When at the end of 2003 Tom Connelly told his partners at Phoenix-based KeatsConnelly that he wanted to leave the firm he had helped found, he simply was looking to pursue a new set of personal priorities. With his new firm, Versant Capital Management, he was hoping to create a lifestyle practice, focus more time and energy on investments, spend more time with his family in the Minneapolis area and get out of Phoenix during its semi-annual allergy seasons, when many residences and golf courses switch from Bermuda to ryegrass and back, leaving him ill with bronchitis.

KeatsConnelly had specialized in cross-border financial planning, addressing the complex needs of Arizona’s fast-growing population of Canadian snowbirds. The firm devoted much of its time to issues involving immigration, dual citizenship, cross-border taxes and estate planning, and Connelly was becoming increasingly interested in investments. For a while, it looked like Connelly’s plan for a lifestyle practice might pan out. He left KeatsConnelly amicably, taking with him about 20 clients with around $70 million. (To this day, he still recommends his old firm to foreign retirees seduced by Arizona’s balmy winters.)

A French word with Latin roots that can no longer be found in many dictionaries, the name “Versant” was the brainchild of Connelly’s wife, and it means to be skilled and well-versed. Starting a new firm in 2004 at 48 years old as the U.S. economy was emerging from a tech bubble and a terrorist attack might have seemed a daunting challenge for many advisors. But Connelly just wanted to spend more time with family and not deal with bronchitis twice a year. He bought a three-story home on the Mississippi River in St. Paul, looking to grow his lifestyle business in both cities.

Soon after, however, clients were finding him on a regular basis in Phoenix, where he enjoyed a stellar reputation, while expanding his firm in the Twin Cities proved an uphill climb. “I had a family name but not a business name” in St. Paul, he recalls, and the Minnesota state capital possessed a wealth of advisory talent. Clients for his advisory business in Phoenix were falling out of the sky, so in 2011 Connelly closed his stand-alone St. Paul office (moving it into his home to serve the handful of Minnesota clients he had).

By 2007, Versant had three employees and about $190 million in assets under management, and Connelly was about to get an institutional investor’s view of the worst financial crisis in 80 years. In late 2006, Arizona Gov. Janet Napolitano appointed him as a trustee of the then-$25 billion Arizona State Retirement System (ASRS), where he’s served ever since. (See related story.)

As an RIA, Connelly has always tended to be somewhat more conservative than most—it’s unusual for his clients to have more than 65% or 70% of their assets in equities, though there are exceptions. His investment philosophy might best be described as opportunist and contrarian with a value bias. “I think more like a Depression-era person than a baby boomer” who learned about investing in the 1980s and 1990s, he says.

During the late stages of the tech bubble, that meant many of Connelly’s clients at his old firm had between 30% and 60% of their assets in equities. Instead of looking at U.S. growth stocks, he was finding returns in beaten-down emerging market closed-end funds.

At Versant, this opportunistic style has led him to make small investments in gold, typically 2.5% to 5.0% of most clients’ portfolios. In the previous decade, Connelly viewed gold as a way to protect clients against the “Greenspan put” and soaring debt levels.

In 2007, Connelly read an article in the late Peter Bernstein’s newsletter about credit default swaps (CDS) by Tom Seides, president and chief investment officer of Protégé Partners, that startled him. “I decided that if I ever saw some large and/or discontinuous moves in CDS rates, I’d make some moves,” he recalls.

By the time equities began to tumble in spring 2008 following Bear Stearns’ bankruptcy, most Versant clients had less than 50% of their portfolios in equities. “I wouldn’t represent that I could do it again,” he says, chalking it up to luck. Call it what you want, but he sensed something was seriously wrong in the financial system. He had also sold a house in Phoenix in 2005 and spent the next 30 months renting an apartment before buying a big condo with room for his family in 2008.

Nonetheless, it was a harrowing year, even if Connelly and Versant clients were surviving better than most Americans. “Clients would come into meetings and ask how I was doing,” he says. “It was surreal.”

Starting in 2006, Connelly found himself sharing a large client with Elizabeth Shabaker, director of investment operations at Phoenix-based Inlign Wealth Management, an advisory firm formed by partners in the wealth management unit of the late Arthur Andersen & Co. With 175 clients and $2 billion in assets, Inlign probably was the largest RIA in Phoenix.

The mutual client, a successful real estate executive and CEO of a public company, was a general partner in her family limited partnership, which was managed by Shabaker and the staff of Inlign. At the same time, her personal money was with Connelly at Versant.

In early 2008, Genspring Family Offices, the multifamily office arm of Suntrust Bank, acquired Inlign. The two firms’ approach and cultures clashed sharply. Inlign embraced an open-architecture platform utilizing a cost-conscious approach to asset management that relied heavily on passive investment vehicles. In contrast, Genspring used its own internal investment team, including several proprietary hedge funds.

Shabaker recalls the two firms having detailed discussions about investment strategy before the merger. The agreement at the time was that the philosophy would be evaluated after the merger, and the partners would decide whether it made sense to run Inlign’s open-architecture platform in tandem with Genspring’s in-house strategies.

In the early part of the post-acquisition period, the merged firm ran on two platforms. However, efficiencies and scale proved a serious challenge in the Darwinian post-crisis era, and after much deliberation, top management decided Genspring’s platform would be the sole survivor. “We were told to get on board in 2010,” she recalls.

Instead, Shabaker and others, including former Inlign founder and CEO Mark Feldman, began looking for lifeboats. At about that time, their mutual client with the FLP introduced Shabaker to Connelly. Back in 2006, Connelly knew Versant lacked the infrastructure to service the woman’s FLP. “She knew I wasn’t happy at Genspring. She wasn’t either,” Shabaker says. “At that time, I wanted to find a place with the same core values and beliefs as we had at Inlign.”