DENVER - RIA firms can learn from the smart decisions and big mistakes made by Sierra Investment Management, a $1.8 billion firm based in Los Angeles.

Managing director David Wright shared the firm’s history and the management’s best and worst decisions since Sierra’s launched in 1987 during a session at the National Association of Active Investment Managers on Tuesday.

Early on, Wright and his partner Ken Sleeper decided “naively,” Wright says, to create their own enterprise and to try to do it all – enterprise management, portfolio management and asset gathering.

Today, Sierra manages separate accounts for wealthy families and has two affiliates, Ocean Park, which manages separate accounts for unaffiliated financial advisors, and Wright Fund Management, which manages two mutual funds using the same “intellectual capital.”

One of the best moves the firm has made is focusing on one service. Wright says “We stick to what we do best.” For Sierra that means portfolio management, not financial planning or wealth management.

Another smart decision was selecting a specific target market - Sierra chose conservative individual investors – gathering data on the goals of that demographic and then designing products around that market’s goals, Wright says.

This group’s goals are two-fold: Staying out of trouble during down markets and getting satisfying returns over a market cycle, he adds. To meet those goals, “We decided to construct and actively manage our client portfolios using mutual funds, not individual securities,” Wright says. (This was before ETFs were a possibility.)


Despite the growth in the businesses, not all was smooth sailing. Wright pointed to some major mistakes with a lasting impact on the firm.

“One of the biggest errors we made was not bringing in marketing or sales professionals earlier,” Wright says. He notes that the firm should have brought someone in to help with that as soon as it made sense, at about $100 million in assets under management.

Another big misstep: not realizing until recently that there were investment platforms out there that where separately managed accounts (SMAs) could reside and gain visibility with advisors. The firm is now actively marketing their accounts to TD Ameritrade, Schwab, Envestnet, Morningstar and others.

Wright’s advice to other RIAs? “Think in terms of doubles,” he says. “In our industry it is feasible to double AUM repeatedly. The time to double will vary, but this is a very useful motivating paradigm.”

UBS and Merrill Lynch have recently approved the Sierra funds for use by their reps, making Wright optimistic about the firm’s near future. “I believe our next doubles will happen in nine months.” If it doesn’t, he says, he doesn’t care, he’s confident it will happen soon.

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