Brightworth's partners want to take the firm to the next level-and they have a plan to do it.
To understand how the recently renamed advisory firm
Brightworth more than doubled its assets under management since 2000,
it helps to know the story of the prospective client who didn't want to
sit in the corner. The retired, sharply dressed gentleman came in for
an introductory meeting with Dave Polstra, the firm's founder, who
gestured for his guest to sit at the round table in the corner of his
office. The man hesitated, and then explained he couldn't sit in a
corner because he's claustrophobic. He hesitated again before saying he
was in a German P.O.W. camp during World War II, where he was confined
by barbed-wire fence and barking dogs.
Polstra let the man tell his story about the P.O.W.
experience and how it affected his life, of how it made him wary of
giving up control of things, including investments. The man's story
provided Polstra with insights into his thinking and the best way to
approach him from a financial perspective. "Getting to know our clients
on a deeper level is our whole premise," says Polstra. "It's more than
just the numbers."
The man has been a client for ten years, and he
slowly learned to cede control of his finances. "He's a great client,"
says Polstra, "but it has taken years of patience and care from us to
get to that level of trust. I tell my staff it takes years to earn a
customer's trust and respect, but it takes only a second to lose it."
Based in the Atlanta suburb of Norcross, Brightworth is a fee-only firm
with about 240 clients and roughly $525 million assets under
management. Most clients are referrals either from existing clients or
from Atlanta-area attorneys and other professionals in the business
community. Their customer retention rate is 97%.
Brightworth wants to expand its assets under
management to $2 billion in about five years, and solid client
relationships will continue to be a cornerstone of the firm's success.
In May, Brightworth plans to host another of its periodic client
events. The venue is the newly opened Georgia Aquarium in Atlanta,
billed as the world's largest, and will include a dinner (presumably,
not seafood) in front of two large viewing windows.
But Brightworth's four partners know it takes more
than just a good ear and warm fuzzies to grow and manage an advisory
company. The firm laid out a ten-year strategic growth plan in 2002,
and continually seeks ways to fine-tune their operations. They throw
around wonky terms such as systematizing to describe how they create
processes to manage everything from handling prospective clients to
establishing employee bonus plans. This mix of art and science filters
down to the beverage level-they keep track of their clients' soft drink
preferences and what they take in their coffee so that they're properly
provisioned during office visits.
Important to their strategy of taking the firm to
the next level is providing the kinds of services needed by
high-net-worth clients with complex and sophisticated issues. For
example, among Brightworth's clients are a number of executives with
large amounts of assets tied to company stock. They're reluctant to
diversity because they don't want to pay a small fortune in capital
gains taxes.
"We show them they've already paid the alternative
minimum tax on a lot of these appreciated securities," Polstra says.
Consequently, when they sell those stocks they can realize an AMT
credit that reduces or eliminates their federal tax burden.
At the same time, these executives often have a
large 401(k) plan heavily concentrated in appreciated company stock.
"By pulling that out in-kind and coupling it with a charitable trust,
we're able to integrate their tax, cash flow, charitable and estate
planning all in one," says Polstra. "We think it takes a strong level
of expertise to deliver that kind of planning."
The firm's partners often join a client when they
meet with their estate attorney to help decipher the financial mumbo
jumbo and to work with the attorney to make sure client objectives are
met. After Chris Dardaman recently completed a financial plan for a top
executive, he joined the man at the meeting with an estate planning
attorney.
The man thought he'd be going alone, and was so
pleased that Dardaman joined him that he left a message that night
thanking him for going the extra mile. "It's always great to get that
type of feedback from clients," he says.
Until recently, Brightworth was the firm formerly
known as Polstra & Dardaman. Polstra, 48, is chairman and a
nationally known speaker on such topics as IRAs and executive
pre-retirement planning. As CEO and chief investment officer, Dardaman,
43, is the firm's big-picture guy whose easy-going, conversational
manner and thick Rolodex keeps the firm plugged into the financial
services business. "He knows so many key people in the industry," says
Polstra, "and that helps add basis points to our clients' returns
because he's connected to great financial people others don't know
about."
The two met after Dardaman's in-laws hired Polstra
as their financial advisor many years ago. As the day neared to go over
the financial plan, they called to say they were bringing along their
son-in-law. He had a finance background and had helped them with their
finances, explained the father-in-law, and he wanted to observe the
plan presentation. "I thought to myself, 'That's kind of weird,'" says
Polstra, adding slyly, "I think he had an ulterior motive."
If so, it worked. Both were alumni of Arthur
Andersen & Co. back in the days when it was the nation's most
prestigious accounting firm and had developed a passion for financial
planning there. They hit if off, and discussions over the next 18
months or so ultimately led to a partnership that began in 1992.
Business was fine and they were gaining a good
reputation, but they had bigger goals in mind for their firm. Enter
Alan Gotthardt, 35, a wunderkind on the fast track at Ernst &
Young's Atlanta office, where he worked with some its wealthiest
clients. The three came together in 1995 while working on the estate
settlement for a mutual client who recently had passed away. One thing
led to another and they realized they might be a good fit, but it took
numerous breakfast meetings at a local IHOP restaurant to finalize the
arrangement before Gotthardt signed up in 1997.
Gotthardt saw a firm on the rise that would allow
him more personal interaction with clients beyond mainly tax work.
Polstra & Dardaman saw Gotthardt as a sharp guy who could help take
the firm to another level. As the firm's president, Gotthardt provides
the firm's strategic direction and design, from its growth strategy to
its name change. "After I joined we asked ourselves if the name should
become Polstra, Dardaman & Gotthardt," Gotthardt says. "And we
realized the answer was, heavens no."
The firm wanted a new name that would help rebrand
it as an enterprise-level outfit. The partners also figured a generic
name would make it easier to take on additional partners someday
without worrying about putting people's name on the door and creating
an unwieldy moniker. They hired a marketing consultant and looked at
hundreds of possible names that they hoped would project the proper
image.
None of the suggestions tickled their fancy, but
they hit pay dirt during the second consulting session when somebody
put together the words "bright" and "worth." They officially became
Brightworth on January 1, and they say feedback so far is positive. "We
had one long-time client tell us, 'I like the new name, heavy on the
worth, please,'" Polstra says.
Even with a well-conceived growth plan, the three
partners realized the management team needed another person to bring it
all together from an operations perspective. Through a mutual friend
they were introduced to Ray Padron, 49, who had served as chief
financial officer at financial consultant Ronald Blue & Co.'s
Atlanta-based national headquarters. Prior to that, Padron oversaw the
creation of the company's Baltimore branch office, and had started
another financial planning firm before joining Ronald Blue.
The three partners liked Padron's operational
experience. Padron was impressed by the firm's mission statement and
its growth strategy. "I realized my operational background and people
management skills were a good personal fit for me," Padron says. After
discussions that lasted more than a year, he came on board in 2004.
All four partners are certified public accountants
and certified financial planners, and are also designated personal
financial specialists and certified investment management analysts. Yet
they all have specific fortes and different strategic roles that
complement each other. As Polstra puts it, they seem to fit together
like pieces in a jigsaw puzzle.
Dardaman is the idea man who's always talking to
financial industry players, business gurus and others to brainstorm
ideas to make the firm better. Gotthardt's job is to distill these
ideas to find the golden nuggets he can build into their business
strategy. Padron's role is to execute these strategies and make them
reality. "The simplified version is Chris runs out of gas at the idea
level, I run out of gas at the design level, and Ray takes it from
there and gets people motivated to do it," Gotthardt explains.
Things aren't always that cut-and-dry, and the
partners have enough overlapping skills to help out in each other's
area of expertise. For example, Dardaman recently wanted to find a way
to let employees share in the firm's success by replacing its
semi-arbitrary bonus plan with a more formal system. He talked with
lots of different outside people to get ideas.
Gotthardt ran with that and decided they needed to
do more than simply throw money at employees. At that point, Gotthardt
and Padron began discussions on formulating a workable plan.
Eventually, it came up for a partner-level review. They agreed on a new
system and recently implemented a new bonus plan with "ownership
elements without actual ownership," Padron says.
Polstra spends a lot of time with clients and with
mentoring the young planners on staff, who do a lot of the client work.
And while all four partners speak publicly at conferences, "I probably
do more than the others because I just love doing it," says Polstra. He
speaks on financial topics at forums ranging from his son's high school
to preretirement workshops at Coca-Cola.
One of Polstra's specialties is his expertise on
handling IRAs for wealthy executives. "There are creative planning
techniques with large IRAs that pass assets through certain trusts and
allow you to coordinate the IRA distribution with the rest of the
estate plan," he says. "A trust named as IRA beneficiary is a very
unique thing that needs certain language to qualify. A lot of attorneys
overlook that, and I guess that's why I speak all over the country on
it."
It also provides exposure for Brightworth. "Whether
it's getting our name out there or getting our newsletters to
attorneys, we just want to be well known," Polstra says. "I think we're
one of the best-kept secrets in town. Atlanta is a big place with a lot
of wealthy folks, and we want to serve that growing base."
The message Brightworth wants to promulgate is this:
It's an independent, fee-only and open-architecture firm with no agenda
to push certain financial products. But even as Polstra feels the need
to raise Brightworth's public profile, the firm has long been known
within Atlanta's professional circles.
Ben White, a prominent estate-planning attorney in
Atlanta, has seen Brightworth in action for years when they worked
together with mutual clients. "In my practice I've worked with
investment managers from around the country, and it's hard to find
managers who provide consistent results," White says. "These guys have
steady results, they listen to clients and they seem to have a clean,
objective approach." When it came time to choose his own investment
manager a couple of years ago, he went with Brightworth.
Dardaman says the firm's equity accounts gained
roughly 12% in 2005, while most of its accounts gained 8% to 10%
overall. The firm's client minimum is $1 million, but the typical
newcomer is worth $4 million to $5 million. "Most of our clients want
to grow their capital," he says, "but the first goal is to preserve
it." Although reluctant to divulge long-term performance numbers, he
says Brightworth has consistently topped its benchmarks by "several
percentage points" over the years.
As chief investment officer, Dardaman employs a wide
variety of domestic and global investment vehicles, ranging from
equities and exchange-traded funds to separate accounts and alternative
investments. He and his research staff work with roughly 30 different
money managers across a wide spectrum. "We like managers that use
flexible approaches rather than abiding by strict style boxes," he
explains.
Brightworth's due diligence of money managers
includes both quantitative and qualitative analysis. "The qualitative
aspect is most important," Dardaman says. "We look for levels of
excellence and integrity."
He cites an example from several years ago when they
researched a mutual fund company and called someone they knew who used
to work there. "He said he didn't trust them, and that's all we needed
to know," Dardaman says, adding that that particular firm eventually
got snagged in the mutual fund scandals a few years ago.
Another part of Brightworth's approach is
philanthropy. They developed a proprietary process for interested
clients, called the philanthropy portfolio, that builds a comprehensive
charitable giving program into an overall financial plan. "It's like
the next frontier," says Gotthardt. "Investing in others creates
societal benefits and brings tremendous satisfaction for individuals."
Gotthardt is the author of The Eternity Profile, a
book on the benefits of philanthropy. The four partners are all active
in their local churches, and while they don't wear their religion on
their sleeve, they say the basic values of their respective faiths are
the firm's foundation.
It's one reason why they stress integrity as an
important quality when choosing clients, money managers and new
employees alike. "We're very particular about who we want working for
us over the next 20 years," says Gotthardt. "We look for the sharpest
people, but we also look for a certain presence. We can't quantify it,
but we just sort of know it when we see it."
Brightworth employs four young planners who work
closely with the four partners in developing financial plans and making
presentations to their clients. "They're looking for highly committed
people who enjoy a fast-paced environment," says Annika Ferris, a
recently minted CFP who joined Brightworth in 2003. She says one of the
biggest challenges to her job is juggling all of her different
responsibilities. "We take time to do things right, and sometimes that
takes awhile. It's definitely not a nine-to-five environment, but it's
actually a fun atmosphere here."
Ferris loves the support and training she gets from
the partners, and she's on a track to eventually become an advisor.
She'll likely be joined by new colleagues in the future, as Brightworth
hopes to expand its staff from 20 to 32 employees as it grows its
business. "The average age of the partners is 44," says Polstra. "We'll
be around a long time, but we're building something to last and we want
to bring in qualified talent behind us to let the business last longer
than we do."