To repair the traditional wealth management business plan, Massey, Quick & Co. treats their clients as peers.

When the three founding partners of Massey, Quick and Co. LLC embarked on the journey to create their own wealth management firm three years ago, they did so in part because they thought the traditional business model used by many wealth management experts was not just broken, but severely compromised.
To remedy that situation, they founded the Morristown, N.J., firm to deal with clients as peers. The three founders, and their newest partner who joined in June, do not invest any money for a client unless one or all of them have some of their own substantial personal funds committed to the same investment. The firm does not manufacture or sell any products, never shares fees with a money manager and is not a broker-dealer.
In fact, Dwight B. Massey; his son, Stewart R. Massey; Leslie C. Quick III; and the newest partner, Joseph Belfatto, do not consider themselves wealth managers at all. Instead, they say they are wealth advocates. Like so many independent advisory firms, they were at once repelled and motivated by financial giants peddling proprietary products.
So the partners at Massey Quick, many of whom started their careers on Wall Street, came to embrace the independent model. "Every firm out there, from a major investment bank to a large trust to a retail brokerage firm, has a specific goal above and beyond all others, which is to sell their products to their clients. We thought that was the part that was broken. We wanted no conflicts with our clients," says Stewart Massey. "The only ones who pay us are the clients, so they know there is no motivation on our part except to do a good job for them."
Expanding upon that explanation, Quick notes, "If someone offers us a commission, we insist the net savings go back to the client. If we recommend insurance-and there is potentially a lot of money to be made in insurance-we make sure our client is getting the very best rate by opening up the process to competitive bidding."
The firm must be doing something right, since it has grown to $1.1 billion in assets under management in just three years. The firm does not have a lot of clients-fewer than 40-but the clients are all high-net-worth people or foundations and endowments with an average of at least $35 million invested. The partners add to that mix with some $100 million of their own money committed to the same investments they recommend for clients.
"If you have three people looking at a portfolio, you can have three different interpretations of risk," Stewart Massey says. "We understand that fact because we are looking at the investments through the eyes of an investor, which we are, and not as a service provider."
The other thing that the partners feel sets Massey, Quick apart from the competition is the level of experience each partner possesses. All have Wall Street experience, with three having been successful CEOs and the fourth a senior-level manager. The most senior member of the firm, Dwight Massey, has retired twice but can't seem to stay retired. He has had a 30-year career in commodity markets and was instrumental in constructing one of Wall Street's first leveraged buyouts of a worldwide sugar-producing and marketing concern, Czarnikow Rionda. He then worked with a Ridgewood, N.J., money management firm, Murphy Capital Management, helping to build it to more than $300 million in assets under management.
Why not finally retire and take life easy? "I can do everything-work, play golf and relax," says Dwight Massey. "I am determined to keep my mind active, and I cannot stand the prospect of a day without productive things to do."
Dwight Massey's career started somewhat unusually. When Fidel Castro took over Cuba in 1959 and nationalized the sugar industry, the sugar production company where he was employed was nationalized by the Cuban government.
"We had a large production/broker company in Cuba but Castro took that away without compensation," Dwight Massey remembers. "It was a big hit to us and we had to recover in a parallel part of the business. We rebuilt Czarnikow Rionda to be a global broker so that it could be sold to a worldwide firm. That was actually fun, and it helped make my career."
So, when his son asked him to help form the new wealth advocacy firm, to manage their own and other high-net-worth people's money, he jumped at the chance. At the time, Stewart Massey had already been president of a nationally ranked wealth management firm, The MDE Group, with more than $1 billion in assets. He had worked at Dean Witter Reynolds and headed Morgan Stanley's private client group in Asia, Australia and Japan, and more recently was head of institutional sales, marketing and product development for Morgan Stanley's prime brokerage business. His extensive resume also includes a stint as president and CEO of Robert Fleming Inc.
Like his father, Stewart also has retired twice already, once when Robert Fleming was sold, a retirement that lasted all of four months before he returned to Morgan Stanley and then retired from that firm as well.
Quick is also a Wall Street veteran, having been the fourth employee at Quick and Reilly Inc., the first New York Stock Exchange member to offer discount stock brokerage to the investing public. He built one of the first electronic Internet trading platforms in the industry, and he finished his time on Wall Street as chairman of Fleet Securities Inc. after Quick and Reilly was acquired by Fleet Bank.
"Les and I made a lot of money trading in inefficient markets and then we began discussing where the inefficiencies were in the financial services business as a whole," Stewart Massey says. "That is how we came to the conclusion that the traditional wealth management business was severely broken and designed the plan for Massey, Quick."
Once they established the firm in the upscale business park in suburban New Jersey and were on their way to success, an old friend of Quick's was invited on board. Joseph Belfatto and Quick worked together on Wall Street, where Belfatto held senior roles with HSBC and Merrill Lynch, running various aspects of their capital markets business.
"I concluded it was time I did something for myself and something that was entrepreneurial," Belfatto says. "The field of wealth management was intriguing and offered tremendous opportunities. I had watched these guys at Massey, Quick and was impressed by the progress they had made in a very short time. They had developed a model and an approach to the business that was unique because it is built on years of experience and an in-depth knowledge of institutional markets. They have a lot of experience in the alternative space and the hedge fund space.
"The momentum they had built in such a short time shows they value character and integrity, and there is nothing more important than character and integrity," Belfatto explains as his reason for joining the firm. "Also, they are very client-oriented. A lot of firms spend too much time dealing with internal issues and not enough time on clients. Here, it is different."
Before they ever opened their doors, the founding partners sank $2 million into the firm to hire the best staff they could find. Most of the staff of 12 is made up of people they have known and worked with for years. Clients are obtained in the same way-from past experience or from word-of-mouth recommendations of people who know the partners. Little or no advertising or prospecting goes into obtaining new clients.
Money managers, on the other hand, are culled from a long list of prospects. The firm receives hundreds of inquiries a year from those who want to help handle the clients' investments, but the partners do extensive research before they even agree to hear a manager's pitch. Of the 100 or so they eventually talk with, maybe three or four will be selected. Massey, Quick uses about 37 fund managers, with very little turnover. The Massey, Quick managers are traditional equity and fixed-income managers, as well as managers of hedge funds, funds of funds, private equity and real estate.
"All of our managers have an absolute return focus," says Stewart Massey. "We steer away from alternative managers that use leverage."
"You know how they say location, location, location for real estate?" Quick asks rhetorically. "For us, it is performance, performance, performance."
Stewart Massey adds, "We like to hire what we call 'old pilots'-experienced people who know how to navigate through investment storms. The backgrounds of many of the people in the wealth management business are in the accounting or legal professions, or they were retail stockbrokers. Our backgrounds are very different. We are from the institutional side of the business, where we were senior level managers who focused on investment performance."
Part of their investment philosophy has been developed from the volunteer boards and organizations to which the partners lend their expertise. Among his outside interests, Quick is the chairman of the Investment Committee at St. Bonaventure University and serves on the Bishop's Finance Council for the Diocese of Metuchen in New Jersey. Dwight Massey was on the board of trustees of Stevens Institute of Technology in Hoboken, N.J., his alma mater, and he now serves on the board of Lasell College in Newton, Mass., his wife's alma mater. His principal area of interest for both schools was endowments, handled by the trustee investment committee. He now chairs the investment committee at Lasell.
Likewise, Stewart Massey serves on the board of trustees at his alma mater, The College of Wooster in Wooster, Ohio, where he chaired the investment committee for 15 years, and is on the investment committee of the Visiting Nurses Association of Somerset Hills, N.J. Belfatto is on the board of trustees of Susan G. Komen for the Cure. Taken together, the partners have managed at least $600 million in investments for the schools and organizations they are affiliated with, which gives them a unique outlook on the market and has enabled them to refine their investment process.
Each investment portfolio is designed specifically for a particular client, whether it is an individual, a family, an endowment or a foundation. The partners have done well for their clients since they created the firm in 2004, but they acknowledge the market has been on their side. The real test will be when the market sours, as it always, inevitably, does. To try to protect that success, the investments are always balanced against risk.
"We have clients come in who think they have a very conservative portfolio and after we analyze it, we find they actually have a lot more risk than they think," says Stewart Massey.
If the client has more than one money manager, the question becomes how the different managers compare with each other. If the client's money managers are all achieving about the same results then, in effect, the wealth might as well be administered by only one manager, the partners argue. Instead, the money managers selected by Massey, Quick are chosen, in part, because they achieve different results, which smoothes out the rough edges of the market.
"We want to hire the most talented managers we can find, but also, we want them to have a relatively low correlation of investment history to each other. That smoothes out the edges. We want to reduce volatility, reduce the correlation to traditional benchmarks and reduce the draw-down risk," says Stewart Massey. "Those are three key things."
At the same time, when selecting managers, the Massey, Quick partners closely examine returns in 2001 and 2002. Many of the managers they work with have double-digit positive returns for those years.
"But I would even settle for a level performance from a manager for those years because the S&P 500 was recording double-digit losses at that time," Belfatto says. "If you can seriously outperform the S&P 500 when the market is bad, you know you can do well when the market is good, like now."
Traditional measures of investment success are not necessarily the gold standard at Massey, Quick.   
"The vast majority of equity managers, in my opinion, are closet benchmarkers," Stewart Massey says. "They are trying to keep up with the S&P index and they will not stray too far from that index. If a client comes in with a lot of investments highly correlated to the S&P, they have S&P risk. We replace the managers that hug the benchmarks with ones who are not afraid to manage the risk of the portfolio by being willing to wait. That reduces the risk."
Stewart Massey describes their investment strategy as conservatively postured. "All of our managers, across all asset classes, have a demonstrated history of preserving capital in difficult markets. There is no 'typical ' asset allocation for our clients, as each has unique needs and a unique asset allocation model," he says. "We run cross-correlation studies on all our managers. When we construct portfolios, we aim for low correlation between managers."
Those results are quantifiable and are laid out clearly in a simple report for clients, who may never have read their financial reports in the past because the reports were too confusing.
"We are very math-oriented," Quick notes. "We have two quantitative guys who do nothing but quantify our performance."
In fact, their work in volunteer activities made it clear that they wanted quantitative measures for their advisory practice. "The investment committee at some of the schools where we served were like a lot of investment committees-decisions were made on the basis of contacts. There was no methodical way of measuring success. We did not want to do that here," Stewart Massey says. "We do not make decisions on the basis of a contact or a sales pitch. We do our homework before someone comes in the door, and then we start quantitative monitoring. We do not even meet a manager until we have monitored him."
Conducting detailed pre-interview research makes the firm "more efficient," Quick adds.
That's often followed up by an onsite interview. "We want to meet them in their office," says Belfatto, explaining the process. "We want to see their investment process and their work environment, and see how they make decisions. If they have a lot of new staff or a lot of turnover, that is a bad sign. Then the quantitative measure continues. We also want to see if the managers have their own money invested in the places where they are putting clients' money."
The due diligence then continues as long as the manager is part of the Massey, Quick family. "The biggest mistake someone can make is to hire a manager and then drop the due diligence," Stewart Massey says. "Our clients do not have time for this. They rely on us for the due diligence."
The partners invest the time with the clients because they have a small number of clients to deal with and they expect to have them around for a long time. "We have had clients we have talked to for nine months before we actually make any investments for them, and they will be asking, 'When are we going to invest?' But we want to understand them and their goals first," he adds. "We want to develop trust, but then we want trust that is verifiable. We are the strategists, and we want to have these people here to serve their children some day. That is where we are heading with this," says Quick.
In addition to wealth management, Massey, Quick offers financial planning; tax planning; estate planning; executive compensation planning, including consideration of stock options, deferred compensation analysis and contingencies; and multigenerational wealth transfer. The firm has a small client base that defies generalizations.
"We do not have a 'typical' client," Stewart Massey explains. "Our client base is split between business owners, executives, those who have inherited wealth, foundations and endowments."
Although most of the people at Massey, Quick have long-standing ties with one or more of the partners, the firm also hires young people through an intern program as a way of mentoring new talent. This summer there are familiar ties among the interns also. Christian Massey, Stewart's son, is one of the young people brought on board for at least a few months, and one of his classmates and a friend of his make up the complement of interns.
"Financial services is something I am keenly interested in, and this is a way to get good experience," says Christian of his time working with his father and grandfather. "It will help me decide what I want to do."
A fellow student from Colgate University in Hamilton, N.Y., Shehzad Khan, is studying economics and also wants to gain some experience in the financial field to get a better idea of his future, while Stephen Smith, a friend of Christian's, just wants to explore the field to see what financial planning is about.
"This helps me more than working at a large firm because I have an opportunity to sit in on meetings, deal with the partners and actually contribute," Khan says.
In fact, the four partners are on the "floor" with all the other staff members. There are no private offices, and, for the most part, no private meetings, as long as clients agree. Although informal, the firm has a structure of four committees for planning and implementation purposes, with a partner in charge of each committee.
The most recent proposal the firm undertook was the question of how to grow the firm without taking on too many clients and without losing the personal touch and ability to maintain due diligence. The answer came along in the form of joint ventures. Massey, Quick has partnered with the First National Bank of Santa Fe (New Mexico) to make investments for the bank, which will continue to provide the services for individual customers. They have talked with other community and regional banks about similar arrangements.
"For the Santa Fe bank trust department to continue to grow, they needed a fee-only, conflict-free, open architecture model, which we will provide," Stewart Massey says. "At the same time, the partnership allows us to get in front of people and organizations we never would have been introduced to without the bank. I think we can compete with any wealth management firm in the country."