Harris Trust breathes new life into MyCFO

My goodness, MyCFO lives.

Harris Trust & Savings Bank of Chicago quietly scooped up the majority of the assets of the high-profile Silicon Valley startup after it seemed to drop off the radar.

Although that purchase happened a year ago, only now are the bankers beginning to answer questions and promote the victim of the tech bust.

“It was a contrarian buy, and I’m sure some people wondered what the heck we were doing,” says Wil- liam E. Thonn, executive vice president of Harris Trust and chairman of Harris MyCFO Inc., which does business under the name MyCFO. “We went into it with our eyes open.”

Mr. Thonn says his 121-year-old company went contrary to its typically conservative, Midwestern approach because it reasoned that the four-year-old Redwood City, Calif.-based MyCFO was still perfectly positioned. It has connections to Silicon Valley executives and entrepreneurs throughout the world of high tech.

The beauty of this market, he adds, is that winning an account does not generally require taking it away from a competitor.

“The future is still in tech,” Mr. Thonn says. “It’s going to come back. We’re not talking about buggy whips here.”

Signs of life

After 11 months under his charge, MyCFO is starting to grow again, Mr. Thonn says.

One sign of life is that MyCFO is contemplating opening a branch in Chicago. The company has also diversified its customer base so that it is far more evenly balanced between old-money and new-money clients.

“In terms of real assets, we’re better off,” Mr. Thonn says.

The company’s literature says that it serves 200 families with combined wealth of $16.5 billion.

But company executives won’t specify how many assets it keeps under management. Mr. Thonn allows that its managed assets exceed $1 billion and that some clients pulled out.

MyCFO learned the hard way the lessons of having all its eggs in the tech basket.

“We had clients worth $1 billion, but then they woke up and had nothing left, and they left, or we asked them to leave,” Mr. Thonn says.

Dennis Miller, president of Miller/Russell & Associates Inc. in Phoenix, which has $600 million under management, says he never believed the hype about the wealth services firm, which focused on the affluent even in good times.

“I always thought they were going to struggle,” he says of MyCFO, “but they put some ungodly amount of money into it on the front end, and everyone assumed they were going to own the world.”

But the company, which Netscape co-founder Jim Clark started in 1999, has changed its business plan to one based more on human contact and less on line code.

MyCFO executives veered from their tech strategy because – ironically – people proved cheaper than computers. More recently, it dropped the “.com” from its name.

Because its average customer had more than $100 million in assets, each family needed customized software, which was an expensive proposition.

“You couldn’t build scale,” Mr. Thonn says.

Catering to the superrich

Charlotte Beyer, chief executive of the Institute for Private Investors in New York, says that technology aside, MyCFO still retains a niche and that its pioneering model – based on accounting expertise rather than investments – exerts considerable influence on the wealth management for the superrich.

“Jim Clark’s original vision really spoke to simplicity, clarity and control,” she says. “Nobody had ever captured that essence.”

Though Mr. Thonn will not disclose how much his bank paid for MyCFO, he says the amount was modest because it didn’t pay for any of the false starts in technology.

Still, whether or not Harris can get a return on its investment is an open question.

“Our goal now is to stem the tide and build new relationships,” Mr. Thonn says.

Jeffrey A. Roush, San Rafael, Calif.-based senior managing director of MyCFO, says that Harris acquired his company primarily for its employees. MyCFO completed an assets-only sale, and it extended offers to 75% of the work force. It now has 130 employees.

Attrition was light, though the company’s Los Angeles office withdrew from its own company prior to the sale.