Coronacrash Update: Fieldpoint Private’s Christopher DeLaura & Robert McCabe with Tony Sirianni
Advisor Hub CEO Tony Sirianni recently had a chance to sit down for a conversation with Christopher DeLaura, Director of Wealth Management, Fieldpoint Private, and President and CEO of Fieldpoint Private Securities, and Robert McCabe, Managing Director and Branch Office Manager. They discussed what the last months have been like at Fieldpoint Private and their views of what the industry might look like coming out of this crisis.
The last few months have been unprecedented and unexpected, a perfect storm if you will, of management challenges both on the employee and client level. You have had to deal with employee safety issues that no executive has training for, and a directly correlated market crash. What have you implemented at your firm to address this dual threat? Take coronavirus first.
Chris: Back in December, before any of this started, we implemented a fully virtual desktop for all of our colleagues. The idea was to free the desktop from its ties to our physical facilities, so we could function in the same environment, with the same tools and interface, whether we were at home on a Sunday, in the office on a Tuesday, or traveling to see clients.
We also implemented full e-signature capability, so we can open new accounts, process loans, etcetera, without the need for physical documents. And our bank has always been digital rather than bricks and mortar, with most of the traffic on mobile devices.
Very early in this crisis we started testing groups of employees, and then full departments, working from home, and aside from a rotating skeleton crew for mail and teller services, we’ve been 100% remote since mid-March. These systems have worked flawlessly, and they’ve kept us safe and with our families, where we ought to be.
And the market crash?
Bob: Our clients have weathered the storm well, and we outperformed the S&P in Q1 as the crisis escalated. Their wealth is multi-generational, and we’ve always understood that managing tail risk over very long periods of time will prove to be the most important source of alpha. All of our methodologies, from asset allocation to manager research, are based on this.
Broadly speaking, our clients tend to be roughly 50 percent equities, with the rest in fixed income, alternatives and cash. They also hold enough cash to get through downdrafts like this without having to sell with a weak hand. So they were really able to stick with their plans and it has served them well.
How about the continuing market volatility? What are you telling your advisors to do and what are you hearing from clients?
Bob: Well we’ve certainly gotten used to it, it’s part of investing. It’s all about communication with our clients, regularly scheduled and ad hoc, and this has increased dramatically — often several times a week. This environment has us focusing on our active managers that can pick winners rather than hugging an index, and we’re updating our focus list to reflect this, and inviting our advisors to listen in on our quarterly calls with our managers.
Chris: But the market isn’t the only thing that’s been volatile, right? No one alive has been through one of these events. So we’re talking with clients about their health and the emotional aspects of the fear and separation. As a trusted advisor you get involved in all of this.
One side effect of the crisis has been a perfect storm – in good way – for wealth planning. The AFR and 7520 “hurdle” rates are at their lowest levels ever, and the market sell-off and other asset price deterioration has made this the most hospitable time to implement certain GRATs and other techniques. We hosted an interactive conference call on this with our clients earlier this month.
What about the economy longer term? Where do you think we will be in 6 months, and how can advisors and their clients take advantage of that long-term direction?
Chris: Short-term, we’ve got our work cut out for us, but longer term we’re very optimistic.
We had 10 strong years, and then we got punched in the face. No one knows the ramifications, but we believe in six months we’ll be in a better place. Until then, and after, there will be winners and losers. It will be important to have managers that understand this, and ours have been five times more likely to beat their benchmarks – after coming onto our platform – than managers industrywide. So we’re confident that we are playing from strength.
Right now, we are seeing a divergence between the financial markets and the economy, and I believe that’s going to continue. The environment will continue to feel unsettled, and it will be more important than ever for clients to understand their tolerance for the next downdraft, but to stay invested. In the meantime, we’ve taken steps to help clients through the worst of this.
When this started we were not an SBA lender, however within 3 weeks we became an approved SBA lender, because our clients and advisors asked for it, when the big banks were turning clients away We’ve processed over 50 SBA PPP loans for our entrepreneur clients, to help them keep their people employed (over 1400 employees were positively impacted by this) and their own wealth plans on track. In fact, we processed one loan in 30 minutes and took a nearly 100-year old family relationship away from a Big Four bank, with the advisor in the center of the client experience, where they should be.
What about our business? What do you think the long-term impact of this dual crisis will be on the advisor business model?
Chris: Like any crisis, it will separate the weak from the strong, and the service cultures from the self-dealers. We had a record Q1 in wealth management revenue, and we are in the strongest capital position in the firm’s history. We have over $200 million in new wealth management wins coming during this quarter, because clients are consolidating with their trusted advisors at Fieldpoint, away from their other firms.
Bob: I think this says something about the value of our model. The advisor and client come first. The firm serves their agendas, not the other way around. These are times when that one-on-one relationship is essential, and that model simply doesn’t work at scale. When the you-know-what hits the fan, nobody wants to talk to a machine.
I fear the crisis won’t be kind to a lot of the independent RIAs. There are RIAs that are taking PPP money, which means they’re getting a loan from the government to pay their people. Contrast that with Fieldpoint, which instead of taking PPP money made itself an SBA lender in three weeks, because our advisors said our clients need it.
Chris: I think the other impact on our industry will be geographical. We’re watching geography disappear right before our eyes. Wherever we find the right talent and mindset, Fieldpoint has the technology to do business and support their success. I think we will see more of this, but it’s going to be a tough transition for the traditional firms and those that are resource-challenged.
So these things tend to bring out the good and the bad in people. What has most encouraged you, what have you seen that’s reaffirmed your faith in our community and how it’s handling these difficult times?
Chris: It has been incredibly heartening to see what my Fieldpoint colleagues have accomplished these last few weeks. They are locked up at home, working from basements and kitchen tables, juggling toddlers and parents. No breaks, no vacations. And they’re responding to clients and one another in real time, over nights, on weekends, to do whatever it takes to help everyone get through this.
At the same time, we’ve fed over 400 front-line nurses with a program that funds independent restaurants that are fighting to survive. Our people are pre-paying their barbers for haircuts when all of this is over, paying nannies that aren’t working, and doing dozens and hundreds of other things to make this easier for the people they touch. We were deemed an “essential” business, and that sounds pretty much spot-on.