(Dow Jones) In its short life so far, Constellation Wealth Advisors has seen little besides turbulence.
But the firm, founded in the spring of 2007 by former advisors with Smith Barney's family-office group to provide investment-management, financial-reporting and family-office services to private clients with at least $10 million to invest, has held its own so far in the face of the worst and longest economic downturn since the Great Depression.
This, says co-founder Paul Tramontano, is a result of Constellation's strict adherence to client-first principals, its independence--and a bit of serendipity.
"When we launched, we were in a bear market for securities, but a bull market for advice," Tramontano says. "Later, when things got bad and people began to worry about the safety of their assets [at the big banks], they started to focus on independent advice, which was to our benefit."
It didn't hurt that Constellation's advisors, who were managing something like $3 billion when they left Smith Barney, transferred the bulk of their legacy accounts to the new firm more than a year before the downturn got really ugly. By the summer of 2008, the firm was managing a good $3.5 billion.
Then, in the darkest hours of the financial crisis of 2008 and on through the institution-driven stock-market resurgence of 2009, Constellation was inundated with unsolicited prospects.
"That was a surprise," says Tramontano. "We'd never seen as many new queries. Even when equities were up, people were concerned about big banks."
Industry statistics support the notion that the downturn has been good for stand-alone registered investment advisers--at least comparatively. According to data compiled by Aite Group, a consultancy, independent RIAs like Constellation ended 2009 with a total of $1.5 trillion in client assets compared with $1.3 trillion at the end of 2007-a gain of 15.4%, or $200 billion.
Meanwhile, the five biggest brokerages saw a collective decline of 17.5% in end-client assets, from $5.7 trillion at the end of 2007 to $4.7 trillion at the end of 2009.
In the long run, Tramontano sees this "obvious movement on the part of clients from big firms to boutiques" evolving into a wealth-management marketplace with nimble independents dominating the high end of the market and big firms catering to the "mass" affluent--investors with between $250,000 and about $5 million.