Wirehouse Superstar Goes Solo
An Interview with Lori Van Dusen, Principal, LVW Advisors
Pittsford, NY based Lori Van Dusen is a remarkable woman- a wife, a mother to two sons, ages 15 and 20; resourceful, smart, passionate, and fiercely determined. She is entirely self-made, having been raised by her grandfather after her parents divorced. Her interest in the markets and all things financial came from her grandfather who she recalls lovingly as her role model. “From the time I was a little girl he would throw me an annual report and ask me what I thought. I had no idea what I was reading at the time but I knew I wanted to learn because I wanted to be like him.” Almost 25 years of fearlessness, determination, passion, grit and a fabulous staff and support system have led her to become one of the top women in the field, and the founder and president of newly formed independent LVW Advisors, a partner firm of New York City-based Focus Financial Partners.
Long an admirer of Lori’s business, I sat down with her in her suite at the Ritz in New York City to hear her story in greater detail and fill in some of the blanks.
MINDY DIAMOND: Tell me a bit about the nature of your business and the work that you do for your clients.
LORI VAN DUSEN: Today we manage $3 billion in client assets but advise to family office and endowment assets well in excess of that. We have 37 clients. They range in size from about $10 million, which would be our minimum in liquid assets — up to about $700 million. Half of our business is private clients, high net worth individuals and the other half is not-for-profit institutions that are healthcare-related or education-related or some other type of not-for-profit or private foundation. There are organizational issues and there are investment issues that always intersect in the small- to mid-size institutional market. You can’t just manage the money. You have to think about things like: “What could happen to their operating budget? What could happen to the funds you manage? Are the funds you manage really long-term assets or can they become short-term?” You almost have to be an organizational consultant and not just an investment advisor.
MD: So how did you get started?
VAN DUSEN: Well, it was different then. I started out with a desk and a phone at Shearson in the World Trade Center. I had no contacts. I had no big network. I didn’t play golf well. And, even if I did, it wouldn’t have worked for me. I was a young woman. I started out cold-calling and I cold-called the AARP list and here’s why. I figured, “who has money, demographically? Older people. I like older people. I was raised by older people.”
I was always trying to solve problems and I really wanted to understand and empathize and I did a lot of that on the phone. And, of course, then I would have to meet people. And, if it was from a cold call and not a seminar and they’d never met me before, they typically would go white when I walked in the room, because they didn’t expect me to be as young as I was. I just wasn’t the image that they had in their head. So you learned how to be better, more patient, work harder and longer and do whatever it took to be successful.
MD: Did you do anything else to differentiate yourself from the pack?
VAN DUSEN: I would just ask people about themselves. Some of the questions I asked (and still do today) are: What kind of experiences have you had? What are you trying to do with your money? Where are the other pieces of your financial life? Tell me about your kids. What did you do to create this wealth? What I found out, really quickly, was that nobody was doing that. It sounds crazy now, but, back then, nobody was consultative, and nobody was an advisor. We were putting everything together on one page for the client like a balance sheet with investments and they had never seen it before. This was well before Excel. Our model has always been about learning everything you can about the client, learn everything you can about the business, then educate, always educate and solve the problems. And it just is that our game keeps being upped, because the world has become more complex; there’s more competition.
MD: Tell me about being a female advisor in a male dominated profession.
VAN DUSEN: What always turned me off in the business were women that I met that had such a huge chip on their shoulders because they felt that the business was not kind to them. When I first started in the business, people weren’t happy about me being there and they weren’t happy about me being successful. I was an anomaly. And I was abused. I went home and I would sometimes cry about it and then I would think “Okay, what am I gonna do about it? Well, I’m gonna get up tomorrow and I’m gonna continue to do what I do.” I don’t really measure myself by anyone else. I don’t care what they do. And I’m just going to be better and I’m going to serve the client.
We’re not auditors and CPAs. So we’ve actually partnered with a firm that’s also a Focus Financial affiliate and they do outsourced CFO, treasurer and other functions…it’s like having a business with Legos attached to it where you can just keep building and solving problems for the client.
VAN DUSEN: Everybody’s different and there are a lot of different business models and a lot of different ways to give financial advice, whether you’re an independent, whether you’re in a wirehouse or you’re in some kind of a partnership. I don’t think there’s a right answer; I think it has a lot to do with the person, the team, the client base and the needs of the clients, primarily. In my case, I felt that a wirehouse is built to serve thousands of financial advisors all with heterogeneous kinds of business models. I spent a career building a practice that was holistic and objective. I didn’t think I was aligned with the client if I were selling product. So I never really sold product. As my business became more sophisticated, as the clients became larger and had more complex needs that I needed to solve, a lot of the wirehouses were just organized around product line, and that didn’t work for me.
MD: What challenges did that present to you?
VAN DUSEN: You could not easily solve a client’s complete problem. It was impossible to customize platform within the wirehouse world. We’re dealing with both sides of the client’s financial life, we’re dealing with the investments, we’re dealing with the debt and credit and lending issues. We’re trying to solve things quickly. If you spent some time in our office, I think you’d see that everybody runs at a very fast pace and it’s always about what do we need to do to help the client and how quickly can we get it done in the right way? In a wirehouse, that’s difficult. And, with the regulatory environment and a lot of the issues that were on the front page of the newspapers, it was actually very difficult for us to do institutional business in the wirehouse.
MD: So, how did you arrive at the decision to go independent?
VAN DUSEN: My decision to go independent was really just an evolution over a lot of years. Our client base evolved; it was bigger and more sophisticated. And we absolutely had no product incentives or product-related fees; we were charging for our advice–it was a recurring revenue stream based on assets under management, which is still our model. And we just wanted to have the best possible solutions for clients.
And so it was my judgment that the advisory world was ready for that, where it had never been ready for that before. I couldn’t have done what I’ve done since October even three years ago or five years ago. (Note: Lori established LVW advisors, with Focus Financial as a minority partner in her operating company, in October, 2011.)
VAN DUSEN: We have strategic relationships with six specialty research providers who are some of the best in the business. We are assimilators of a great deal of information. We are of the size that we can afford to pay these people. I have a relationship with New York City based Dynasty Financial Partners, which has done a terrific job for me. We use a variety of other research providers including CAIS, Morningstar Direct, FEG, eVestment, Pertrac and Hedgefund.net. We now have 115 – 120 dedicated analysts at our disposal. We can go out and get the best-of-class providers for things like our technology, our reporting needs, all of the kind of things we used to do ourselves; stress-testing of portfolios and look-through analysis and understanding investments. We can put the best package of tools and resources together customized around our client base; we couldn’t do that in a wirehouse.
MD: When you made the decision to leave the wirehouses, deals were pretty robust; meaning transition packages being offered by other wirehouses to incent movement. Can you talk with me about the thought process during your due diligence related to this and how walking away from the opportunity to be paid a large sum of money in the form of a transition package entered into your decision?
VAN DUSEN: I guess at the heart of all of that, there’s two questions you have to ask and answer as an advisor and it’s “Do you want to be in your own business? Do you want to be in control of that business or not?” And, for me I have this entrepreneurial background. I’ve never been an employee. You could say, technically, I was an employee of Smith Barney, but I never felt like an employee. I really didn’t. I’ve always felt like an entrepreneur. I’ve always kind of been in my own business. But, when you actually take the leap to building your own business, there are other things that you have to consider. In my case, I had a very simple business in the sense that it was just straight advisory fees. We were custodian agnostic. We had very little, maybe 10% of our assets, custodied at the brokerage unit at Smith Barney. There was really very little transition that we would put the clients through. I think that when I looked at all the other options out there, the bottom line was that I knew I wanted to be in my own business. I knew that I wanted to be in control of a customized platform around our client needs. But you have to be prepared to handle all the things that you may not have thought about, like people have to get paid, H.R. issues, lights have to turn on, you’ve got contractors, you’ve got your own space, etc. You have to be equipped to handle all these kinds of nuances.
MD: Why did you ultimately choose to partner with Focus Financial?
VAN DUSEN: Focus is a minority owner in my operating business and while they’re a partner, they don’t control my business. They are not making decisions day-by-day, they’re not telling me what to do or how to serve my clients, but they are a great resource in terms of almost everything.
So my decision to partner with them was based upon a number of factors. They did a lot of preliminary work with me. They worked harder than everybody else. They jumped higher. They ran at our speed. They tried to solve problems that we anticipated having in advance. They helped me build out a platform. And I think our clients would say, from their perspective, it’s been pretty seamless. I think they did not feel like we missed a beat.
And so it was really important to me to pick a partner who could help me identify the pieces I needed to put together, from research to technology to everything that we needed to serve the client.
MD: How was Focus Financial in the transition process?
VAN DUSEN: I thought that they under-promised and over-delivered. They lived in our office. They brought in a SWAT team. The clients had to sign some paperwork, but Focus really handled all of the transitions, the transfers, helping us do our vendor contracts, the enterprise agreements with everybody. They set that all up and they did, I think, a fabulous because I knew that we had to be focused on the money we manage and advise our clients without taking our eye off of the ball. Focus was absolutely integral to that going off smoothly.
MD: So how did you feel on day 1 of being an independent business owner?
VAN DUSEN: It felt like I was home. It felt like I had finally gotten to the place that I should have been at a long time ago. I think the best part about it is just being in a place where you have absolutely no dissonance. You just feel like everything is aligning and it’s been so much fun, because I’m an entrepreneur at heart.
MD: Can you give me a specific example of something that has changed for you in the last 5 months?
VAN DUSEN: One of the things that was always frustrating to me in the wirehouse environment was trying to solve a problem and having to live within the confines of the wirehouse structure and utilize whatever resources were there. And so it was just not always best in class and I felt like our clients deserved best in class. One of the things which has been in my head forever and came out of nowhere was the notion of an outsourced CFO and Treasurer function. We’re not auditors and CPAs. So we’ve actually partnered with a firm that’s also a Focus Financial affiliate and they do outsourced CFO, treasurer and other functions. So it’s really just one more piece — it’s like having a business with Legos attached to it; where you can just keep building and solving problems for the client.
MD: It sounds like you have demonstrated to the clients that you made this move for their benefit and you have and will continue to serve them in the best way possible. Did they believe you at first? How did they react to the notion that you were going to go out and be an independent?
VAN DUSEN: Well, we had 100% retention of our client base and the business is up 20% since October, in terms of new clients. I think that our clients, generally, received it as best as you could ever expect a client to receive it. We told clients that we were marrying one of the most experienced teams of investment advisors with the most robust platform we could put together. That’s pretty powerful.
MD: Was anyone skeptical about where assets would be custodied? I recognize that most of your assets were held at multiple custodians, so it probably was easier for you than for most. But what about clients who had custodied assets at Smith Barney? Were they concerned about what would happen to them?
VAN DUSEN: No, I think they knew we have always been the firm who did a lot of custodial searches for clients and we’re custody-agnostic. It’s “Where do we get the best service, best execution, best fee arrangements for our clients? Where do they get the best information? Where can we and how do we get data quickly and easily?” All of those things. So I think most of our clients rely on us for the choice of custodian, so it was not a very difficult conversation.
MD: What does LVW Wealth look like today, in terms of your internal staff?
VAN DUSEN: As of next week, we’ll have fifteen internal people. And then, of course, we have the resources of Focus that we use for certain things including H.R. and other kinds of related issues, so we do tap into them to round out what we may not have internally. We don’t need to build everything in house, nor should we. Why would I build an entire team of research folks when I can access Callan for example? We have access to unique combinations of resources that has allowed us to build a state of the art business. Now, we are in a completely open source platform. It makes us so much more powerful.
MD: And how do you spend most of your day?
VAN DUSEN: Oh, my gosh. I spend most of my day on both investment-related issues, in just researching because I’m, essentially, the CIO — and also in talking to clients about their portfolios. And I have a lot of people who run a lot of interference for me and run point. We have an internship program and my team is organically grown for the most part. They all, with the exception of one person, started their careers with me.
MD: And has your day-to-day life changed now that you’re a business owner?
VAN DUSEN: Yes, because as I said I spend most of my time on investment-related issues and client issues, I’m also spending my time on those strategic partnerships I outlined. So it’s just really fun, to figure out “How do we leverage the business? And how do we grow it to the next level in the best-possible way?” And, from the very beginning, it’s always been about “How do we serve the client? Because that’s why we’re in business.” “How do we do this better?”
MD: So, any surprises, positive or negative?
VAN DUSEN: Just how fast things are happening. It’s like “if you build it, they will come”, to use an overused phrase. But, I had been thinking about this outsourced CFO situation forever and, all of a sudden, it’s there. I had been thinking: “How do I serve clients really well in a friction-free way? How do I get to the best possible people that do what we do on the lending side of the business? Who are those people?” And I found them. You call them up and say, “Here’s my problem. Can you help the client?” and you turn the client over to them, they have a conversation, they solve the client’s problems. How great is that?
MD: Have you thought about what’s next for the business?
VAN DUSEN: I’m going to hire someone from the outside who can act as a CIO. I hold most of the CIO responsibilities now, but I’d really like to hire someone that can collaborate, sit on our investment committee Day One and help leverage us even more on the institutional side.
But I think it’s just taking all these pieces that I talked about and evolving each of them and growing them. And so, I need to hire someone who can give me more bandwidth in order to do that. I always feel if you leverage the top of the business, you really leverage the entire business.
I think that our business has great momentum and I think we’re doing a lot of the right things. I think we have to continually be very critical about what we’re doing. I am a perfectionist. I’m competitive; I want to do things the right way. And, you know, the more you put that out there and work at it; it’s amazing what comes around.
As seen on Forbes.com
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