for client investments. Finn says the firm continually does due diligence on outside managers in alternative investments such as hedge funds, real estate, private equity, venture capital, commodities and timber.
Within each of these categories, the firm has three to six managers it will utilize depending on a client's portfolio needs. The firm continues to recommend a core of indexed public equity portfolios for most clients, but it does use outside managers for public equity positions as well, she notes.
In either case, the firm's investment philosophy doesn't fall on either side of the passive vs. active management debate, but rather is somewhere in between. A typical client portfolio will have a mix of passive and active products, reflecting the firm's belief that there is room for both philosophies in a successful strategy, says Coventry Edwards-Pitt, a relationship manager at the firm who, before being hired in 2004, evaluated equity managers for Goldman Sachs.
"There are some areas of the market that are still inefficient, where you can find managers who can provide alpha," Edwards-Pitt says. "That tends to hold true in the alternative space."
The firm's focus on reshaping its investment strategies is partly due to a "healthy skepticism" among clients, and the market in general, regarding traditional stock and bond investing, says Schaffer, who is part of a team at Ballentine, Finn in charge of guiding investment strategies. "We don't recommend anything we don't completely understand and agree with," he says.
Along with its self-initiated searches, the firm is deluged by solicitations from managers who want a crack at its wealthy clientele, Schaffer notes. During the course of a typical year, the firm will perform due diligence on up to 300 managers. Of those, perhaps 60 might be given serious consideration, and maybe a dozen actually recommended as managers for clients, he says.
In addition to a rigorous selection process, clients also have the benefit of gaining greater access to quality investments, Schaffer says. He cites as one example a private equity and venture capital fund the firm recently approached that required a $5 million minimum on all accounts. The firm was able to negotiate that minimum down to $1 million per client because it was able to bring 30 clients into the fund, Schaffer says. "We have pretty good access because we have a strong client base," he says.
Another focus of the firm over the past several years has been an emphasis on serving multiple generations of its client families. Ballentine says the firm has stepped up its involvement with adult children, both as planners and educators. In one case, for example, the firm set up a series of educational meetings for a family that felt two of its college-age children were squandering away the family's money. After the meetings, during which the children were presented with the hard realities of where their finances were headed, they agreed to budget themselves and increase their earnings.
Ballentine says the firm has contracted with a psychotherapist as an outside consultant to help with these types of situations. The firm's senior staff meets with the therapist half a day every month.
"One way to think about money in a family situation is it acts like an amplifier," Ballentine says. "It tends to turn up the volume on whatever bad behavior is occurring."
A Better Business Model
When asked to explain the rationale behind the creation of Ballentine, Finn, the founding partners mention their desire for an "ongoing and proactive" relationship with clients.
One of their clients, a corporate CEO who has used their services for four years, can vouch for the fact that they've achieved that goal in his case.
Talking about his experiences with advisors before becoming a Ballentine, Finn client, he says, "Everyone was trying to sell us something. There was always a pretext to them managing your money," says the client, who chose to remain anonymous.
That hasn't been his experience with Ballentine, Finn, he says. "The reason we went to Ballentine, Finn and love being with them is they are truly the quarterback for our wealth and they do not try to sell us anything," he says. "They are in the business of directing traffic, calling the plays, hiring and firing the money managers."
The firm, in fact, handles every facet of his financial life, including their charitable giving, estate planning and major purchases.
"They know everything about us," he says. "They see the whole picture."