Financial advisors frequently break out of wirehouses and go independent. But few of them double the size of their assets in a matter of months.
Capstone Affluent Strategies has done just that, in just under a year. And the leaders of the Irvine, Calif., firm are predicting even more fast-paced growth in the near future.
The firm was launched last October by Darin Pastor and five other advisors from Prudential Financial Inc. who wanted to create their own independent, fee-based firm. They were off to a good start from the beginning, having taken clients with $450 million in assets with them.
Since then, the firm has already built a staff of 60 advisors and advisor associates in 11 offices across the country, plus its headquarters in Irvine. Capstone expects to have more than $1 billion in AUM by the end of the year. Pastor says he is not going to stop until he hits his goal of 200 advisors.
Many who create new firms are happy with flat revenues the first year and don’t expect phenomenal growth, says Mindy Diamond, the president and CEO of Diamond Consultants, a New Jersey recruiting firm that places financial advisors nationwide. After all, it takes time to set up operations, and the creation of the new firm understandably disrupts a team’s momentum.
“It is almost unheard of to more than double your size during a matter of months,” she says.
But Capstone’s success can apparently be attributed to the leadership of Pastor, the firm’s 42-year-old chief executive officer. The team spent a year pre-planning, reaching out to advisors who might be interested in joining. When the time came, that planning allowed the firm to open offices around the country almost immediately, he says. And the firm also had a prolific recruiter: William Regan, Capstone’s COO, whose background is helping advisors in transition.
Pastor’s career started not in finance but in his family’s soda business in Buffalo, N.Y., which his grandfather and father operated. Pastor eventually decided the soda franchise involved too much heavy lifting and wanted to try something different.
Brash and confident even at the beginning of his career at the young age of 27, Pastor went for an interview at what was then First Union. He asked the person conducting the interview to bring in his W-2 or 1099 forms so Pastor could see if the banker was as successful as he seemed.
“He did it begrudgingly, and I saw that the bank officer was doing better than me, and he was only lifting a pen, not soda cases,” says Pastor, who decided to switch careers. He later ended up working for JPMorgan Chase & Co. and then at Prudential.
When he was leaving to start Capstone, Pastor was able to take a team of five professional planners and a lot of clients with him, say colleagues, because he had earned credibility in the 2008 market crisis.
“In the spring of 2008, I got a call from Darin,” says Dan Yeager, a client who followed Pastor from Prudential. “Everything was fine then, but he told me the stock market was overheated and to get everything out of the market. I had a lot of different accounts, so it was not easy. It took an entire day, but I got everything out, and when the market crashed, I did not lose a thing, which was a huge gain.”
That foresight and determination, Pastor says, allowed him to “play the Pied Piper” and lead clients to Capstone. “When I get an idea, I am like a dog with a bone,” he says and he makes sure clients and staff know how he feels.
His character, according to Keegan Burke, vice president, investment executive, sets pastor’s leadership style. “He’s intelligent, driven and has a vision and philosophy that I believe in and relate to. Darin carries a level of confidence that creates the type of energy you want to be around.”
After he prompted clients like Yeager to get out of the market in 2008, he pushed them to re-enter the market to take advantage of the bull run, Yeager says. Pastor has also helped Yeager with advice on other investments, such as real estate, that Pastor had no stake in.
“They figure if I handle their portfolios this well, maybe they should ask my thoughts on other parts of their lives,” he says.
When it comes to hiring other staff members, Capstone cherry-picks the best graduates, those with 3.0 GPAs or better, from high-ranking law and business schools, and then requires them to complete a 16-week internship program. The firm has 20 recent graduates who are financial advisor associates.
For more experienced staffers, Capstone looks for college-educated advisors with proven track records who focus on their clients’ needs and objectives. They have to have a commitment to lifelong learning, family, their community and philanthropic work. Experienced staff members are expected to continue their education, and Capstone has taken the unusual step of paying for half the costs of any postgraduate work done by its advisors.
“To be competitive and stay on top of your game, you have to continue your education,” Pastor says. “I put my money where my mouth is and where my belief system is. We are now picking up half of $350,000 in educational expenses for advisors. Other companies do not pick up nearly that much of the cost.”
For instance, Tracy Veatch, the first vice president and compliance officer at the firm, is working on her MBA at the Thunderbird School of Global Management, and half of her tuition expenses are being paid for by the Capstone tuition program. (She followed Pastor from Prudential and considers him her mentor.) Kristofer Reddaway, Capstone’s executive managing director, is working on his MBA from Drexel University. At Capstone, he mentors new employees, in addition to his financial planning work.
“We take education very seriously,” Reddaway says. “You always want to be better and more knowledgeable than your competitors.”
Pastor has also set up an ownership program for all employees, including support staff.
“This is an innovative program that is results driven,” says Veatch. “You treat clients with more respect when you are an owner. The client gets a higher level of service—something he cannot get at a large firm.”
Pastor adds, “There are no employees at Capstone, only owners. The client has a different experience when dealing with an owner.”
Capstone selected LPL Financial as its broker-dealer partly because of the size of the organization and partly because it is located nearby in San Diego. Fees at Capstone vary depending on the custom service being performed for the client.
Despite the firm’s fast growth, Pastor considers Capstone to be small. “We are small, and that allows us to be nimble.” The firm takes investment advice from people it trusts on Wall Street but then adds its own research. Although Pastor says he personally is more conservative than some other advisors at Capstone, he will occasionally look into more unusual investments.
“I learned as a child to see opportunities where others can’t,” he says.
Looking for unusual opportunities is something he learned from his grandfather and father. His grandfather and two great uncles, avid hockey fans, bought the struggling Buffalo Bisons Hockey Club in 1956 after they threatened to move from the city.
Future NHL stars were brought to Buffalo and in 1963 and 1970 the Bisons won the Calder Cup and became one of the premier clubs in minor league hockey.
Now Pastor is considering repeating history by bidding for the bankrupt Phoenix Coyotes hockey team.
“I’ve done my due diligence, and I think it is an undervalued asset that is located in one of America’s best cities,” Pastor says. He says he would not buy the team, despite his affection for Phoenix and hockey, unless he thought it was a good investment. Like his wealthy clients, he is focused on wealth preservation. He will put his clients in some alternative investments, but only for a small part of their portfolios.
“Money is not easy to come by,” Pastor says.