For a new RIA to be managing $520 million for some 3,000 investors within six years is noteworthy. When that RIA was founded by an estate planning attorney, there must be a surprising reason.
Insurance agents, Dean Zayed, CEO of Brookstone Capital Management in Wheaton, Illinois, told Financial Planning. I got to know many of them, from my estate planning work.
As Zayed explains, there are thousands of independent insurance agents who focus on life insurance, fixed annuities, long-term care insurance, and so on. Theyre successful financial professionals, he says, but they typically are not doing feebased asset management.
Zayed, who holds a CFP designation as well as his law degrees, gives two reasons for this gap in insurance agents services. Generally, these agents dont have the necessary licenses. In addition, theyre often focused on product sales.
I set up an RIA, Brookstone Capital Management, six years ago, Zayed said. The sole purpose of this RIA is to offer turnkey asset management to independent insurance agents. We have a nice niche here, and thats where we plan to stay.
So far, Zayeds niche includes 220 advisors in 45 states. For the most part, they work in one- or two-person shops. They all have their Series 65 licenses and they are all IARs [investment advisor representatives], under our RIA.
These insurance agents may work with clients who have investable assets to manage. If so, they can turn to Brookstone for asset management. We have 16 model portfolios, which we have developed in-house, Zayed said. We customize the use of these portfolios for individual clients, based on the information we get from the insurance agents. Generally, each investor will receive a mix of two or more portfolios.
Zayed said that Brookstones investment style tends to be tactical. Were not buy-and-hold investors and were not day traders. Some of model portfolios might be considered traditional, some are income-oriented, some are specialty. In the specialty category, Zayed mentions an inflation-protection model, which holds ETFs in areas such as commodities and precious metals.
The income models work well with our insurance agents clients, who tend to be conservative, Zayed said. Where is he finding income in these low-yield times? Zayed said that opportunities exist in high-yield bonds, master limited partnerships, and floating rate funds. Weve also had success with our hedged equity portfolios, he said. In this portfolio, we keep a long position on an S&P 500 ETF while also using options on that ETF to reduce risk and generate income.