Ohio firm's secret – go where the clients are

Carnegie Investment Counsel's move to the suburbs increased productivity and convenience for clients

Aug 31, 2015 @ 10:42 am

By Trevor Hunnicutt

When a business wants to improve relationships with clients, sometimes the answer is to get closer to them. Literally.

The financial advice firm Carnegie Investment Counsel has done just that. Over the last several years, they've moved from a hulking marquee building in Cleveland's downtown theater district — where they'd been for three decades — to a building they now own in a tony town east of the city.

As is the case in many American regions, those suburbs are where a good number of their wealthy clients now live.

“We just mapped out where our clients were,” said Gary P. Wagner, a principal of the firm and its chief operating officer. “We covered 80% of them within five miles.”

The move was more than just a friendly gesture. It was an approach to drive more productivity for the business and its employees. For instance, an adviser could more easily meet with a client in the new office, near his or her home, saving the client the time and expense of a trip downtown to meet them.

The move also has made it easier to showcase the firm and its staff to clients and their friends who attend the series of educational seminars it conducts, called Carnegie College.

The relocation of the business is just one example of how trimming fat in day-to-day operations has transformed Pepper Pike, Ohio-based Carnegie into a profitable business.

InvestmentNews recognized Carnegie last year with a Best Practices Award, identifying it as a standout among participants in the publication's Financial Performance Study of Advisory Firms. Carnegie's pretax income per owner and operating profit margin ranked highest among all the firms participating in that study.

(More: InvestmentNews recognizes leading firms with Best Practices awards)

Since 2009, Mr. Wagner has been an owner of the firm, which in the 1990s he covered as a Midwest-based account manager for Charles Schwab & Co., a vendor of brokerage services to independent advice firms.

“It had been run like a lifestyle business,” Mr. Wagner said. “Our first task was to really recreate the brand, reinvest back into the company, in terms of people and technology.”

Having a focus on investment management — the firm has a particular specialty in bond trading — has also allowed it to handle outsourced portfolio management services for trust companies and other registered investment advisers, which can be a profitable business.

Despite maintaining multiple locations (the other branches are in Cincinnati, Philadelphia and Fort Myers, Fla.) the firm is centralizing its back-office functions. And it dropped less profitable businesses, including tax preparation, a service for which it now makes referrals.

Carnegie also has acquired other firms at a striking clip: seven transactions in the last six years. The firm managed $160 million in assets back in 2009, Mr. Wagner said. That number has crossed the $1 billion mark, according to the firm's most recent filings with the Securities and Exchange Commission.

Still, Carnegie is taking nothing for granted, especially after a recent bout of stock market volatility that tested the smooth market environment that's boosted financial advice businesses.

“It keeps us up at night,” Mr. Wagner said.

That's why he keeps a spreadsheet that allows him to predict and “stress test” his company's cash flow for the coming quarters. It allows him to test catastrophes, such as a 30% drop in the stock market.

“The spreadsheet has all of our variable and fixed expenses built in so that gives me some comfort that if we have an '08, everyone's going to have to make serious adjustments, but I can see at what point do we need to start making changes,” Mr. Wagner said.

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