Registered investment advisory firms founded in the early 1990s are often described as pioneers. The term “trailblazer” is more apropos for Bloomfield Hills, Mich.-based Heber Fuger Wendin (HFW) Inc., which is going strong in its ninth decade.

HFW, a fee-only financial advisor and investment counsel firm established in 1934, has always served as a fiduciary and put clients first—even before the Investment Advisers Act of 1940 imposed this duty on investment advisors.

HFW specializes in fixed income, which is 95% of its $4.6 billion in assets under management. It also knows its way around equities. The firm has just eight employees, which is surprising considering the scale of its business. And although it has historically focused on community banks and other institutional clients, it is now also eager to grow its wealth management practice for individuals and families.

“We’re not going to abandon our bread and butter banking business by any means, but like any business we want to diversify,” says David Barnes, chairman, president and CEO of HFW since January 2013. Barnes, 56, practiced business law for many years and joined HFW’s board of directors in 1987. He and his wife Heidi, the firm’s treasurer and systems manager, became its sole owners in late 2012.

Diversifying the firm’s client base is especially important, says Barnes, because community banks and credit unions are shrinking. HFW’s initial clients were savings and loan institutions. Over the years, it has branched out into insurance companies, credit unions, hospitals and foundations.

HFW began working with personal accounts in the late 1930s when the widows of bank presidents asked it to manage their money. Twelve years ago, it created HFW Compass Personal Wealth Management Solutions and Service to serve bank employees and board members of its institutional clients. Over the past five years, HFW’s wealth management assets have risen from $9 million to $50 million. Many of its 55 clients in this space have come aboard in the past few years, largely through word of mouth.

Although wealth management remains a tiny part of HFW’s overall business, “It cements our relationships with our institutional clients,” says Barnes. The firm will soon begin offering wealth management services to the members of one of its credit union clients.

Great Depression Roots
Richard “Dick” Wendin, 75, an investment advisor with HFW and son of firm co-founder Sigurd R. Wendin, is happy to chat about its early days. The so-called firm historian—who recalls playing with the old Dictaphones in his father’s office as a child—joined HFW in 1982. He is also president of Sigurd R. Wendin & Associates, a firm specializing in the valuation of closely held companies.

Sigurd earned an MBA from Harvard Business School in 1925 and was working in the statistical research department of Bank of New York when the Great Depression hit. After reading about bank holidays and other troubles, he saw a need for someone to advise small community banks. “He looked around the country for the area that could most use his help,” says Wendin, “and lo and behold came up with Michigan and Detroit.”

Sigurd, one of the early chartered financial analysts, moved from New York to Detroit and started Wendin & Co. A couple of years later, he teamed up with Heber Fuger, a firm that was doing similar work.

“Ted Fuger was a very brilliant bond analyst and John Heber was an outstanding customer man, as they used to call it back in those days,” says Wendin. His father combined both of those aspects, he says, and was elected to lead HFW.

The Federal Reserve used to have someone from HFW come lecture its new class of bank examiners. Starting in the 1950s, HFW spent four decades as advisors to Puerto Rico. The commonwealth’s secretary of the treasury asked the FDIC to recommend a firm that could advise on treasury and bond issues and pensions. “He didn’t want a big money-center player because they still had the reputation of being hooked up with the banana companies,” says Wendin, referring to colonial leftovers.

“My dad took a boat down there, spent about a month going over things and realized we could help them,” he says. “We were there for roughly 40, 45 years after that.”

Barnes also shares family ties with HFW. His father Gordon (who, like Dick Wendin, was a Detroit Bank & Trust Co. alum), joined HFW in 1972 and helped it expand its geographical presence. (It now has clients in 11 states.) He became its sole owner and retired in the late 1990s.  

Building Trust
Becky Gersonde, who joined HFW in 1999 and heads its wealth management arm in addition to working with institutional clients, says the firm offers a personal, hands-on experience for all clients. “There’s a trust factor we promote here,” she says. She thinks clients are attracted to HFW’s low fees (which she estimates rank in the bottom third of the industry), transparency and specialty in fixed income.

Some of the firm’s clients weren’t aware of how much their former money managers’ fees were eating into their returns, she says, at least not until the 2008 financial crisis, when the market improved but their assets didn’t improve quite as much.

HFW’s moderately conservative investment philosophy appeals to the firm’s wealth management clients, many of whom have reached or are near retirement age, say Gersonde and Barnes. (By the way, the firm does not invest in Detroit-issued debt.)

HFW uses Schwab’s institutional investment platform and buys funds with low expense ratios. Another reason it has been able to keep its fees low and staff lean is that its clients, financial professionals, “don’t require a great deal of hand-holding every time the market swoons,” Barnes says. But HFW is open to hiring more people as it grows its wealth management practice, he notes. In 2013, it hired an investment advisor who works closely with Gersonde on this business.

She and Barnes don’t anticipate having a hard time finding qualified candidates. Recent mergers and acquisitions in Detroit have displaced many people with 20 to 30 years of experience in financial services. And younger people are graduating college with experience gleaned from internships with other companies, they say.

The average tenure of HFW’s employees is approximately 14 to 15 years. Barnes speculates that the firm’s collegial environment helps it retain people. “Employees are given a lot of discretion and a long leash,” he says. “They don’t need me looking over their shoulder all the time.” Gersonde also credits the mutual respect among employees, who sit in an open trading area and know each other’s clients.

“If we’re out of the office it really doesn’t matter,” she says. “Another advisor will step in to help a client and they know that.”

John Oberdick, who leads Ann Arbor State Advisors in Ann Arbor, Mich., has HFW subadvise his individual clients’ fixed income assets. He visited the firm and “kicked the tires,” he says, before forming a business relationship about two years ago. HFW advises its affiliate Ann Arbor State Bank and advised the bank’s predecessors.

“We have been worried about a rising yield environment for a long time and don’t have the resources to manage a portfolio of individual bonds,” he says. “They [HFW] filled a niche.”

HFW enables Ann Arbor State Advisors to use individually laddered bond portfolios for clients. Oberdick describes HFW’s depth and breadth as comforting and says the firm is “reactive and proactive from a service standpoint.” HFW provides performance reporting for the fixed income piece, which Ann Arbor State Advisors incorporates into the reports it prepares for its clients.

One of HFW’s wealth management clients, a retiree who declined to be identified, owned a business in the recreational industry and was involved in manufacturing. He was initially introduced to HFW when he served on bank boards and says he was impressed with the balance sheet suggestions it offered to banks.

HFW handles the majority of the financial planning needs for the client and his wife. “They do a very good job of forcing you in a nice way to review your objectives on an annual basis,” he says. This includes looking at success and failures, he notes.

Gersonde has also provided the couple with suggestions regarding long-term care—a subject they hadn’t previously looked at—and estate planning.
The client says it was important to find an advisor his wife would be comfortable working with if something happened to him. “Although I’m the primary contact, she is extremely pleased with Becky and the organization,” he says. Gersonde adds, “I actually consider them as part of my own family.” Most of her customer relationships go beyond business relationships, she says.

HFW is also expanding its institutional practice and expects to add an insurance company client later this year, says Barnes. It is sending its third annual satisfaction survey to institutional and individual clients. “Without knowing how clients think about our service, we’re feeling around in the dark,” he says.

What would the firm’s founders think of the direction in which HFW is moving? “I think they’d be very pleased,” says Wendin. “We’ve got good people working here doing good things for their clients, and what counts is what your clients think.”