Name: Daniel Moskowitz, president and CIO, Chatham Wealth Management
Location: Chatham, N.J.
Years in business: 23
Number of employees: seven total, including five executives and managing directors and two support staff
For years, the advisors at Chatham Wealth Management were content to manage money, and weren’t all that concerned with drumming up new business. With new leadership, though, the firm has changed course. It’s become a referral destination for TD Ameritrade, and is winning over erstwhile do-it-yourselfers with a distinctive portfolio management story.
Q: How did you arrive at your current position?
I started on Wall Street in 1988, at Bankers Trust, and I spent 10 years trading and selling taxable fixed income. Then my stepfather approached me with an idea. He had a business that he had started in 1978—one of the first fee-only investment advisors in New Jersey—and he was looking for an exit strategy. So I took pay a cut for a couple of years to come on board, knowing he’d be turning the business over to me.
On Wall Street, I had Series 7, 24 and 53 licenses. The State of New Jersey waived the series 65 because of all the other licenses I had. Two years later my stepfather had enough confidence in me that we formed our partnership.
The business slowly became mine, and in 2004 there was a watershed—John Raab (Moskowitz’ stepfather) was diagnosed with cancer. He got treatment and recovered, but after that he moved up his retirement plans.
Q: So how is life away from Wall Street?
I really enjoy sitting down with clients and getting their story on how they acquired their money. We have doctors, people who started own businesses … I have clients that emigrated from Hungary as janitors and saved a million dollars while working for (pharmaceutical giant) Merck. It’s a very diverse group of clients.
Q: Chatham Wealth Management was called out at the recent TD Ameritrade conference for doubling its assets to $150 million in two years, in part by focusing on options strategies. Tell us about that.
Well, the market is up 100% in last two years—that helped quite a bit! We have also gotten into this referral program with TD. They have branches that cater to the retail client around the country. We’re one of five New Jersey advisors they can use for clients who are looking for more. They might want some handholding, or they might decide they don’t have the time or knowledge to do it themselves anymore. In the past, that client was leaving TD and going elsewhere.
It’s a win-win for TD because the assets stay there and we pay them a fee as long as the account is with us. After the financial crisis, we were finding that a lot of those referrals needed to be talked off the ledge. They either held on and lost a lot of money, or went to cash and were still sitting in cash when they come to us. Their big concern is how we’ll protect them on the downside. We tell them we like most of our clients to have a balanced portfolio—but that we also use options to protect a portion of their equity portfolio.
At the moment, for certain clients who need that protection, we’re buying enough index puts to protect 10% of their overall equity exposure. More important to them than performance—more important than anything—is that they don’t want to go through what they went through before. They want to know, for the fee they’re paying us, what we’re going to do for them that they can’t do themselves.
Q: How else do you differentiate yourselves on the portfolio management front?
It’s also the way we trade bonds. Anytime we buy a bond, we pass it along to the client at the same price. I deal with 15 to 18 different bond dealers, so I’m not just buying from TD. Clients pay the exact same price I pay; no markups and no commissions.
A lot of clients also like the story that having non-dollar-denominated debt assets in their portfolio is a good idea when the U.S. government is running huge budget and trade deficits. Australia, Canada and Brazil are running huge trade and budget surpluses, and the yield’s a lot better. These (investments) are not typically available to the retail client, and they are a little more competitive.
Q: So TD’s Advisor Direct program has been a real growth engine for you?
We’ve been in the referral program since August of last year, and I think we’ve brought in $15 million. If we bring in $30 million a year through this program, we’re going to grow pretty quickly. (_Elizabeth’s note: TD Ameritrade says it doesn’t disclose the specific criteria to become part of the referral program, but that advisors must meet AU and service criteria, and that geography is a consideration._)
Q: Those are big chunks for a firm with just about $155 million of AUM. Why the modest asset total?
John Raab and myself were not, and are not, salesmen. We were not actively looking to add new accounts. If we had a client who referred our business to a friend or colleague, we were happy to go and see them, but we really had no marketing plan. We were more concerned with managing the assets we had than marketing.
That’s absolutely changed. Greg (Shaw, managing director) joined us in 2010, and John (Lui, managing director) joined us in 2009. They are heading up the Advisor Direct relationship: Their job is to bring business in. Once I was running the business full time, I decided I wanted to grow—slowly, but I wanted to grow. Greg Shaw kind of fell into my lap. He’s a 30-year friend of mine who had worked at Fidelity for the last 10 years referring assets to advisors who were on the Fidelity platform. A few years ago he started talking to me about it. I said, “I know TD has a program, but it’s not that great.” When I started to hear that the TD program was getting a lot better, I said to Greg: “Let’s see if there’s a way we can make this work.” And we did—now we have a real growth plan.
Q: Four of the five top people at your firm have trust bank backgrounds, and the fifth worked in Fidelity Investments’ private client group. Is there a lot of trust-bank DNA in your culture?
John Raab worked for 15-plus years at U.S. Trust Company managing ultra-affluent relationships. He took the old bank trust model to high net worth (clients).
The trust model was all about individual, personalized portfolios, and that’s what we provide. We use individual stocks and individual bonds for the custom core we create for each client. Foreign bonds, options and other things are our satellite strategies to enhance the portfolios. We have no two accounts that look exactly the same.
Q: Why do you use TD as your custodian?
I like the fact that even when we were a $50 million firm, I could call Tom Bradley, the head of TD institutional, and he’d pick up my call and take care of my problem in 15 minutes. Tom has the same team together today as he had eight years ago, when I started looking for custodians who catered to investment advisors. The teams at Fidelity and Schwab seem to change every year. TD has very good technology and all sorts of resources to help you increase business and make your business more efficient, but bottom line, they’re willing to go the extra mile to help you in any way possible.
Q: What have been your best and worst days as an advisor?
The worst day: I had a client who had lost a lot of money in the Internet bubble—a doctor and his family. We started working with them in 2003 or 2004, and did what I thought was extremely well for them. The seemed extremely happy for five years and we built a really good relationship. Then I got the notice they were transferring their account, without even bothering to call me. When I did finally talk to them, (it turned out that) they wanted to take more risk. That had never been conveyed to me. Certainly in the first few years of our conversations, it was the opposite that they wanted. I did truly like them, and it was a considerable amount of money.
The best day was actually a period of time there in early 2009, when the market was still getting badly beaten up. The clients who’d call during that week or two, almost to man, wouldn’t ask about their portfolio, but would say, “How are you, Dan? How are you doing?”
_ A previous version of this article incorrectly stated the number of years that Greg Shaw worked at Fidelity. RIABiz regrets the error._