Jane Williams had investing in her blood. Her father had been a runner on Wall Street and later an accountant. Her mother and grandfather both played the stock market and she started tracking the markets herself while still in high school.

Yet when she tried to get a job at Merrill Lynch in the mid-1970s, mostly they wanted to know how fast she could type.

Fast-forward 30 years. Williams is now 64 and a seasoned veteran of the advisor wars, moving from brokerage to wealth management after leaving Merrill. She and two partners formed Sand Hill Global Advisors in 1982 in Palo Alto, the financial fuel provider for Silicon Valley. In the 1990s, that was a bit like being strapped to a rocket.

In 2000, Williams sold the firm to a bank—just in time for the tech crash. She bought it back seven years later—just in time for the housing crash.

Now her firm has emerged independent once again, one of the “purest non-soft-dollar firms I’ve seen,” says CIO Brian Dombkowski, who joined in 2010. “Everything comes out of our pocket.” Free again, the firm boasts $1.1 billion in assets and 18 employees, including nine partners. It hopes to add more people to the mix in 2013 and perhaps even swallow another firm with its own weight in assets.

According to Dombkowski, being owned by management matters. “We have a saying around here. ‘No one ever washed a rental car.’”

It’s a far cry from the firm’s beginnings, where Williams and her two original partners had to tend to their pea of a dream and, despite their talents and smarts, run into a lot of good luck.

The Great White North
A Northern Virginia native, Jane Williams spent the 1970s traveling around, trying to break into the business. She was a dutiful wife, she says, following her husband, who often relocated for his work in building materials. Unable to land a job at Merrill in the states, she finally broke into the company’s office in Ottawa, Ontario, where the couple had relocated. Even there, though, she was rebuffed at first.

In Canada there was no Equal Employment Opportunity Commission, she says, so they could say it bluntly: women bad. “They could actually talk with you honestly about what they were thinking, which was: ‘Our clients are all male. We’re sort of nervous about throwing a woman into this. We don’t know how that’s going to work. We don’t know if it’s going to work. What if we turn our clients off?’”

They even gave her a test and told her she’d bombed. After she was hired later and moved up the ranks, she heard she’d done great. She also later discovered that for a time she was the only female with Merrill’s brokerage business in Canada. An honor—but sometimes not: Once, at a trade conference in Toronto, she says, she found herself locked in a hotel room as a lusty, inebriated local bond trader pounded the door outside in a ham-fisted attempt at seduction (and she had to work with him later). She also suffered the more banal indignities of being constantly considered somebody’s assistant. But being different was also her advantage. She was a woman. But she knew the U.S. market. It also helped to have a sense of humor, she adds.

Seeking warmer climes, she and her husband moved to Palo Alto and she transferred to the Merrill office there after agitating “like a Jack Russell terrier” for equal partner status by the early ’80s.

But by 1982, she and two of her team members, one of whom was Sand Hill co-founder Gary Conway, felt the weather change. Economists and investors by background, the three felt their investment management duties being shifted to the East Coast while their client-facing duties seemed to revolve more around selling products. A move across the street to a rival like Goldman Sachs seemed unlikely to change things.

A venture capitalist client and friend put a flea in their ear: Why not strike out on their own. They were sitting in Silicon Valley, after all, a petri dish of entrepreneurialism, and it might not take much capital to make the goose lay eggs.

“He showed us why we didn’t need capital. We could bootstrap it,” she says of the VC client. “We set up at 3000 Sand Hill Road [in Menlo Park], which today is an incredible, prestigious address.”

This was before Sand Hill Road became known globally as the financial birthplace of the high-tech world. The four-building complex was populated by venture capitalists and their vendors. The landlord wanted lots of small renters, not big fish, which offered a teeming pool of possible clients. Williams and her partners decided that rather than blow all their money on marketing, they could just lodge themselves in the incubator.

The only person who tried to talk her out of the new business was her CPA father. “He said, ‘Jane, are you sure you want to do this? Oh my gosh! So much risk.’ And I said, ‘Well, you could lend me some money to do it.’ And he said, ‘No.’ He really shook me hard to find out whether I really had resolve or not.”

The venture capitalist friend who’d spurred them on also riddled them with Sphinx-like admonitions. Besides asking how they were going to bring in clients and staff, he asked them things like, “‘What if you guys enter an order wrong and add a zero to a transaction and you bought rather than sold? … What is your backup plan? What insurance do you have? What coverage do you have? How much money do you have in reserve? What are your capital requirements?’

“He really grilled us.”

She and her two partners agreed not to go on vacation for three years. They hired no assistant for three months. They took turns entering orders by teletype by day and vacuuming floors at night. They waited nervously to see if their Merrill clients (whom they could not solicit) might follow them. Three months into the partnership, Williams got the incongruously great news that she was pregnant after years of trying.

A beginning fraught with challenges, but the entrepreneurs came. A year in, the three were nicely profitable, she says. The firm started out dually registered as a broker-dealer and RIA, trying out a collaborative approach with clients, but the clients pushed them to take more control over the portfolios and transactions.
“You don’t act like brokers,” one lawyer said. By 1992, the broker-dealer fell by the wayside.

Like all firms, Sand Hill hit a ceiling. Williams says the firm took a long time to hit $100 million in assets. But as Silicon Valley took off, so did the firm. Many new fortunes were being made as companies went public and sold, and Sand Hill was at the center of it all.

“We were at $250 million, I’m guessing in ’97, and then we blew the doors off and that is purely a reflection of what was going on in the marketplace and where we are geographically.” By the time the firm sold itself in 2000, it had $500 million in assets under management and another $500 million under supervision.

Today the firm boasts clients at big tech firms like Facebook (whose headquarters is a few miles away). But it has not always been easy to deal with young tech clientele. Many entrepreneurs in the 1990s had not been through downturns or market crashes and didn’t always know the benefits of diversification. They sometimes tied up entire fortunes in their companies only to see their net worth evaporate. Some thought their success meant they could do no wrong, and didn’t see the role luck had played. One client at Convergent Technology in the 1980s, for instance, borrowed private money against his restricted stock, only to watch the stock value plunge.

“Convergent had been as high as $30 or something, but it was down to $27. He said, ‘I’m just going to wait until it gets back up to $30.’ When it hits $24, of course, he was going to wait until it gets back up to $27, etc. etc.’ So he was busted.” Today, she says, the firm doesn’t work with clients who aren’t realistic. The firm wants to help people diversify their new wealth and provide possible independence from their huge holdings in single companies.

“What we did in that last part of the boom in the ’90s and through 2001,” she says, “was we generally did some planning and calculated what the level was at which they would achieve financial independence—that is, the ability to make a financial decision about whether you’d want to stay with your company or whatever.”
“We would create that as the selling threshold and we would diversify that base and monitor and become liquid on all of that excess cream over time,” Williams recalls. “There were, however, some, like eToys. We had a client come to us from eToys, actually a couple of clients, and we sold all of that stock because we could see no substance in the company. And to their credit, these folks said, ‘You know what, I gotta agree with you,’ and they sold and that company went out of business. So you’re not going to get the person who says, ‘No, I’m going to let my cards play out here.’ You can’t really advise them. There’s nothing for us to do.’”

In part because of its location, Sand Hill has dodged a major problem afflicting most RIA firms—an aging client base. “Our younger clients really come in two forms,” says Dombkowski. “The children from existing clients and then younger clients who have participated in entrepreneurial wealth creation. … [It is] a technology-savvy generation, and they have a different preference for communication—and not surprisingly, they are at a different stage in life, with different priorities. One of our great competitive advantages is a core advisory group in their late 30s and early 40s who ‘get it’ when it comes to interacting with them and who can relate firsthand to their life priorities.”

Success With A Sober Side
The tech boom helped bring Sand Hill’s fortunes over the moon, but some sobering numbers also brought Williams back down to Earth. By the end of the 1990s, the company had suddenly become very valuable. She had a 40% stake and a buy-sell agreement with two partners—two older partners. A recipe for disaster. Williams realized she was going to be left holding the bag—forced to buy all of her now very expensive firm.

“I couldn’t get myself behind the concept that I would become the deep pockets for these two guys.” The three tried to transfer stock internally, but for the most part, junior staffers were ready to buy homes, not companies.

Sand Hill started looking for suitors. But the negotiations always seemed to end with some comment or demand that would queer the deal. “We were amazed at what we would hear out of their mouths [at banks] really late in the process,” she says. Fiduciary Trust seemed ready to make a deal, but at the last minute the firm unveiled its plans to turn her into a traveling teacher, flying her all over the country. Encounters with companies like U.S. Trust gave her similar unpleasant impressions: “We would be absolutely gobbled up in these black holes.”

At last came Boston Private Financial Services, a private bank. It was a good fit, she says. Boston Private wanted to back off, let the firm keep its autonomy and method and brand. In hindsight, the sale was also a stroke of incredible luck given that a year or so later, the tech industry had cratered.

“We sold in August of 2000,” she says. “We sold at the high of the market.” Eventually, the firm saw revenues drop, top to bottom, by 12%. Not that Sand Hill would have been ruined, she says, but she admits the timing was “lucky as hell.”

The relationship with Boston Private was “stellar,” she says. The bank did what it said it would do—kept its distance. In fact, it didn’t even want to help the firm grow. No problem. She said another firm she knew of got swallowed by a bank and was promised a client gravy train. But it never materialized.

“They just wanted to get their interest in our profitability.” The bank did make suggestions, however, when Sand Hill’s margins started declining.

“Boston Private helped us in late ’06,” she says. “We had bulked up in staff. I was concerned about that, but hadn’t had the experience of managing through such a period. So we agreed with them to cut two staff people, which was probably the hardest thing I’ve ever done in my life. But again, we were lucky because we did that before the crisis in the market occurred. So we were lean and mean during the crisis.”

That second crisis—the 2008 financial meltdown—decimated the banking industry, and Boston Private was not spared. Bad real estate holdings in California and Florida mauled the bank’s capital base, and like many others, it took a chunk of government bailout money—some $154 million, putting it among the top 100 TARP recipients, according to ProPublica.org.

The carnage presented an opportunity for Williams and Sand Hill, though. The firm had already bought back a quarter of itself in 2007, and shortly thereafter began negotiations to buy all of itself back as more staffers were given stock.

It was “a very fortunate set of circumstances from one vantage point,” says Dombkowski. “The credit-crisis meltdown occurred and they wound up being able to buy the company back in June of ’09. And it was just an excellent time to be buying a company at trailing-12-month revenues.”

Autonomy wasn’t the entire motivator. There was also fear. Boston Private was going to have to start trimming subsidiaries. In 2009, it not only divested from Sand Hill but several other firms. Williams realized that if Sand Hill didn’t buy itself back, it might be sold off against its will.

“We represented such a small-impact item for them,” she says. “If we had blown the doors off our results in every respect, if we had doubled and redoubled the size of the firm, we still would not have moved the needle in their profitability.” At the same time, she wanted to get stock into the hands of the people coming in and restructure for a more manageable succession.

Sand Hill turned to Dallas-based Fiduciary Network as a financial partner and emerged with nine partners. Fiduciary Network made a small equity investment but, more important, financed the buyout of Boston Private’s stake while providing loans for younger partners to buy into the firm.

“They have two assets most RIA firms don’t have,” Fiduciary Network CEO Mark Hurley says. “They have really sophisticated young people, a group of young owners who are very smart, and they have more younger clients than most firms. Jane has built a great team underneath her. Many advisors are too insecure to do that.”

The firm is now set to grow through internal growth of 10% but also via acquisitions—and she says that the firm has a couple of targets in mind this year. She says a firm with $100 million in assets could be good, or even one with the same assets as Sand Hill, maybe one with up to 10 people who can fit into the current office footprint or a small satellite office in the same region. One focus would be younger people who can help share the equity.

But finding a good fit for the culture is hard, she says. The last two acquisitions (in the pre-Boston Private years) were failures. It was hard to incorporate these shops, which were run by lone rangers who didn’t fit into the culture, wouldn’t collaborate and had bad habits like excessive trading.

“What we found was that it was really much harder to incorporate people unless they move into your office.” And that’s a problem, she says, because, “when you are small, when you hire another person, it stair-steps your profitability down for the short-term.”

Early on, Williams developed a specialty in catering to women facing problems with their finances, including divorcees of high-tech executives. Eventually, Sand Hill earned a reputation as a go-to advisor for women about to become newly single in Silicon Valley. For her efforts, she won a Schwab IMPACT 2010 Leadership Award in 2010.

She stresses that the new Sand Hill, restructured and ready for succession, is a team effort and credits Dombkowski especially with working uncounted hours to take over responsibility for growth and maintaining the firm’s compliance record. “There are a thousand alligators out there.”

Dombkowski says there are three critical components to the succession plan: relationships, leadership and then ownership.

“In the case of client relationships,” he says, “we work in a team environment, and have partnered our retiring relationship people with one of our advisors, who is in every meeting, spearheads projects and is always introduced as the lead relationship person on a going forward basis. In terms of leadership, we have identified where we have the internal talent—and where we may need to supplement with external hires—the next generation of leadership in the firm.  Those individuals have been involved in a multiyear grooming process, so that when the official role changes occur, all aspects of managing the firm can be transitioned without missing a beat.”

He says that in terms of ownership, Sand Hill has a set internal formula for pricing. He says it is a simple multiple of free cash flow. “And importantly, we have an established schedule for retirees to sell down their ownership over a three-to-five-year period to existing and ultimately new shareholders,” he says.

The succession plan fits in with Williams’ desire to keep a ruggedly independent culture. “I have a very strong value system around this firm remaining independent if it chooses to be,” she says. “My partners, when I’m long gone, will make their own decisions about what happens to this firm in terms of ownership, but I will do everything I can so that they can maintain independent ownership, they have a way of transferring stock internally at a reasonable level … so they don’t have to look outside for a transaction if they don’t want to.”

“I’m not going to be as much a part of the future just realistically,” she says.