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April 2011
Simplicity and Transparency
By Amanda Pagliarini

     Eastover Investment Advisors’ founder, Donald Toney, won the Charlotte Economics Club Standard & Poor’s 500 Forecast Contest for 2009. On January 27, 2010, the Charlotte Economics Club presented Toney the 1st Place Award for predicting the S&P would close 2009 at 1111. It closed at just above 1115.

     Some would call it luck, others might credit his decades of experience in the industry. If you ask Toney, he’ll tell you he’s “just learned the right people to talk to.”

     Before founding the Eastover Investment Advisors, Toney built a career in portfolio and investment management with Hartford National Bank in Connecticut. In 1976, he moved his family to Charlotte to continue his career with NCNB and later helped organize Interstate Asset Management where he served as chief investment officer.

     Toney ultimately abandoned the comforts of a corporate career to open Eastover in 1988. “My wife thought I was crazy. But I wanted to be in control of my own destiny and, most importantly, I wanted to choose how to service my clients.”

 

Keeping it simple

     In what Toney describes as a client-centric business, the private firm model at Eastover Investment Advisors affords the ability to offer more personalized, consultative service. Perhaps that’s why the firm, which currently holds a little over $175 million under management, has 15-year-plus relationships with the majority of their clients. Toney considers the $1 million to $5 million dollar client to be their sweet spot, though accounts range from $500,000 up to $17 million.

     After decades spent working for large corporate banking institutions, the investment advisors at Eastover all joined the company for the same reason it was started—client service capabilities. Like Toney, they saw more opportunity in the privately owned model.

     “There are so many road blocks to client service in the larger financial institutions,” David Morgan comments. “Corporate interests and goals and client interests don’t consistently align. Here, I’m not serving ‘senior management and the street analysts.’ I’m not urged to recommend products because of the demands to increase profits or meet top-down goals.”

     Oftentimes there are even limits to the types of clients you are able to serve in the larger financial institution. Morgan continues, “If a family has $500,000 to work with, but your firm has a $5 million minimum, why should you have to turn them away when you know you can help them?”

     Sandy Carlson, the firm’s planner is a CPA and a CFP. She says, “It’s often the families with smaller amounts of money that need the most help. And that help goes beyond investing.”

     Carlson handles clients’ financial and estate planning needs as well as insurance review. She is also focused on small business retirement plans. “Wealth management to us means more than just making investments. We look between the cracks to see what the client is not focusing on and advise them on solutions to potential problems. It’s a very fluid situation with each client.”

     The newest member of the team, Donal Barrett, came to Eastover after a 15-year career with U.S. Trust and Wachovia, now Wells Fargo. “In my last 10 years at the bank, the name of my department changed three or four times. Each time the name changed, the model of how we worked changed.”

     Through affiliations with broker dealer Allen, Mooney & Barnes, and with Fidelity and Raymond James as custodians, there are no limitations in what Eastover can provide their clients versus that of a larger institution. In fact, Morgan notes, “We’re much less expensive than our competitors. Eastover’s fee-based model is generally less than the 1.25 to 1.50 percent (plus the underlying expenses of third party managers and funds) minimums our competitors charge.”

     Many prospective clients would probably look right past the team at Eastover Investment Advisors because of its conservative approach. With a company policy to “invest conservatively, service aggressively,” Morgan doesn’t believe you have to take big risks to make money. On the contrary, their clients make money by understanding and managing their risk

     If you sat in their office in 2009, you might be convinced that they were on to something. While most of their industry was weathering hurricanes, they saw little more than clouds.

     Their policy on client service might be aggressive, but when it comes to investments and financial planning, Eastover commits to keeping it simple. Carlson, Morgan, Toney and Barrett all squirm in disapproval when mentioning hedge funds or eccentric investments.

 

Objectivity and Accountability

     “Anything that doesn’t have transparency or liquidity—we’re not interested,” Morgan says with conviction. “I’ve seen what lack of transparency can mean to an investor; clients take comfort in knowing exactly what they own.”

     Toney credits a relatively quiet 2009 despite the tumultuous economy, in part, to this strategy. “We saw a lot of value in the corporate bond market and municipal bonds held up fairly well. There were really only one or two frantic calls we fielded during the economic crisis. I think it had to do with the fact that our clients trust us,” Toney says modestly.

     Part of earning that trust comes from clarity and this overarching policy of keeping everything, including statements, simple. Client statements are kept to a couple of pages with clearly identified, simplified information.

     “We don’t believe in sending out 50-page statements of crowded information with eight different managers listed. We’re more hands-on and want the person reading the statement to understand it,” Morgan explains.

     One’s money and how it is handled is an emotional matter, a fact Eastover doesn’t take lightly.

     “Outside of taking care of someone else’s children, taking care of someone else’s money requires an enormous amount of trust,” Morgan admits. “These are stressful times and clients are concerned about their ability to remain financially independent and maintain their current lifestyle. It’s not been easy, but it’s certainly been rewarding.”

     Advising is based on a client’s lifestyle, life events, and future plans. They don’t believe in financial planning templates, but rather creating plans that are tailored specifically to each client’s needs, risk tolerance, and long-term goals.

    “So when clients come to us and want to take action following the latest sound bite, it’s our job to ask, ‘Does this adhere to the plan that is based on your long-term goals?’ We try to take the knee-jerk emotions out of the process and help refocus our clients’ attention to their ultimate goals,” explains Morgan.

     “If you have the time and expertise, managing your own investments is not a poor decision. Generally though, you don’t build your own house. You need the help of an architect, engineer, mason, designer…”

     He argues that even armed with knowledge of the markets, it’s too challenging to make decisions and react objectively about your own money. And there again, disseminating all of the information and distinguishing fact from noise is critical.

     “Over my career, I’ve gotten more calls from clients wanting to know more about something Jim Cramer said the night before on Mad Money,” says Barrett.

     Toney’s founding model based on consistent and regular communication is still Eastover’s foundation today. “When you communicate regularly, you mitigate surprises,” affirms Toney.

     In fact, Eastover insists on annual meetings, even when the client expresses satisfaction with the current strategy or plan. “The clothes I have on today might not fit quite right the next year,” Morgan explains. “You have to have that annual ‘fashion’ check-up to make sure everything still fits properly.”

     “We make house calls, though,” Toney chuckles. “We’ll come to you, meet over a meal or over coffee. We just feel strongly about that face-to-face time.”

    In a time when many Americans are jaded by the financial industry, the need for accountability from financial service providers is paramount.

     “For the past several years, greed ran the thinking in this country,” Toney says plainly. “Beyond the moral or ethical implications, the consensus at Eastover is that simply ‘greed is not good.’”

     In their 2010 Winter Newsletter, Morgan touched on a meeting with a non-profit that was referred to Eastover after expressing dissatisfaction with their current advisor’s lack of answers regarding performance. In the newsletter, Morgan addressed the issue of accountability to clients with a nod to The Blues Brothers:

     “The movie The Blues Brothers, with Dan Akroyd and John Belushi, has many outrageously funny scenes, but the one that stands out to me right now is the confrontation in the sewer between Belushi and Carrie Fisher, the jilted bride-to-be. Before Carrie can shoot Jake, he drops to his knees and spouts a litany of excuses: “I ran out of gas, I had a flat tire, I had no money for cab fare, my tux didn’t get back from the cleaners, an old friend came into town, someone stole my car, a terrible flood...locusts..an earthquake...it wasn’t my fault!!!!!!!!”

     Eastover continually stresses the attributes of accountability, simplicity and transparency. They believe that when clients have questions about performance, they should have answers.

 

Multi-Generational Stewards

     “Because we are a small firm, we can’t hide behind an institution and be relative to how everyone else is doing,” Morgan notes. “Some people get in this business for their livelihood, and some just want to go for that brass ring.” Those who want the brass ring don’t last because, as Morgan jokes, once you’re in the business you realize there’s no such thing.

     Last year, Morgan met with a client’s son, a recent college grad, to discuss setting up his first 401(k) plan. “There’s no money in that, but it means a lot to the client. And frankly, it’s a sound financial decision—it’s time for him to start saving.”

     When you consider clients to be family, meetings such as these are par for the course. The advisors at Eastover enter into client relationships to be a steward of their money, through multiple generations. That’s just what Toney has accomplished.

     “Clients’ children become clients and before you know it, we’re discussing plans and accounts for their children. I go to clients’ wedding anniversaries, birthdays, their children’s weddings, family funerals. You really develop relationships with not just one client, but their family,” says Toney.

     Morgan, Carlson and Barrett concur: “You can approach this business in a very sterile fashion, but because you really get to know your clients, you’re affected by the things going on in their lives and you really want to deliver for them.”

     Having built a successful and respected practice that has attracted top talent to the team, people often inquire about when Toney plans to retire.

     It is important to Toney that the firm has added investment depth and strength with its association with Raymond James and Allen Moody and Barnes, and having quality people like Barrett, Carlson and Morgan there so there will always be business continuity.

     Although he adamantly states, “I have no thoughts or plans to get out of the business or retire. If I did, I would lose 95 percent of my friends. And besides,” he smiles, “I don’t think my wife wants me around the house that much.”

 

Amanda Pagliarini is a Charlotte based freelance writer.
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