How a suddenly wealthy, young Bay Area widow found her RIA after months of fruitless efforts

With a big life insurance settlement augmenting a considerable estate, this young mother had literally dozens of sit-down meetings and a hard-fought happy ending

Monday 4.22.13 by Brooke Southall

Brooke’s Note: When I was talking to Jane for this article there came a point when she asked that I stop for a second and put myself in her shoes. Here’s a young woman suddenly in charge of millions of dollars for the first time in her life when she has, in essence, never been responsible for any wealth to speak of whatsoever. Not only that but she spent decades getting a high-level degree in a fairly arcane subject that left her with no translatable skills to the job market. Nor is she inclined to work much soon, because she has young children. In other words, this money she possesses may have to last her the rest of her life. She doesn’t feel qualified to manage the money but she is also just as uncertain about whom to trust or how to find a trusted advisor. See: What is the value proposition of a financial advisor — and how is a budding RIA culture upping the ante?. The one thing she trusts are her honed research skills and tenacity. Here is the tale of how all of this plays out and how an RIA with no renown got the nod over advisors tagged as stars in the Bay Area.

The first time I talked with Jane Smith (not her real name) in July 2011, she had called me in the wake of her husband’s death six weeks earlier. The Bay Area widow with two elementary-school-aged kids had been looking for a good financial advisor. I’m editor of a publication that reaches thousands of them. Did I know one? I wrote about this conversation in this article: See: Three telling conversations about where the RIA business is headed.

When Jane called me, she was at wit’s end not only because she was fresh off a personal tragedy and was dealing with the sudden responsibility of inheriting her husband’s significant assets and life insurance policy proceeds. She had also, at this stressful time, really put herself out to find an advisor — meeting with quite a few and finding thorns in roses or underwhelming opportunities.

Jane got an overwhelming sense of vanilla from the advisors’ worn-out talking points about risk management this and allocation that. See: Forget their reputation; rich women are more fearless investors than supposed.

“Here’s your net worth; here’s your life expectancy and here’s why everything’s going to be hunky-dory,” is how she summed up those meetings. See: One Santa Fe woman’s female-centric approach to advice is attracting clients to her iconoclastic RIA.

So on a recent Monday morning, when I spent an hour talking with her in a follow-up interview, my question was: Whatever happened?

I got my answer — and it was, if anything, maybe more interesting — and affirming of RIAs — than I might have expected.

Odds-on favorites strike out

What I hadn’t known until our most recent talk was the degree to which Morgan Stanley and Bernstein Global Wealth Management (the advisory unit of AllianceBernstein) had the inside track on winning Jane’s multimillion-dollar account. Before Jane’s husband died, he had taken a number of prudent steps to ensure that her finances would be expertly handled upon his death.

The highest recommendation from friends he received was to seek out advisors at Bernstein Global and an elite Bay Area office of Morgan Stanley advisors. He and Jane jointly interviewed the Morgan Stanley advisor. Though that advisor came across as intelligent, there was a clear drawback to his approach.

“He didn’t really even look at me, she says. “This guy didn’t want to slow down and explain stuff. As highly recommended as he was, he didn’t seem like a good fit.”

With that experience in mind, Jane later returned to the more personable and patient Bernstein advisor almost by default. She came away feeling uncomfortably neutral about him.

“Just as I was on the verge of signing, I said: 'Why am I rushing into this?’ [My] funds [held in a Schwab retail account] are fine sitting here and I didn’t like the funds all being in-house like AllianceBernstein.” See: A Harvard lawyer, a Columbia MBA and an engineer break away from AllianceBernstein private client unit to form an RIA.

'The empathetic thing’

Having accepted defeat in her first, friend-referred foray, Jane describes what happened in coming weeks and months this way: “Then I went a little bananas,” she says. “What else can a woman with a Ph.D. do but fall back on her research skills?”

So began the odyssey of not only browsing but actually meeting with advisors — including one from LPL. Jane ended up really liking this man, who she called a much better, respectful person with whom she exchanged lots of personalized follow-up e-mails. “He was extremely intelligent and well-spoken. I liked him the best by far, yet he was the most highly priced.”

In my original conversation with Jane, I ran the names of a number of prominent RIAs in San Francisco and Marin County by her — albeit with big disclaimers that i knew them only as sources. She had already met with a number of them, and accepted my ideas and interviewed others. A number of these firms I chose because I knew they had women on staff with experience in dealing with women in turmoil after divorce or loss of a spouse.

But Jane didn’t find that female advisors were necessarily better for her. “Do women listen differently? I think the two women [in one RIA office] had the empathetic thing, but I also got that from the guy at a second wirehouse. I think there’s more of a personality range than a gender difference [that drives how advisors interact with female clients.]” See: She’s the boss: Keeping assets means keeping the power of the family matriarch fully in focus.

The reasons advisors didn’t fit the bill varied. In one case, the firm had a $10-million minimum that Jane fell below. A couple of others tried to put Jane with a more junior advisor than the one she had originally reached out to. One RIA associated with a roll-up she found to be simply too expensive considering its bland approach to investing.

The Morgan Stanley advisor had what she believed was the least value-added investing plan of all. “The proposal they sent contained a whole bunch of ETFs. I said: why would I pay you to invest in ETFs?” See: Schwab’s purchase of Windhaven made its asset growth soar — and RIA assets may be the afterburners.

All or nothing = nothing

Having gone through so much research and come away with so little conviction about any of the advisor choices, Jane confesses to feeling a sense of “what now?”

“I was really flummoxed,” she says.

In that humbled state, she actually returned to the Morgan Stanley broker with whom she and her husband had originally met .This was a decision she rapidly regretted.

“I found them to be the most annoying. They really pissed me off. They didn’t want me unless I brought all my assets.”

Jane adds that annoyance turned to anger when the brokerage office sent her a proposal in a PDF format but when she looked at it, part of it had another client’s information — something she pointed out.

An office employee had a matter-of-fact suggestion, according to Jane.

“They said: disregard that second sheet.”

'I just want to be helpful’

With all options exhausted — “I had been bending everyone’s ear and I was no closer to a decision” — Jane let a couple of months pass and focused on her children.

One day she was at an all-day school event and found herself standing next to a neighbor and the father of one of her children’s schoolmates. “Everyone knows I’m the one whose husband died.”

Jane asked the father what he did for a living and he assured her that she wouldn’t be interested and that it was related to bonds. After they talked for a while, Jane told him that she’d be interested in a proposal from him.

“He demurred and said: 'I just want to be helpful.’”

Eventually, after some convincing, she met with the schoolmate’s father and his partner at the small RIA that specializes in bonds, and they agreed that they would do some investing on her behalf.

“His non-salesiness was really right for me. I don’t like being sold to.” See: How to market to women: Don’t.

Conservative approach

What Jane also liked about the advisory practice was that it was a small enough that her assets were important to its existence and that the partners came at it from a bonds-first perspective. This jibed with her intrinsically conservative investing instincts.

“My husband was diagnosed in 2008 and I have zero work history. I don’t have to work. My profile is that I’m a retired person, just with a much longer life span.”

She also liked that the small RIA keeps its assets with Schwab Advisor Services so she didn’t have to move them to another company. The RIA charges fees that are on the low end of the spectrum and invests directly in bonds.

Jane’s firm has placed her in 70% bond investments and 30% equities, and she has received stock advice from the RIA including, for instance, counsel to lighten up on a concentrated position of Amazon shares. She has been with the small RIA for a year and is satisfied with the service. She sees her advisor frequently around the neighborhood and has visited his office three times.

So has she referred her new advisor to anyone?

“I mentioned him to my parents” (an affluent couple who have been engaged in their own fruitless search for an advisor), she says. “Nobody’s asked me. But I would.”

For another article about a consumer navigating the odyssey of finding an advisory firm, see: Why I moved my account from Schwab’s RIA and what Chuck could do to improve Schwab Private Client.

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