David Bugen refutes the tired adage that nice guys finish last. Cordial and unassuming in conversation - disarmingly so - this CFP runs a firm that's one of Financial Planning's top 50 fee-only RIA firms in the U.S., managing $2.4 billion in assets for more than 1,000 clients.
His client base tends to be more well-to-do than ultra-wealthy, he says. About 85% of the clients at RegentAtlantic Capital - the Morristown, N.J., successor to the firm he first co-founded three decades ago - have investment assets ranging from $2 million to $10 million.
To serve these clients, Bugen has assembled a team of specialists: 13 wealth advisors who are not only top-notch financial advisors, but often have developed expertise in particular career niches or life niches, and can offer clients boutique treatment.
"At RegentAtlantic, most wealth advisors have developed practice specialties, so they are qualified to address the unique needs of specific clients," Bugen says.
Among the clients that the firm's advisors focus on: attorneys, business owners, pharmaceutical executives, physicians, women going through divorce and female Wall Street executives.
Wealth manager and partner Jane Newton, for instance, works with women on Wall Street - many of whom, like other busy executives, have let personal finances fall to the bottom of their to-do lists. Newton knows her clientele, having started her own career with 17 years working in investment banking for J.P. Morgan.
MOTIVATING THE TEAM
Each wealth advisor is responsible for obtaining and keeping clients, offering strategic advice and asset allocation, as well as general oversight of all their client relationships. And Bugen, who focuses on working with corporate executives and retired clients, now spends much of his time helping these other advisors in the firm build their niche practices.
Some of this comes from a personal realization he had several years ago. "I delegated too little for a long period of time, and then hit the wall from overwork," he admits. He developed the emphasis on specialties to keep valuable employees from getting bored, but also from the realization that no planner can be all things to all people.
By encouraging wealth advisors to develop a niche for which they have a passion, RegentAtlantic keeps team members motivated, Bugen says - and that gives the firm a double payoff. It helps create a plan for the firm's long-term viability, ensuring that the practice will remain independent and continue to advise clients in the same manner once the owners have retired. The strategy also assures clients that they can expect to receive quality advice and service in the future. "What scares me about this industry," Bugen says, "is the lack of succession planning among smaller firms."
Another motivational strategy - giving advisors a stake in the firm's success. There are three components of a wealth advisor's pay: base salary, incentive compensation and profit distributions.
RegentAtlantic also works with Mark Hurley's Fiduciary Network, which acts as a bank and assumes the risk of lending young planners money to buy out older partners. In RegentAtlantic's case, these funds are repaid ideally by the younger planners' profit distributions so that the other two levels of compensation remain undisturbed.
The goal, says Bugen, is for RegentAtlantic employees to own a majority of the company - and, ideally, for no other employee to have more than 10% of that ownership. (He retains 20% himself.)
When it comes to RegentAtlantic's investing strategy, the phrase "multi-asset class broadly diversified portfolio" might be something of an understatement. In a typical core portfolio, the firm uses a variety of instruments, including individual stocks, individual bonds, ETFs, mutual funds, exchange-traded structured notes, ETNs and FDIC-insured structured CDs.
Digging deeper, the firm's broadly diversified asset classes include both traditional sectors as well as some more obscure inclusions. Equity categories include global large-caps, U.S. small-caps, international small-caps, emerging markets (like the BRIC countries) and frontier markets, such as Jordan, Kenya and Vietnam.
Other categories include cash, global bonds, inflation-indexed bonds, what he calls "opportunistic bonds" (fixed-income securities seeking total return through a combination of long and short strategies), high-yield bonds, real estate, commodities, hedging strategies and infrastructure - a category that, for RegentAtlantic, consists primarily of oil and gas pipeline MLPs.
The portfolios use debt-to-equity allocation and broad diversification to manage volatility: In general, the greater the fixed-income allocation, the lower the volatility. The fixed-income portion of the portfolio emphasizes short-term bonds to dampen volatility.
The firm's all-inclusive planning and investment management fee starts at 1% for assets up to $5 million, then falls to 75 basis points from $5 million to $8 million, 50 basis points from $8 million to $10 million, and 25 points for more than $10 million.
For ultrahigh-net-worth clients, Bugen and team engage in intensive estate and tax planning in coordination with their clients' legal advisors. Customized tax-managed portfolios utilize a rich dose of tax and charitable techniques, including grantor- retained annuity trusts, qualified personal resident trusts, spousal lifetime access trusts, charitable remainder unitrusts, charitable lead annuity trusts and donor-advised funds, as well as family foundations and maximum gifts to children.
Like all advisors, Bugen says he has had both dream clients and those who fall short. One element of success, he says, is knowing when to end a professional relationship that's just not working.
He recalls one new client, earning $50,000 a year, who inherited $6Ã¢â‚¬â°million. The money was to be distributed over 10 years: $2 million immediately, $2 million in year five and $2 million in year 10. By the midway point, however, the client had spent the whole $4Ã¢â‚¬â°million she'd received to date.
Feeling he'd failed to help the client budget appropriately and manage her inheritance, Bugen resigned as the client's advisor.
"I thought I could change this client, so she could maintain her financial security," he says now. "I finally realized that everyone has their own values - and that it is not my job to impose my own values on clients."
Jim Grote, CFP, is a Financial Planning contributing writer in Louisville, Ky.
Chairman, RegentAtlantic Capital, Morristown, N.J.
Credentials: B.A. in economics and M.B.A. in finance, Rutgers University; CFPe
Experience: Financial advisor for Financial Blue Prints; founded Individual Asset Planning (now RegentAtlantic) in 1983. Adjunct professor, personal financial planning, Fairleigh Dickinson University
AUM: $2.4 billion
How I see it: "What scares me about this industry is the lack of succession planning among smaller firms."