Investment advisor Cheyne Pace is preoccupied with tax efficiency -- 
a focus that’s helped him attract $1.7 billion in client money since he founded Yale Capital in 2004. Last year, when he thought about relocating, tax advantages were among the things he considered before moving himself and Yale’s headquarters to Dorado, Puerto Rico.

U.S. investors are bemoaning the tax drain on their savings and seeking help to reduce the bite, Bloomberg Markets magazine reports in its December issue. Millionaires worry more about taxes than terrorism, ranking the issue third behind the political environment and government gridlock among their national concerns, a 2015 survey by research firm Spectrem Group found.

Wealth managers say they’re working more on tax issues since the federal government boosted the levies on wages and investment gains of big earners in 2013 for the first time in a decade. Today, the marginal income tax rate, on earnings above about $400,000, is 39.6 percent, up from 35 percent in 2012. On top of that, some states target their richest residents. California raised its top marginal rate to 13.3 percent in 2012 from 10.3 percent on income above $1 million.

“After-tax returns matter, especially in a lower-interest-rate environment,” says Elizabeth Nesvold, managing partner at Silver Lane Advisors, which specializes in mergers among wealth management firms. “As more baby boomers age, every penny will count.”

Pace, 47, wants to see those pennies add up. He chooses investments from oil pipelines to shares of bank stocks that pay tax-preferred dividends to help clients build savings and lose less to levies. “I need to make sure their net return is as high as possible,” he says. “One of those components is fees, and the other is taxes.”

Yale boosted its assets under management 70 percent last year, making it the fastest-growing firm in Bloomberg Markets’ second annual ranking of registered investment advisers. Wetherby Asset Managementtops RIAs by size for a second year. The San Francisco–based firm managed $3.6 billion as of December 2014, up 3.5 percent from the previous ranking. A dozen companies are new to the list this year.

Pace works with 35 family groups who have at least $10 million apiece to invest. They’re mainly entrepreneurs and executives from oil, gas, pharmaceutical, and technology companies. Many have a lot of their wealth in the stock of a company theytook public or that they got in an acquisition. He’s helped them protect against losses by transferring some of that stock into so-called exchange funds, which also hold shares from executives at other corporations. The strategy lets clients both diversify and defer taxes on gains because it doesn’t trigger 
a sale, Pace says.

One of the firm’s most successful investments is master limited partnerships. MLPs hold pipelines and other assets that transport natural resources, rather than the commodities themselves. When profitable, the securities provide distributions, similar to stock dividends, and offer tax deferrals on most of the income an investor receives.

Pace bet clients’ money on a natural gas–transporting MLP called Energy Transfer Equity. The Dallas-based partnership gained more than 468 percent, with dividends reinvested, from 2007 through 2014. He’s still a fan despitea 26 percent drop this year through mid-October in MLPs in general and a plunge in overall energy prices. Six of the firm’s 10 biggest U.S. equity positions were in MLPs as of June 30.

Pace got his MBA at Yale University, where he focused on asset allocation. He kicked off his wealth management career at Goldman Sachs in 1994, a year when MLPs were first catching on. He moved to Merrill Lynch in St. Petersburg, Florida, in 1999. To win business, he cold-called Silicon Valley entrepreneurs whose companies were going public. When he broke out on his own to form Yale about five years later, clients with about $180 million in assets joined him. Today, he owns more than half of the business.

RIAs have increased their share of the wealth management market every year since 2007, more than doubling the assets they manage to $2.7 trillion as of 2014, research firm Aite Group reports. These independents have a duty under the Investment Advisers Act of 1940 to put customers’ interests first. They usually earn a fee based on assets under management. Brokers, who often call themselves advisers, only have to recommend suitable investments and can make commissions from their firm’s products.

Yale is the only firm in Bloomberg's ranking of the top 50 RIAs that has relocated to Puerto Rico. Its clients currently get no tax relief from the move. But owners of investment firms who become residents pay no capital gains taxes when they receive a percentage of the investment profits, says Gabriel Hernández, who heads the tax division of accounting firm BDO Puerto Rico. If the Puerto Rican company passes distributions or dividends to owners from the fees it collects, those are tax-free, too, Hernández says.

There’s a catch: You must live in Puerto Rico at least 183 days in a year, show close social ties, and employ at least three Puerto Rican residents at the firm. Pace says he’s trying to become a resident himself, but any tax advantages for him are still unclear.

One challenge all RIAs face is succession. The average age of founders in our ranking is 61. Pace says he’s delegating more, but it’s hard because he wants to be involved in every portfolio. When it comes to eventually passing the reins, he says he’ll look for someone with an academic background who’ll maintain his tax-efficient focus—be it in Puerto Rico or beyond.

Bloomberg Markets ranked active U.S. registered investment advisors that provide financial planning services based on the data they reported to the Securities and Exchange Commission as of June 1, 2015. We used filings as of June 2, 2014, for year- over-year comparisons.

The ranking excludes firms that operate as or are affiliated with broker-dealers, banks, or thrifts; trust or insurance companies; or firms with employees who are registered representatives of broker-dealers. Bloomberg also excluded firms that take commissions, sell financial products, or operate as real estate agents, lawyers, insurance brokers, or accountants. We did not consider multifamily offices.

Bloomberg ranked only RIAs that obtained more than 75 percent of their assets under management from high-net-worth individuals. Up to 25 percent of their AUM was from any of the following sources: investment and business development companies; pooled investment vehicles; pension and profit-sharing plans; charitable organizations, corporations, or other businesses; state or municipal government entities; other investment advisors; and/or investors that the RIAs described in the filings as “other.”