So, too, is the firm’s bottom-up, autonomous management style, which Pagnato discovered during one of his monthly West Coast treks to meet with innovators in Silicon Valley. “When I learned how open, transparent and autonomous Google is I thought, ‘This is the way to run a business,’” Pagnato says. “Everyone can see everyone’s calendar. Everyone can meet with anyone. Everyone is seeking the flourishing of others there.”
He came back to Virginia and began transitioning his firm to a bottom-up organization about two years ago. What that means is that any member of the 30-member PagnatoKarp team can see what every other member is working on and can make suggestions and disagree with their bosses, even the founders. They are also empowered to experiment and create the best experiences for clients. “What happens now is you have nearly 30 people who are innovators and nearly 30 people who are creating,” Pagnato says.
Recently, that empowerment spurred on a young trader to provide portfolio metrics that allow clients to see a visual diagram quantifying how their assets are being protected. “He’s two years out of Carnegie Mellon and he created this to give our clients a high degree of confidence. That happened because of bottom up,” says Pagnato, who spent the first five years of his professional life as a scientist at McDonnell Douglas. His scientific background fuels an atmosphere of constant experimentation designed to continuously elevate client value.
That’s led to an overall client offering that includes intensive financial planning and the development of an institutional-level investment policy statement for each client.
“Our primary deliverable when we begin the relationship is a comprehensive financial plan covering everything from assessing risk tolerance goals and objectives up through lifestyle and legacy planning and new business ventures,” says Lars Okeson, the firm’s CFO and one of its six family wealth advisors. Okeson is a CPA, a former advisor of Alliance Bernstein and a longtime CFO. He took a company public in the 1990s.
“We use a very comprehensive and customized process that allows clients to pre-experience what may happen with their wealth in the future,” Okeson says. “It enables them to make meaningful decisions about wealth transfer, estate planning and philanthropy.”
Instead of clients having to hire a CPA, investment manager, estate attorney and travel agent, PagnatoKarp acts as a one-stop shop. “In my assessment of the industry, there really is no firm that is doing all the things we do for the $10 million-plus family relationship,” says Okeson.
The firm’s transparency about fees and costs is a major selling point, Okeson says. “In traditional broker-dealers, there are costs embedded in portfolios, traditional soft dollars, 12b-1 fees, insurance commissions. There are all sorts of ways the broker earns revenue. There is only one way we generate revenue and that’s through our advisory fee.”
The firm’s $3.8 billion in assets under advisement also works in clients’ favor—giving them access to a wider array of top investment managers, as well as alternative investments. The firm is also able to aggregate funds to get clients into investments that require a high minimum stake.
That kind of access helps the firm’s investment team build a customized investment portfolio for each client. “We are asset-class agnostic,” Karp says. “Every client is unique. No two portfolios are identical. We don’t use labels or put people in buckets. We get to know goals and tax status. Based on what we know about you, we build a portfolio.”