Anne Shumadine, one of three founders and now chairman of the board of Signature Financial Management, has successfully courted an exclusive client base that receives an enviable level of service through a 5-1 client-to-staff ratio. Founded in 1994 as an independent, fee-only family office and wealth advisory firm, its 29 employees manage over $2 billion in assets for 150 clients.
An attorney herself, Shumadine's firm includes five other attorneys, one CPA and several CFPs and CFAs. Six employees share ownership with plans to broaden this number.
Norfolk, Va.-based Signature has grown, in part, through acquisitions and is still looking to acquire small practices or existing teams. In 2007, the firm acquired Achenbach Associates in Charlottesville, Va., and in 2010, it obtained a team of two advisors from U.S. Trust in Charlottesville.
However, most of the firm's growth comes from its internal team structure that attracts and retains wealthy satisfied clients. Says Shumadine, "I am most proud of our client relationships and our investment strategy."
Four teams serve clients in two major divisions: affluent and family-office services. The affluent division serves clients with investable liquidity between $5 million and $20 million. These clients, who make up 90% of Signature client base, receive traditional wealth advisory services.
Clients with over $20 million, currently 15 clients, receive a multitude of ancillary services provided by the family-office division. These services include bill paying, acquiring and licensing planes and boats, help finding adequate health insurance and concierge doctors, help selling and acquiring private businesses, philanthropic planning and management of charitable foundations, as well as the creation of tax notebooks.
While Shumadine and her team do not prepare and file client tax returns, they do collect all the pertinent information a client's CPA will need in a tax notebook. Clients also benefit from the creation of family almanacs. A family almanac summarizes a client's existing estate planning strategies and income tax situation, as well as investment and other financial assets that have an impact on wealth management.
Analyzing private business dealings includes helping clients decide if it is in their best interest to buy or sell private businesses as well as assisting those clients in hiring investment bankers and attorneys. Shumadine notes that the six attorneys in the firm do not practice law or draft documents. As in-house counsel, they review documents and recommend outside counsel.
Whether clients are in the affluent or family-office division, they are served by four different teams. The client management team consists of eight relationship managers who work in different combinations for client families. Each relationship manager is a technical expert in one or more areas and has a deep background helping clients with complex planning needs.
An investment team of seven full-time and two part-time staff manages the investment portfolios. Clients are supported by an infrastructure team of five employees and a five-person operations team.
The infrastructure team handles administration functions for clients (such as payroll taxes, bill paying, etc.) as well as all administrative functions for Signature. The operations team handles all trading, billing and reporting, as well as managing custodian relationships. (Note that any one employee may work on more than one team.)
A client's fee structure depends on the division in which he or she is served. Affluent clients are charged only on a percentage of assets under management. Family-office clients are charged a flat fee based on both the amount of assets under management and the complexity of their total financial picture.
Regarding asset fees, clients are charged on a sliding scale beginning at 1% of assets under management for the first $1 million down to 15 basis points on assets over $100 million. For larger clients, fees are often negotiable.
Signature's investment strategy is designed to fit its ideal client-wealth generators who are interested in the stewardship of their capital and in leaving a small family legacy. As Shumadine explains, "Most of our clients are first-generation wealth who do not want their children and grandchildren to become trust fund babies. They are typically not interested in establishing long-term dynasties, which distinguishes us from many other family offices. We don't do 100-year plans; we do 5-year plans."
For example, one client with assets in the $50 million to $60 million range plans on leaving each child $2 million. This legacy may seem a bit low, Shumadine admits, but it does reflect the Warren Buffett philosophy typical of her clients. Even the average client's charitable foundation is designed for the funds to be expanded during his or her lifetime.
With these caveats in mind, Shumadine describes a recent baseline model portfolio for affluent clients in the following manner. First, portfolios are built on macroeconomic analysis looking at current and future trends to the extent possible. Second, the model portfolio has four categories or buckets, as Shumadine likes to call them.
The protection bucket, ranging from 10%-20% of the portfolio model, includes conservative fixed-income investments like Treasury inflation-protected securities, Treasury bills and bonds, and high-grade municipal bonds. Nothing too exciting, as the bucket's nomenclature infers. Low risk and low return are the expectations.
For most clients, 40%-50% of their portfolio revolves around their capital markets allocation. This bucket contains global publicly traded equities. Currently this bucket is about 50% in domestic and 50% in international equities, with emerging markets making up 15%-18% of the total capital markets allocation.
The third bucket of stabilizing assets usually makes up about 30% of the model portfolio and includes investments uncorrelated to the equities markets. This bucket includes real estate, commodities and hedge funds. Some of the investments are publicly held, some privately held. For example, within the commodities portion, clients are invested in private equity arrangements, master limited partnerships, natural resource equities and the newest Pimco commodities fund, Pimco Commodities Plus.
The final bucket, which is often a minuscule percentage of a client's total portfolio, is the excess return bucket. This bucket includes high-risk, high-return investments like private equity and venture capital.
In many cases, clients utilize internal pools for investments in capital markets, stabilizing and excess return buckets. (Clients always have a choice of using other investment vehicles.) Within the capital markets pool there are different active managers with their own specialized accounts, most of which invest separately managed accounts for the pool.
There is also a pool of hedge funds in the stabilizing bucket, and several pools of private equity funds in the excess return bucket. To participate in these internal pools, clients must be qualified purchasers under SEC regulations, which means $5 million in liquid assets.
Shumadine summarizes the firm's investment strategy: "We seek to generate long-term performance for clients. As a consequence, we focus on achieving absolute return targets, measured in real return terms, instead of measuring performance on a short-term basis against one or more benchmarks."
With four teams of employees and diversified investment buckets, Signature has been successful in attracting clients with a strong interest in philanthropy. Although Shumadine's clients may not leave a smaller legacy to heirs, they are more interested in watching their money make its impact now.
Jim Grote, CFP, contributes regularly to Financial Planning.
Signature Financial Managememnt
Assets under management:
+$2 billion (firm)
Quote: "Most of our clients are first-generation wealth who do not want their children and grandchildren to become trust fund babies. They aren't interested in establishing long-term dynasties, which distinguishes us from other family offices."
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