Russ Hill has led his firm through a lot of transitions. During his time at Long Beach, Calif.-based Halbert Hargrove Global Advisors, he’s helped morph the company from a simple brokerage to a tax shelter shop to a commission-based firm, and ultimately to a fee-only planning business with roughly $4 billion in AUM.

Each time the CEO and chairman pushed his company in a new direction, it was to stay ahead of a shifting market that impacted what his clients would need, he says.

Now, some 40 years into his career, Hill is still rolling with the changes, orchestrating another set of transitions. The goal: to keep up with the two biggest trends facing the financial planning industry — the advance of so-called robo advisors that provide investment management for the young and not-so-affluent, and an aging baby boomer generation, forced to cope with unfamiliar terrain such as chronic health conditions and cognitive decline.

Over the next few years, Halbert Hargrove will develop two new businesses — one aimed at young savers, the other to help counsel clients on the practical side of aging. “I’m going to do this regardless of cost,” says Hill. “I think this will be a great differentiator.”

At the same time, the firm is continuing with a long-established succession plan aimed at training and developing a new generation of managers able to run the business when Hill is long gone.

TAKING CHANCES

Hill has a long history of taking chances to grow and negotiate unfamiliar terrain. On numerous occasions during his tenure at Halbert Hargrove, he’s had to borrow to pay the bills or take in investors to finance the addition of offices, technology or the managers needed to keep the operation running, he says.

“You have to build the capacity before you can grow,” says Hill. “I’m conservative with my clients’ finances. With mine, I’d like to think that I’m taking sensible risks.”

Hill started in the financial advisory business back in the 1970s. A fresh-faced Stanford MBA, he was working for his dad at Halbert Hargrove — then a traditional brokerage — peddling stocks for a $500 draw against commissions. Though he says he had neither interest in nor aptitude for picking stocks, he quickly became one of the firm’s top producers and ended up buying out his dad’s partners within a matter of a few years.

“I got to change what the firm did,” he says.

Back in the 1970s, financial planning was all about sales, he explains. “You would figure out the kinds of things your clients needed and then sell them something. It was a terrible conflict of interest but there weren’t a lot of options. If you tried to do pure planning, no one would pay you and you wouldn’t survive.”
What his clients needed in the 1970s and early ‘80s, he says, were tax shelters in commodity-oriented businesses that could soar in times of high inflation. At the time, top marginal tax rates were at 70% and inflation was so rampant that the government imposed price controls to tamp down escalating consumer costs. Meanwhile, the tax code was rife with loopholes that paid handsome returns to those investing in the right products.

Hill launched several investment partnerships that raised cattle, drilled for oil and even made wine, co-founding the William Hill Estate Winery (now part of Gallo). But when the government started closing tax loopholes and made strides taming inflation, Hill morphed the firm again into a traditional RIA selling mutual funds.

FEE-ONLY SHIFT

Then, not satisfied with the commission-based funds that provided the bulk of the firm’s income, he sold the brokerage and launched Halbert Hargrove Russell in 1989 as a fee-only advisor.

At the start, Hill says the company was almost a franchise, representing Russell Investments’ institutional clients from Los Angeles to the Mexican border. As time went on, he broadened the client and investment mix and started adding staff. But as the firm got larger and began to add offices in such places as Houston and Scottsdale, Ariz., Hill realized that trying to juggle the day-to-day operations of a business with the demands of clients was an impossible job.

To grow, he needed managers unfettered by client service. Even though adding executive-level staff seemed like a costly and risky undertaking, Hill took another chance. “We hired a number of people before we could afford it,” he says. “You’ve got to invest in skilled people and train them.”

So far, the investment has paid off handsomely. The firm has 30 professionals managing nearly $2 billion in discretionary assets and it advises institutional clients on how to invest another $2 billion.

However, Hill prefers to gauge the firm’s success in other ways. “Wouldn’t it be nice to rate firms by quality rather than assets under management?” he asks. “We don’t target assets under management. We target relationships and capabilities that we want to have in place.”

Meanwhile, the firm has been planning for its own future as well. For the past eight or nine years, the company has allowed partners to buy into the practice, lending them the money to do so at favorable terms. Hill still owns the majority of shares, he says, but barely — and he expects his interest to be slowly diluted away.

He is now one of a clutch of designated managers who don’t have client responsibilities but are charged with running the business. He’s the directional leader, but the day-to-day operations run nicely without him, he says. That’s handy because he spends a couple months every year on his farm in Italy.

YOUNG SAVERS, AGING PARENTS

Among the capabilities that Halbert Hargrove doesn’t yet have but is actively developing are offerings for both young savers and for clients’ aging parents.

On the younger end, Hill says he sees the need to provide in-person advice to clients who have yet to build sufficient assets to make hiring Halbert Hargrove practical. (Though the firm doesn’t officially have a minimum investment requirement, the minimum annual fee of $10,000 prices many people out.) The company is now trying to develop a digital-traditional hybrid through which “disciplined savers” can sign up online but get individualized advice from a person.

Hill also is adding “case management” capabilities that would help clients with elderly parents — or who need increasing assistance themselves — understand how to use social safety net programs to get the care and help they need without bankrupting themselves.

It’s not the normal purview of investment managers, but complex choices come with aging. Whether a client has questions about how to sign up for Medicare or where to go for help with cognitive ailments like Alzheimer’s, Hill thinks his advisory firm should be prepared to provide the needed advice.

“I’m going to hire a licensed clinical social worker who understands the volunteer networks in various cities,” he says. “Then when you find out that your mom, who lives in Chicago, can’t live alone anymore, we can help you figure out what to do. We want to do that for our clients.”

Kathy Kristof, a Financial Planning contributing writer in Los Angeles, contributes to Kiplinger’s and CBS MoneyWatch. Follow her on Twitter at @kathykristof.

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