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January 2010
Investment Freedom
By Zenda Douglas

     Three executive partners, three friends, sit comfortably around the conference table in an office they own together on Park Street in Belmont. Their easygoing natures and the confidence they exude as they talk about their business, their plans, is inspirational. Advisors from around the country, mostly informed by word-of-mouth testimonials, are reaching out to Capital Guardian, LLC, and its new model for doing business.

     The regional investment brokerage and wealth management firm, headquartered in Belmont, serves the eastern United States with 16 offices between North Carolina and Florida and advisors offshore in Ecuador and Brazil.

     Managing partners David McMahan, Michael Fayed and Alan Boyer have known each other for years going back to college, early employment and basketball days. Capital Guardian has its roots in I.P.S. Financial Services Corporation, a firm founded by David McMahan’s father, Michael “Mick” McMahan, in 1984. IPS started out as Investment Planning Services of Gastonia, Inc., operating as a branch of the Raymond James & Associates brokerage house.

     “David and I went to work for his dad on the same day in 1999,” remembers Fayed. In 2003 they recruited friend Alan Boyer. Three years later, in 2006, the three started under a new name, severed ties with Raymond James and replaced them with the Pershing, LLC investment clearing firm, and Capital Guardian LLC was up and running.


An Opportunity is Made

     Capital Guardian’s success is proof that opportunity is where you make it. While longstanding financial institutions around the country, indeed world, were faltering as a result of the worst economic downturn since the Great Depression, Capital Guardian was able to capitalize on the dynamics inside the industry.

     As financial firms unraveled or required government assistance to survive, advisor layoffs and defections were rampant. Instability and uncertainly became the workplace standard and many advisors looked for new companies and new platforms for themselves and their investors.

     “This growth incentive fell into our lap around December 2008,” Fayed offers. “We cracked the door open for new advisors with a platform and they kicked the door in. Now we have a really strong platform for people to do business in.”

     Rejecting the confinements of traditional wirehouse investment houses—large firms usually with proprietary investment products and limited investment platforms—Capital Guardian is an independent firm whose mantra is “open architecture.” It is committed to allowing its investment advisors the freedom to do business upon an unlimited platform with the benefit for the investor as its only driving force.

     “Most investment advisors invest in what management tells them to,” says McMahan. “Most large firms offer their own financial products and investment tools. Advisors are trained to use them by a commission structure that favors those investments.” Capital Guardian has no proprietary products. “We don’t have a horse in the race by way of product and that makes our investment platform more open, better,” continues Boyer.

     “We wanted to build the firm we wanted to work for,” explains Fayed, who continues to serve his own investment clients. McMahan adds, “We’re affected by the same things as our client advisors. This helps when transitioning an advisor and a book of business into the firm. We know the challenges; we understand.”

     The rapid growth and success that the principals have experienced could knock lesser players off their game but they are forging onward—not afraid to say yes nor timid about saying no. Out of more than 220 advisors that have been interviewed, only 70 have gotten past the leadership of Capital Guardian. Capital Guardian wants to draw seasoned, established advisors with their investors in tow.

     The challenge of such remarkable growth is running the business day-to-day, agree the three principals. “We were a small, one-office operation, now we’re a legitimate east coast, and international broker/dealer,” reflects Boyer. “It’s a lot different operating today than two years ago,” he says.

     The firm’s strategic partnership with Pershing has provided scalability to Capital Guardian’s growth. Pershing, an affiliate of the Bank of New York Mellon Corp., is an investment clearing firm which provides support to broker/dealers by way of technology, human resources, business solutions and practice management.

     “We have a close relationship with those folks,” reveals Boyer, referring to the Pershing employees in Jersey City, New Jersey, and in Lake Mary, Florida. “Obviously, we could not run all of these offices with just our home office staff.”

     He explains, too, the benefit for Pershing of doing business with Capital Guardian: “Most firms are either stagnating or shrinking with major capital issues. We’re going the other way. Pershing needs firms like ours to support growth.”

     Pershing clears over 900 investment firms. Its trademark, “Your Business Without Limits,” fits well with Capital Guardian’s mission to liberate and empower investors and advisors. “In a coordinated effort with Jersey City, we’ve just transitioned a West Palm Beach, Florida, firm that opened this past November,” says Boyer, who expresses a desire to set up additional offices with the same model.


Not the Traditional Model

     “Our focus is on all types and kinds of families and people across the age spectrum and the issues and challenges they face over time,” says Director Paul Vattiato. The firm’s model represents a departure from traditional wealth management and financial planning, reflecting a more holistic approach to investing as preparation and response to life situations. Those could include tax and legal issues, care giving, special needs family members, government benefits and many other life scenarios.

     Vattiato reports that he and his two partners felt a good match with Capital Guardian who was looking for a new model—a family model—in which the planning side and the quality of relationships were different than the norm in the industry. These advisors were previously with a large wirehouse firm whose culture became divergent with national financial issues.

     “Advisors don’t usually move around,” says Vattiato. “It can be scary and disruptive but we wanted the ability to do the work we wanted to do. We got a strong sense of Capital Guardian’s expertise; they were well aware of the difficulties from both the advisor perspective and the client perspective. They inundated us with resources so that nothing fell through in the process and it went very smoothly.”

     Management does not help advisors target clients. According to McMahan, each branch office has its own niche. “In South Florida, they do a lot with eldercare; working to protect sustainable cash during final years. Other advisors work with young professionals. There are many different groups of investors.”

     McMahan says Capital Guardian, with $1.2 billion in asset holdings, has recently developed a strategic partnership with Alliance Bank & Trust of Gastonia, N.C. The agreement calls for three major areas of collaboration: Capital Guardian will refer its deposit relationships to Alliance Bank & Trust; Capital Guardian will serve as the wealth management arm of the bank; and together they will develop commercial insurance business.

     Boyer explains the mutual benefit of the partnership: “Alliance will become our preferred provider of cash management solutions. This will grow the bank’s deposit base and, in turn, increase its ability to develop and provide additional banking services to our clients.” This is important to Capital Guardian whose advisors, coming from other financial services firms, are accustomed to having a suite of cash management products to rely on.

     “We feel very good about the Alliance management team. We trust them,” says Boyer, who describes the process of finding a bank with the right fit as “diligent.” After looking at scores of banks capable of such an arrangement, Boyer says, “We concluded that Alliance understands our business and appreciates the synergistic effect of a strategic partnership between the two firms. We have a very similar set of objectives.”

     Alliance is a publicly traded bank (ticker symbol ABTO), with asset holdings of $170 million.


Widespread Growth

     Ingress to the firm’s offshore activity comes via its Miami office, which handles 90 percent of its South American and Latin American business. A fourth partner, Edward Dieguez, has joined the Miami international office whose brokers and staff represent over 150 years’ experience in dealing with clients from the Americas and the Caribbean.

     “We know the language, the culture and their unique needs,” says Dieguez. “The international client presents the new frontier because they are highly educated, business owners, affluent and usually own property stateside. And they bring a host of products and services along with them.”

     Capital Guardian in south Florida is one of the few firms marketing to that niche, according to Dieguez who says the investors under advisement have next generation needs brought about by the instabilities of their governments.

     “Capital Guardian offers the client and the broker flexibility, true open architecture and product assortment not usually found at a company our size. We have one team with one dream—to service our clients and help our brokers grow their business,” says Dieguez, who has 28 years in the business.

     The partners expect another 12 months of shuffling within the industry as the large investment houses figure out new identities and structures.

     “I’m not sure the big firms in turmoil know who they want to be yet,” says McMahan. “There are so many unanswered questions for advisors: Who will keep their jobs—the $500,000 producer or the $1,000,000 producer? Advisors are looking for solid footing, mostly with independent firms. When this movement settles down, the partners expect to have a big enough base to continue to grow.”

     “We have enough people out there to get the word out. We don’t want to be too large,” says Boyer, meaning it.

     McMahan, Boyer and Fayed also have plans to establish a foundation to support charitable giving. Capital Guardian investment advisors will have an opportunity to contribute to the foundation and to give input as to what causes it will benefit.

     The firm’s continued growth will be carefully scaled. After the expected leveling off of advisor defections and the opening of planned offices along the east coast, the principals of Capital Guardian will be ready to develop a new master plan for the company.

     Together with new offices and more locations in the Southeast, four commitments are bound to be included: a presence in Gaston and Mecklenburg Counties, an open architecture for its advisors, a place where advisors want to work, and first priority for clients.

     In the end, Fayed calmly assures, “Our professional success is measured only by client success.”


Zenda Douglas is a Greater Charlotte Biz freelance writer.
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