[Updated] Former wealth manager for Montgomery Securities and Presidio Financial is remaking his [big] practice in wine country as an RIA

Michael Russo wanted out of his old firm so badly that he was ready to risk losing a book of businesses worth hundreds of millions of dollars. With a six-month contractual waiting period looming after his departure, he was going to test the patience of his loyal clients.

He was willing to walk out the door anyway.

“I was miserable,” he says. His misery stemmed from changes being made at his firm, Presidio Wealth Management, that he disagreed with.

But – like many breakaways – he didn’t want to thumb his nose at a paycheck without getting the support of his spouse. Then, one day, she told him that they could always live in a trailer if the move didn’t work out.

Double-wide angle

“When your wife says: live in a trailer, you know” that you have the green light to take a career risk, says the CEO of Argos Wealth Advisors LLC, which manages $500 million from Napa, Calif. and oversees $1.3 billion. It has about 75 clients.

After his wife gave the OK, Russo bolted Presidio Wealth Management, which manages $3.5 billion of assets from San Francisco. His breakaway from the investment bank did not resemble one of the logistical masterpieces pioneered by advisors like David Hou and Mark Sear of Luminous Capital. See: Merrill Lynch stars take a leap of faith to a new office — and independence.

“The day I left [on April 20, 2007] I didn’t plan to leave,” he says. Russo didn’t say whether there was a specific event that triggered his decision.

Russo, 52, then endured a cooling-off period that would be considered unbearable by many RIAs – six months. His reading of his partnership agreement with Presidio was that he couldn’t transfer client assets any sooner. “I was being super-conservative” in interpreting the contract’s provisions about reconnecting with former clients, he says.

But the extra care to avoid legal trouble produced its own anxiety.

“I woke up [the next day] and said: ‘What have I done?’”

Waiting game

Within a couple of weeks clients began to realize that he had left and began to contact him. He let them know that he would eventually have his own practice. “They said: ‘We’ll wait for you.’”

With the exception of a handful of clients – including ones that serve on Presidio’s board of directors – he says most have now joined him at Argos. He opened the doors of the new practice on Oct. 12, 2007. In 2009, Argos’ assets grew 48%.

Though the company does little marketing, it has one key strategy for developing business. It embraces big-time clients and it serves former heads of business units at Goldman Sachs and JPMorgan, Russo says. The thinking is that people trust easily in the financial opinions of these former financial big-wigs so they become tremendous referral sources.

What prompted Russo’s sense of urgency in leaving Presidio was that the wealth manager’s management introduced its own private equity fund to clients, he says. This didn’t pass the sniff test for Russo and his displeasure over it led to his eventual departure.

Presido’s decision to add its own inventory of managers alongside outside managers is common at many banks and brokerages and its decision to move in that direction in 2007 merely conflicted with the Russo’s philosophy of how best to serve client’s best interests.

“You’re saying [to clients]: We’ll search the world for [the best manager] and 'guess what?: It’s us,’” he says.

Added on Aug. 19, 2010: Brodie Cobb, CEO of Presidio Financial Partners LLC, says that his company’s introduction of the private equity fund in 2007 did not significantly alter the relationship between his firm’s wealth managers and its clients — and that it wasn’t the major factor in the parting of ways between his company and Russo.

“That’s convenient marketing spin [by Russo] but [the private equity fund] is a not a broad offering to our clients,” he says. “It’s mostly new and different people who are interested in middle markets private equity exposure”

Cobb says Russo “is a good man and a solid citizen” and that “cultural and philosophical differences were actually the reason that Michael needed to leave.”

Marquee hire

There is an irony to Russo’s departure from Presidio, according to Jeff Spears, CEO of San Francisco-based Sanctuary Wealth Services.

“He was the marquee hire early on that legitimized Presidio,” he says. “It was instrumental in their growth.”

Russo started the investment-consulting unit at Montgomery Securities in 1991 and then left in 2001, a few years after Bank of America acquired it. Russo started with Presidio in November of 2002.

In fact, Spears said, Russo has had the bad luck of repeatedly starting wealth management businesses within companies – then subsequently those companies have developed proprietary funds that encouraged him to leave.

Boss at Montgomery

“I was his boss at Montgomery,” he says. “It was frustrating for me to have to tell him: I need you to do more production. He replied that it wasn’t in his clients’ best interest.”

Russo said he believes Bank of America introduced conflicts of interest into Montgomery’s program, like charging managers to be on the platform. If managers are charged to be on the platform, it may narrow the possibilities for clients.

“You can’t be partly conflicted,” he says. “You’re either conflicted or you’re not.”

When Russo left Presidio to start Argos, he decided that he’d try a lifestyle switch and moved from San Francisco’s financial district to the more bucolic environs of Napa’s wine country.

“I was really reluctant to do it [initially]” he says. He feared being cut off from clients and the kind of advisory talent that he hoped to hire.

Napa effect

The move has had the opposite effect. Russo travels to clients 80% less than he did when his office was city-based because clients love to visit. And, he says it has actually been helpful in recruiting the people he wants to hired. Including him, the company has eight employees.

Its most recent hire is Jeff Handy, the former head of the private client group at Thomas Weisel Partners who came aboard on July 17. See: Former head of private client unit at Thomas Weisel Partners joins an RIA.

Russo says he plans to grow his practice into the billions but not more than $10 billion. His past success in competing effectively with other wealth managers has relied on finding emerging money managers. Once a practice gets too big, not all the assets can be funneled to these preferred vehicles, he says. Russo wants to achieve scale so he has the resources to continue to build his crack research team.

He graduated Phi Beta Kappa from the University of California at Davis in 1981 with high honors. He received his MBA with honors from UCLA in 1983.