Advisor spotlight: How a Schwab IMPACT award winner aims to hit $1 billion in 3-5 years

Name: Keith McWilliams, Mt. Eden Investment Advisors

Location: San Francisco

Years in business: 25 in financial services, 15 as an advisor

Assets under management: $610 million

Why did you become an advisor?

I’ve always been a buy-side personality, and I feel people should act as agents for clients, not as brokers. I feel that the independent, fee-only model is the best way to serve clients’ needs.

I did investment banking boot camp, where you become a financial analyst. I worked in M&A and IPOs. Later, I went back to the family business. My dad was an investment counselor back in the 50s. He eventually started Villa Mt. Eden winery (in Napa Valley) and sold it in the 1980s.

(McWilliams managed a family limited partnership that oversees the remaining operations of the family vineyard in the Napa Valley.)

Wealth management became a natural for me: I cut my teeth in investment banking, and learned the softer side—estate, trust, and income tax issues—working with the family partnership. I grew up in the wine business and ran off be an investment counselor!

You’ve been independent since starting your own firm in 2004, right?

John Packard (Mt. Eden’s co-founder) and I were at Scudder in the 1990s.

John had spent 40 years at Scudder, and I could have been a lifer there. After seeing what Zurich and Deutsche did to Scudder, we know we were right to leave. But we didn’t have the courage back in 2000 to go independent.

So we joined an East Coast firm, Weiss, Peck & Greer (McWilliams was managing director in charge of the firm’s West Coast private client group).
There, we ran a quasi-independent boutique inside the firm. In the end, Peck & Greer decided to close the private client business.

(One day) a bell went off in my head that going independent was really a no-brainer decision. We had interviewed with a private bank one afternoon, and in the evening, a separate side of their company called to start selling us software research. The large houses were selling what they had out the back door to advisors! That’s when we realized we really should be going independent rather than working with them.

When (Weiss, Peck & Greer) found out we were going open-architecture independent, they very much preferred it to our going to a competitor. They couldn’t endorse us, but they did everything but. We kept 100% of our clients as we went independent.

Describe your typical client

Individual or family, entrepreneurial wealth or inherited wealth. Our average relationship size is $6 million, with a minimum of $2 million. We have 12 clients over $15 million each, and the largest is $60 million. Our sweet spot is in the $5 million- to $15 million zone.

Mt Eden thrives on complexity. That’s hard to scale, but it’s what we love to do. We love the complexity that multiple-trust, inter-generational situations bring to us.

You describe your investment approach as active. How do you sell that to clients in a buy-and-hold world?

I don’t believe this is a buy-and-hold world. It’s a trading world, and we’ve always been long-term investors (Mt. Eden has a nine-person investment team). But we constantly manage with an active point of view; we always manage with an opinion, and we will get tactical.

The buy-and-hold model often becomes buy and forget. You can’t bury 30 stocks in the backyard, then come back in 30 years to see what’s happened. Not in a world where product cycles are short and geopolitical events happen. The world is too fluid and dynamic a place for buy and hold to work like it used to.

We’re a hybrid manager—we pick securities and managers. We remove the conflict by charging one fee on all assets under advisement—whether we take discretion over securities selection or not.

Client service is one reason Mt. Eden won a 2010 Impact Award from Schwab. What is your approach?

John has always said, “call clients before they call you.” We’re willing to go deeper into client situations than most, and we believe in telling them what’s going on in their portfolio beyond preaching the doctrine of diversification, asset allocation and all that.

During the crash we had a policy of calling each client three times: The first time to say, ‘We’re here and we’re doing OK—are you OK?,’ the second time was to educate them about what was going on. The third time was to develop a game plan. We wanted to call with a purpose.

We’re e-mailing clients in funds of funds that may or may not be touched by the insider trading investigation. We’re telling them what’s going on and what we think about it. We’re talking about it while it’s happening, rather than after the fact.

We also seek honest client feedback. I ask direct questions from legacy clients and encourage them to just come out with it when they might be beating around the bush. They know I’m receptive to room-for-improvement comments, and I encourage all of our advisers to be that way.

You anticipate growing the business significantly.

We’d like to get to over $1 billion, to double (assets) within the next three to five years. I’ve been very emphatic in saying that we’re not growing for growth’s sake. We want to be able to afford best-in-class research and systems. And we’ve got to keep entire staff growing in intellectual curiosity and keep supplying them with institutional-class resources.

We’re putting all of our best practices into our workflow management/CRM system, and in general, we’re spending a lot of time systematizing our processes. At the same time, we’re fighting the urge to become bureaucratic. We have to ensure that every client gets the same wonderful service without losing that boutique feel—that’s our big challenge now.

Whom do you look up to in the investment industry?

John Packard, my cofounder. He is a man of really high character. He had the vision, back in the early ‘90s, of what wealth management should look like, with a heavy dollop of financial planning and financial alternatives. He had a vision for what has become the high-net-worth wealth management business.

What has been your best day as an RIA?

One was when we got the (Schwab) award. It’s very affirming to be recognized for what we’ve been seeking to achieve for the past six years.

And your worst?

We had been managing a significant amount of equity for a public financial services company that had been with us for nearly 15 years. In early 2008, they had to liquidate the account because they were being forced by the crisis to shore up their balance sheet. That and the crash to come were a double punch that could have been crippling to any RIA. But we actually grew revenues in 2008.