At the Philadelphia office of myCIO Wealth Partners LLC, Paul Bracaglia is relaxed in business casual attire on a late-August Friday afternoon as he holds down the fort while the firm's other two partners are on the road.

It's not often that all three partners are in the office the same day. Bracaglia was in Washington, D.C., on Monday that week and in Tampa, Fla., on Wednesday. "We have some clients with significant wealth, so we don't mind getting on an airplane and spending two to three hours with them," he says in a conference room overlooking the massive Philadelphia Art Museum across the Schuylkill River. "The three partners are in the office maybe one day a week--two at best. I have some long-standing clients who I know like a brother, so when I see them it's like visiting an old friend. It just so happens they're paying me for the visit."

Bracaglia, 52, joined the firm in 2007 when he and four team members moved their $1.6 billion investment advisory group from PricewaterhouseCoopers to myCIO. Bracaglia's practice focuses on serving high-net-worth folks, as well as advising 401(k) plans. PwC, along with many other major accounting firms around that time, was restructuring its operations by focusing on core audit and tax practices and jettisoning its investment advisory businesses.

Some of that activity was due to regulatory concerns raised by the Sarbanes-Oxley Act. For that and other reasons, Ernst & Young had earlier decided to cut ties with its investment advisory group. Two members of that group's Philadelphia office, David Lees and James Biles, took their clients with them and started myCIO in 2005. Their client list was chock-full of former and current corporate chairmen, CEOs and presidents of Standard & Poor's and Fortune 500 companies, and nearly all of them followed Lees, Biles and their team to the nascent venture.

MyCIO began with roughly $3 billion in assets under advisement, and thanks to the addition of Bracaglia's team and a steady pipeline of high-end prospects from its blue-chip clientele, it has doubled in size during the past six years. It recently hired two new staffers, and now has about 30 employees, most of them with varying professional designations ranging from CFPs and CFAs to CPAs and AIFs (accredited investment fiduciaries), along with MBAs and holders of Series 65 and 7 licenses.

True to its accounting firm background, myCIO will prepare a client's taxes--preparation fees typically run a cool $2,500. But myCIO is really about investment management, with a heavy overlay of comprehensive financial planning. The firm is a big believer that quarterly reviews with clients are the best way to truly understand what they need and want. Hence, the heavy travel schedules.

But the travel is worth it, the partners say, because it helps them do a better job. "I think we make better investment decisions because we understand the totality of our clients' financial situation," says David Lees, 50, myCIO's senior partner. "Our clients see us as experts in investment advice, but we have backgrounds in tax and estate planning."

As Bracaglia describes it, meeting clients in person allows the firm to make investment decisions that go beyond just the numbers. "As much as people try to make this a science, it's really an art."

Running Start
Creating a new advisory business is never easy, but it didn't hurt that Lees and Biles brought over an impressive A-list of corporate executive clients. And Bracaglia bolstered the roster with his own lineup of high-net-worth clients, as well as his 401(k) business.

The firm has about 490 clients across a range of categories, with recent total assets under management and assets under advisement of $6.1 billion. Lees says roughly 15% of myCIO's revenue comes from corporations that hire the firm to provide investment advice and financial planning services to top executives. "It's supplied to them as an executive benefit," he says.

Another 10% to 15% of revenue comes from institutional clients such as employer retirement plans, endowments, trusts and foundations where myCIO provides investment consulting, writes the investment policy and helps choose asset allocations and individual funds. The rest comes from retired executives, entrepreneurs and high-net-worth individuals and families.

MyCIO essentially came about thanks to the changing regulatory landscape. Even before Sarbanes-Oxley, E&Y saw potential for conflicts of interest when its investment advisory practice gave financial planning advice to clients who were executives at--and had stock options and stock positions with-companies whose financial statements were being audited by E&Y, says Biles, 41, who was the firm's regional leader for wealth advisory services.

And when Sarbanes-Oxley happened, E&Y saw potential conflicts regarding its role as the biggest auditor of public, open-end mutual fund companies. "They didn't want us recommending funds they audited," Biles says. "We couldn't be objective [as advisors] in that environment."

Ultimately, E&Y decided to spin off its entire investment advisory group. "They shopped us nationally and various people were interested in buying the practice, including Goldman Sachs, HSBC and Fidelity," Lees says. He adds that Merrill Lynch made a firm offer, but when it began talking to clients during its due diligence process and asked if they'd follow their advisors to Merrill, they got a less-than-enthusiastic response. "Clients realized that if we were the ultra-high-net-worth business of Merrill, we'd be asked to provide Merrill Lynch products. They value our independence and they weren't happy with that."

When that deal fell through and no other buyers stepped in, E&Y offered the business to the partner group. Lees was a partner and national director of the firm's wealth advisory services. Biles was a senior manager and a significant producer at E&Y who had worked with Lees for many years. The two got together to evaluate their options. "We had the biggest and what we thought was the most profitable practice," Lees says. "And since we were the younger folks in the practice, we thought it best we went out on our own."

They needed a name for their new business. "We thought about myCFO, but that was already taken," Lees says. They substituted an "I" for an "F," and myCIO was born. Lees says the name goes to the heart of what the firm is all about: serving as the chief investment officer for its clients, and providing comprehensive, independent and objective (CIO) advisory services.

When PwC later decided to spin off its own investment advisory group, it let each local office buy its respective practice from the firm. Bracaglia's office in Philadelphia was the largest practice within that group, and he says his team thought about hanging out their own shingle. He also initiated contact with several high-end firms in the area, including myCIO.

"The RIA industry is relatively small at the high end, so I was well aware of Dave and his group when I was at PwC and he was at E&Y, and he was aware of us," Bracaglia says. "Although we never found ourselves competing directly against each other for a prospective client, we knew they practiced the business as we did and considered them formidable competition. We knew they were fully versed in financial planning areas in addition to investment management. That was a given coming out of the accounting world."

With their similar operational and philosophical MOs, it was clear to both sides they were on the same page. And they hit it off socially, which was no small feat considering Bracaglia is a die-hard New York Giants fan and Lees and Biles are big Philadelphia Eagles fans.

"The funny part was that unlike most potential mergers where the details of coming together can be tricky and confrontational, in our case it was easy," Bracaglia says. "We talked philosophically about what we felt was fair, and because I think we both wanted the merger to happen we negotiated in good faith and the details were easy to agree to."

Alternative Path
MyCIO is an investment advisor, but it is not into stock picking. Among the investment vehicles it uses are no-load, open-end mutual funds and index-based exchange-traded funds (none of them leveraged or actively managed). The team also employs separately managed accounts invested directly with asset managers, not packaged in a wrap product.

The firm uses a combination of outsourcing and in-house expertise. For the former, they subscribe to Bank Credit Analyst for economic forecasting, plug into Morningstar and Zephyr Associates for investment research, and employ Callan Associates, a consultant to pension plans, endowments and foundations.

"We take all of that data into our investment committee and make the ultimate call on asset allocation and investment products," says Lees, adding that the goal is to build portfolios based on broad-based allocation. MyCIO custodies most of its assets at Charles Schwab and JP Morgan. Fees for myCIO's high-net-worth clients start at 100 basis points for accounts up to $1 million, and drop as assets increase.

The firm is big into alternative investments--mainly hedge fund vehicles using long-short equity strategies. For clients who can afford it, the firm will invest money directly into a particular hedge fund. For those who can't pony up $10 million to $20 million minimums, the firm has created several feeder funds that pool together commingled client assets to meet the investment minimums of a particular fund.

Lees says the feeder funds have a $250,000 minimum. The largest fund has raised $200 million, and the second-largest about $140 million. The fees for the largest fund include a 60-basis-point management fee and 10% of profits. Fees on the second-largest fund are 1.25% and 10%, which Lees says is significantly below industry averages. He notes that these investments go through two levels of audits at year-end, and that the three partners and the firm's managers eat their own cooking by investing directly in each of the strategies.

"The allocation [to alternatives] can be as low as 10% and as high as 30%, depending on the client," Lees says. "But it's a meaningful percentage for all of our clients."

Jim Henry, a myCIO senior manager, says the firm works with seven core hedge fund managers. The only fixed-income strategy is with Radcliffe Capital Management, which runs an ultra-short bond portfolio. "They do a lot of research on non-rated bonds, with a lot of them being convertibles," he says. "Their goal is 7% to 9% returns, with low standard deviation."

Among its hedged strategies, myCIO plugs into a long-short equity fund and a futures fund from Renaissance Technologies LLC, the outfit founded by famed hedge fund investor James Simons. Henry says myCIO runs correlation analysis to make sure all of its hedges aren't correlated, and that these funds have shown their worth in turbulent markets.

"In this type of market environment, the hedges have proven themselves, and it's great to be able to tell clients they were flat in August when the markets were down 5% to 6%," Henry says.

Sticky Referrals
While myCIO's brochure lists family office services as one of its business lines, the company's partners stress they don't have a traditional family office per se. It's more of a mini-family office that's a value-add for their investment advisory clients.

For example, they don't pay bills or organize vacations for clients. But they do a lot of estate planning work in terms of ideas and structure, and then will work with attorneys to implement it. And they'll provide other services, too.

"If a client is buying a house, we'll help them structure how to buy it," Bracaglia says. "That doesn't fit into the definition of what we do under our contract, but it's consistent with what we do from a practical standpoint. We pride ourselves as being investment advisors who practice the business from a financial planning perspective. That's why we like being face to face with them, because we want to know what's going on in their lives.

"I can't do my job correctly unless I'm hearing what you're saying and seeing how you're saying it with your body language," Bracaglia continues. "What makes a good financial advisor is the ability to understand the psychology of their client, and I think the only way to do that is to see it."

That type of service has produced very high client retention rates, as well as hot leads when it comes to client referrals. Lees says myCIO closes more than 90% of its prospect opportunities. "When we get called into a potential new client opportunity, it's because it's typically the result of a referral from a well-respected corporate CEO, CFO and chairman," he says. "It's a gold star in terms of seal of approval."

Says Bracaglia, "It's a steady referral that's not overwhelming because we want to preserve our high-touch service. It's a good pace that lets us keep growing."

Team Effort
Each of the three partners has his own team underneath him, consisting of senior managers, analysts and others. "I'm part of Team Lees, if you want to call it that," says Henry, who adds he learned the business under Lees and currently does a lot of client management work for Lees' clients.

And Henry has his own clients, too. He has five analysts working under him who are assigned to certain clients, and those analysts intimately learn those clients' finances so they can answer questions if Henry isn't immediately available.

Henry, 33, is one of five senior managers who've moved through the ranks, have direct client-facing roles and are considered the next tier of leadership at myCIO. Another one is Phil Bonelli, 36, who came to myCIO as part of Bracaglia's team at PwC.

"I deal with about 60 clients, and I know everything about their financial picture without having to look at a computer screen," Bonelli says, adding that one-third of those clients are his own and the other two-thirds are Bracaglia's.

Bonelli hopes to attain partner status in three to five years. "Five is probably more realistic," he says. "It takes time to build a sizable enough book of business."

MyCIO's partnership structure is based on revenue generated. Lees generates the most business, so he's the senior partner. Bonelli says he already considers himself a junior partner of the business. "We're consulted on key matters, so we all feel like we own this business," he says. "I feel like I'm in a very good spot as far as a career track goes."
And with its robust client base and reliable referral stream, myCIO seems to be well-positioned for future growth.