True Story: $3.5 Billion Advisor Once Lived on Credit

(Bloomberg) -- When Debra Wetherby started her investment advisory firm in 1990, she was 32, just married and had less than $50,000 of capital.

She plunged into an emerging industry of advisors who run their own businesses rather than operating inside big brokerages such as Morgan Stanley, which she’d left in 1988. With 10 clients betting on her, working without a salary and living on credit cards, she rented an office on San Francisco’s Sansome Street and gave herself a deadline: make money in three years, Bloomberg Markets magazine will report in its January issue.

Today, Wetherby Asset Management leases the entire eighth floor of a financial-district high-rise adorned with toga- wearing female statues dubbed the corporate goddesses.

From this perch and another office in Manhattan, the firm serves about 500 families who generally have at least $10 million to invest. That added up to $3.5 billion in 2013, lifting Wetherby’s firm to No. 1 in Bloomberg Markets’ first ranking of independent registered investment advisers, or RIAs, based on the assets they manage.

'GROWTH CYCLE'

Few people knew the term RIA when Wetherby started. Now, the field is on a tear.

 

The more than 20,000 independent RIAs in the U.S. have gained market share among wealth managers every year since 2007, increasing their assets 82% to $2.3 trillion from 2007 to 2013, Boston-based research firm Aite Group says. In contrast, client assets at the largest retail brokerages rose 8.2% to $6.2 trillion in the same period.

“It’s been a continuous growth cycle for RIAs over the past seven years because of the complexity of markets and changing needs of clients,” says Bernie Clark, head of advisor services at Charles Schwab. Schwab holds more than $1 trillion in assets for about 7,000 independent RIAs, which amassed $60 billion in new money in 2013.

“In hindsight, it looks very prescient,” Wetherby, 56, who’s the chief executive officer, says. “It really was more about serving clients a certain way.”

TREADMILL DESK

Wetherby’s largest family, whom she declines to identify, has about $400 million invested. Annual fees start at 75 basis points. They drop to 15 basis points if the assets managed exceed $80 million. (A basis point is 0.01 percentage point.)

Wetherby, who got her MBA from the University of California at Berkeley, won’t discuss returns. She says the firm tailors investments to clients, so there are no averages.

Wetherby puts in 10-hour-plus days and leads by consensus. Each of her 56 employees had a vote on the design of their 8th floor workspace, which they moved into this year, she says. They wanted equal-sized offices around the perimeter and low-rise cubicles in the middle so people could easily interact. In line with the high-tech focus of San Francisco, she chose a desk with an attached treadmill to exercise while reading or listening to conference calls.

Most days, she’ll review trades and meet with at least one family on investments or tax planning. For major decisions, she assembles an eight-person committee that includes herself and seven senior employees.

ORIGINAL CLIENT

She called a meeting on Oct. 15, when the Dow Jones Industrial Average tumbled and the yield on 10-year U.S. Treasuries dropped below 2%. That day, the firm had planned to reinvest money pulled from the Pimco Total Return Fund after Bill Gross, manager of the bond fund, left Pacific Investment Management in September for Janus Capital Group. Instead, it waited until markets calmed.

Saul Feldman is one of Wetherby’s original clients. He met her at Morgan Stanley in the 1980s, when he was an executive at General Parametrics and the bank helped take the technology company public.

Feldman, 84, became CEO of HealthAmerica of California and later United Behavioral Health. He says he appreciates Wetherby’s steady hand. She’s guided his family through financial ups and downs -- and preserved their capital.

Now, Wetherby is helping to transfer Feldman’s wealth to his sons and grandchildren. She says her firm’s advice revolves around such goals.

“It’s not about the money,” she says. “It’s about what you want money to do for you in your life.”

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