Some kids go to band camp, sports retreats or scouting trips. For the 16-year-old Tom Anderson, Wall Street Camp was the highlight of his high school years.
Fast forward a couple decades, and Mr. Anderson is pursuing the goal of managing a billion dollars within a few years.
“It’s been a lifelong dream, and something I’ve always wanted to do,” he said of his career as a financial advisor.
Mr. Anderson, a fifth-generation Cedar Rapidian, is the executive director of wealth management and a financial advisor at The Anderson Group at Morgan Stanley. He is spreading his investing philosophy by adding staff around the United States. The Anderson Group at Morgan Stanley manages about $400 million dollars, and that number is growing.
In September, Mr. Anderson was honored to be the only person from Iowa invited to attend Barron’s Top Advisors Summit. Around 300 industry leaders from around the country attended, he said.
Barron’s magazine produces an annual list of the industry’s top 1,000 financial advisors. Mr. Anderson has been honored three out of four times, and wasn’t eligible one year because he was transitioning his practice from Merrill Lynch. He is the only person from Eastern Iowa to ever be honored in the top 1,000.
Jon Bancks, associate vice president of The Anderson Group at Morgan Stanley and resident manager of the Cedar Rapids office, said the list is based on best practices, not simply the amount of assets managed or employees in a company, so it’s more meaningful.
The Top Advisors Summit, in Orlando, Fla., was attended by 58 of the top 100 advisors and select others by invitation. Mr. Anderson said it was a great opportunity to discuss industry trends, future projections and the current political climate.
Mr. Anderson’s take on wealth management is part science, part art.
“Just as there are three primary colors that create every piece of art you’ve ever seen, we use three portfolios,” he said.
His portfolio management strategy includes the same three “buckets” of money for every client: one that is “strategic fixed income,” which aims to grow parallel to inflation; a core portfolio designed to give a 4 percent return over inflation, which he compared to a personal endowment; and one that is more risky, but has a greater possibility for reward.
While different clients use different amounts of the three “colors” in their investments (for example, an older investor might have a greater percentage in the “strategic fixed income” bucket), there are still just three— that’s where the science comes in.
“There’s no ‘maybe’ or ‘sortof’ in how I manage money,” Mr. Anderson said.
A typical financial advisor might manage investments for hundreds of families. If they each have a different strategy, it’s hard for the advisor to come up with the best solution for each, he said. By having just the three portfolios, Mr. Anderson is able to monitor the markets and make the exact same adjustments for all his clients at the exact same time.
In addition to making the portfolios easier to manage, it helps make investing more accessible to his clients, he said.
“Clients have a better understanding of what the different parts of their portfolio are,” Mr. Anderson said.
The idea of splitting investments into different “buckets” isn’t new. Harry Markowitz introduced the idea of Modern Portfolio Theory in a 1952 article, which argued that any investor needs only two portfolios. He won the Nobel Memorial Prize in Economic Sciences for the theory in 1990.
Mr. Anderson studied the theory throughout his education (and at Wall Street Camp), but said not many financial advisors actually implement it.
“What is most surprising to us is that these ideas are unique in their implementation,” he said. In fact, he doesn’t even know of another financial advisor who has a written-out investment philosophy.
Mr. Anderson is hoping to scale his portfolio strategies nationwide, as he franchises his philosophy. He is looking to hire 12 people in the next 12 months, in cities around the U.S. Fred Rose, a financial advisor in The Anderson Group at Morgan Stanley, said this franchising is possible because each member of the office has their own specialties. Mr. Anderson manages the different portfolios while Mr. Rose and Mr. Bancks, a certified financial planner, manage the details and individual client relationships.
Mr. Anderson hopes to expand this model by adding more financial planners to manage relationships in different cities.
Local dedication, global perspective
Mr. Rose, a Coe College graduate, is one of the group’s newest employees, having started as an intern in January 2011. His plan after graduating was to return to his native Chicago, but after working with Mr. Anderson, he considers himself a Cedar Rapidian.
Mr. Anderson said he makes a conscious effort to recruit and retain talented young professionals in the Corridor, and help them get involved. The company works with local colleges, but finding the most talented people can be a great difficulty.
Mr. Rose said that Mr. Anderson is a motivating leader in the office, but his involvement outside of work is his biggest inspiration.
“What we do in here is important, but it’s not nearly as important as what goes on outside in the community,” Mr. Rose said.
Mr. Anderson has spent significant time abroad, and he said that is an important influence in his investing strategy. During his education, Mr. Anderson participated in programs at the London School of Economics and the Cass Business School at City University London, and he spent a full year at ESCP Europe on their Madrid campus. He is fluent in Spanish and has lived and worked in Spain and Mexico.
Mr. Anderson said one of his biggest passions outside of work is reading about economic history.
Mr. Rose said this mix of historic insight and global thinking gives Mr. Anderson a knack for making future projections.