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Business Observer Friday, Sep. 20, 2019 4 weeks ago

Crisis management: Financial gurus turn bad timing to their advantage

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Rapid organic growth comes with a healthy dose of caution for veterans of the 2008 financial meltdown who united to start their own investment advisory firm.
by: Brian Hartz Tampa Bay Editor

AGW Capital Advisors came into being at the nadir of the economic downturn; it opened for business in April 2009, a time of bankruptcies and bailouts that sent markets both foreign and domestic into a tailspin.

Not the greatest moment to launch a registered investment advisory firm … or was it?

“In the financial crisis, it became increasingly clear to clients [of other firms] that they were in a product because of commissions and other considerations,” says P.J. Gardner, a co-founder and principal at the Tampa-based firm. “But because our clients engage us on a fee-only basis, they weren’t concerned. We’re paid for advice, and we want the best return for our client.”

A decade later, AGW’s simple, fiduciary take on investment management seems like a no-brainer. But it wasn’t always the case, particularly in a time when bad actors like Bernie Madoff rampantly abused clients’ trust.

“In bull markets, people get complacent,” Gardner says. “So all of a sudden when they lose money, people start asking questions, and it became apparent how rife the industry was with conflicts. Trust was shattered. The ‘uninvited guest’ at all of our meetings was Madoff.”

“The industry is picking horses and jockeys, and a firm that’s growing 20-30% organically really stands out.” P.J. Gardner, principal and co-owner of AGW Capital Advisors

Thanks to a focused, deliberate, conflict-free approach to growth, over the past decade AGW has come to manage $2.2 billion in assets spread across 85 clients, a mixture of institutional investors and high-net-worth families, mostly local, that value the firm’s fee-only philosophy. But having survived a baptism by fire 10 years ago, AGW’s principals — a group that also includes Jay Annis, Charlie Hardwick and Paul Whiting Jr. — find themselves facing new hurdles.

First and foremost, AGW wants to maintain its vision and culture over the long haul, a task that’s become more problematic today, when consolidation is on the rise in investment brokerage and advisory sector.

“Most advisors are treading water,” Gardner says. “The growth that you’re seeing is inorganic growth. … There’s a huge consolidation wave underway, but if you look at net client acquisition, it might be 5% or something like that. But the importance of culture is tremendous. Smashing together a bunch of firms where the common denominator is big egos — I’m not sure how that all plays out in the end.”

Gardner says few RIA firms have grown at the steady, 20-30% rate AGW has over the past few years. (Privately held AGW declines to disclose its revenues.) And that consistent excellence makes it a target for acquisition.

“The industry is picking horses and jockeys, and a firm that’s growing 20-30% organically really stands out,” he says. 

Although AGW’s principals are still relatively young — Annis is 43, Gardner 41, Hardwick 48 and Whiting 50 — they’re already looking to safeguard the future of the firm. They have 12 employees and plan to hire two more, and they’ve hired a talent management consultancy to develop a succession plan and path to partnership for the next generation of AGW leaders.

That plan includes diversification of the firm’s talent base. For example, Gardner says, AGW recently hired someone with an accounting, not investment, background.

“The industry’s value proposition is shifting,” he says. “People are looking to us not to do tax preparation and file documents but because we naturally know the intimate details about a family. They trust us. And they’re often saying, ‘Should I be doing anything different on the tax side?’”

Hardwick adds: “We’re not just looking at a client’s liquid portfolio. We take into consideration all their other assets. They might have a business, real estate portfolios or generational issues. Our advice takes into account the whole picture.”

Although it plans for its own future, AGW also must prepare its clients for the next recession. Gardner says today’s economic climate is “eerily reminiscent” of the late 1990s, when the dot-com bubble burst at the end of a long period of economic expansion.

“Oddly, we would do really well in a crisis because we spend a lot of time helping our clients understand what that looks like,” he says. “What a lot of people do, naturally, is hunker down and bury their head in the sand. But instead, that’s the time to look up, to see what the opportunities are.”

To that end, AGW tends to operate from a footing of constructive paranoia and goes to great lengths to avoid resting on its laurels.

“Our careers have been crisis after crisis after crisis since 1998,” Gardner says. “So you run a little scared, but in a healthy way.”

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