Katherine Lintz, founder of Financial Management Partners, took an interest in education right at the beginning of her career, in 1978, when she helped Chase Manhattan Bank develop pioneering financial education and planning centers for customers. Today, she employs a former middle school teacher three days a week to develop her curriculum for the children of her wealthy clientele, who've entrusted her with $1.8 billion in assets to manage.
Lintz, who's based in St. Louis, also provides guidance to clients using outside managers, such as for money in trusts. This brings her total assets under advisement to $3 billion.
Lintz's clients tend to be young entrepreneurs with a net worth of $25 million to $50 million. More than 10 have assets in excess of $100 million. Of some 140 clients, only six were required to take a distribution of retirement savings last year. In her practice, she says she strives for complete objectivity, which she refers to as "open architecture on steroids" and a focus on inheritance issues.
The advisor is fortunate that she has her pick of attractive clients. Four staffers interview all prospects; Lintz isn't on that committee, she says, "because I fall in love with everyone and want to help them out."
Lintz remembers a woman in her 70s with a portfolio of individual securities at a trust company who brought a CPA advisor of 25 years to the meeting. "Her portfolio was solid, and her advisor seemed very capable," Lintz says. "She really didn't need our oversight; we'd just be another layer of fees for her."
Yet another prospect with four golfing buddies each doing a piece of investment work for him proved to be an ideal candidate. "We kept the good money managers and fired the bad ones," Lintz says.
Many of Linz's clients are looking for help with succession planning. To create a smooth path once the family patriarch or matriarch steps back, Lintz encourages clients to establish a family board of directors, which ideally would govern family money over several decades, continually teaching the next generation of heirs. A board may be authorized to hire and fire trust companies and other advisory professionals, or recommend the hiring of family members.
The typical board includes one or two family members, a lawyer and another outside advisor. Families with a closely held company would also need a board member with extensive business experience.
TEACHING THE BASICS
Financial Management Partners offers children of all ages a variety of financial lessons. These range from Counting Coins and Bills (ages 4-7) to Comparison Shopping (ages 9-11) to Stock Fun 101 (ages 13-15) and Credit Cards/Reports, Budgeting and Compound Interest for older teens. "We've designed 20 different 45-minute lesson plans," Lintz says.
During one of them, Lintz was teaching a 7-year-old at her kitchen table how to read the basics of one-page Value Line reports for three companies the child liked: Barnes & Noble, Apple and Disney. The girl noticed that Barnes & Noble had a "D" for deficit. "I asked her why Barnes & Noble was losing money and she said, 'Because books aren't as good as the Kindle!' "
Adults can catch up in discussion groups. Three groups, two of which began in 2008, meet five or six times a year over lunch to discuss everything from investment fundamentals to the commodities markets. Guest speakers like Nathan Dungan, author of Prodigal Sons and Material Girls: How Not to Be Your Child's ATM, sometimes appear.
An investment committee of five staff members and an outside consultant from a St. Louis institutional research firm, Asset Consulting Group, make all decisions. Lintz notes that the fees for outside research are significant, partly because the two firms communicate daily.
A typical asset allocation would include 50% to 55% equities, 30% to 35% fixed income, and 10% to 15% commodities and real estate. Financial Management Partners does not have a separate bucket for alternative investments, although Lintz's clients might hold unusual picks.
The equity allocation includes index funds, actively managed funds, private equity and hedged equities. The model portfolio may change dramatically for clients with significant assets in real estate or closely held companies.
The firm's investment committee uses ETFs, separately managed accounts, mutual funds and private equity, seeking the simplest, least expensive and most tax-efficient investments with the best ratio of risk to return. When a client arrives with legacy stocks that may carry large, embedded capital gains, the committee looks at the underlying fundamentals before deciding whether to sell.
About half of Lintz's clients are considered family-office clients - those defined as needing significant services, regardless of the size of the portfolio - and the other half are simpler investment advisory and financial planning clients. "We range from managing all of a client's portfolio to managing none of his or her portfolio," Lintz says.
Clients pay from 30 to 100 basis points on assets the firm manages as well as fees for family services, which range from $15,000 to $175,000 a year. The high end of the range may cover a wealthy client with multiple philanthropic foundations, private jets, complex banking needs and private equity.
Seventeen professionals, including CPAs, CFPs and lawyers with a background in public accounting, serve Lintz's clients in St. Louis. She has one staffer in Denver — who will soon have company.
"We take a tremendous amount of time to hire the right people," Lintz says. "We do extensive interviews with many members of the management committee, then we use a psychologist who administers four hours of testing for aptitude, personality traits and coachability, then we sit down with the applicants and review the results of the testing and the interviews to see if we are the right place for them, and if they are the right place for us. In addition, we use that testing to design jobs around the core capabilities and highest best use of those folks."
Despite her expertise at juggling the complex services provided by a multifamily office, Lintz most enjoys the simpler tasks. "The highlight of my year is running the classes with our youngest clients to help make the families' values multigenerational," the advisor says.
"The families come together for open communication on what money means to them and how money works," she explains. "Even the partners and team at FMP have been surprised at just how fast the children are able to catch on to these complex topics."
Lintz recalls a recent meeting when she explained the differences between having a sole proprietorship, partnership and a corporation to three children ages 7, 12 and 14. "They were really able to grasp the pros and cons of each structure," she recalls. "As we were discussing the nuances of partnerships, the 7-year-old asked, 'What if my partner does not work hard and I do?' Out of the mouth of babes," Lintz marvels. "They get it."
Jim Grote, a CFP in Louisville, Ky., writes regularly for Financial Planning.
Financial Management Partners, St. Louis
Assets under management:
How I see it: "Families come together for open communication on what money means to them. It's surprising how fast children can catch on to these complex financial topics."