David Smith is the chief investment officer for Rockland Trust’s investment management group. He is responsible for setting investment policy, performing research and managing client portfolios. Prior to joining Rockland Trust, David was a founding partner, senior vice president and senior portfolio manager of Mellon Growth Advisors (MGA), a subsidiary of Mellon Financial Corp. David has worked in the investment management field since 1990, and held positions at State Street Global Advisors and The Tuckerman Group.
PBN: Rockland Trust’s Investment Management Group recently exceeded $2 billion in assets for its clients. Why is thisa milestone?
SMITH: Rockland Trust was started in 1907. It took 100 years for the bank to accumulate $1 billion in client assets under administration in its investment management group. We were able to grow the next $1 billion of assets in just 5 years. We believe this milestone is additional evidence that our world-class investment management capabilities combined with the comprehensive, personal service we deliver are increasingly being recognized as differentiated in the markets that we serve.
PBN: What trends are IMG customers cashing in on? Stocks? 401(K)s? Annuities? Or others?
SMITH: We are believers in modern portfolio theory, which is predicated on the idea that diversity is the key ingredient to long term success. Our clients are broadly exposed to a variety of asset classes. For equity or stock investments, we diversify by buying different sized companies, as well as companies domiciled in the U.S., the developed world outside of the U.S., emerging markets (such as China and Brazil) and even frontier countries such as those throughout Africa. We diversify by geography, credit risk (government, investment grade corporate and below investment grade corporate) and structure, meaning floating or fixed-rate debt.
PBN: How is your approach different than that other wealth management firms, or is it?
SMITH: My experience is that no two wealth management firms practice exactly the same way. However, the industry typically separates firms into one of two broad categories: proprietary separate account managers or open platform providers. Proprietary managers typically believe their value is in their ability to pick stocks for a client in a customized way to meet the client’s goals and constraints. The stock picks are often augmented with some percentage of exposure to laddered treasury or agency bonds to reduce risk. Open platform managers are “managers of managers” because they view their value add as designing broad asset allocations and selecting managers they expect to out-perform for each asset class.
Our approach is a hybrid of the two. We have a core U.S. large cap and core U.S. fixed income capabilities that are very strong performers on their own. However, we believe it is important to diversify beyond our two core competencies and we select “best of breed” third-party managers in asset classes where we do not have competency. The combination or hybrid approach has worked very well for our clients.
PBN: Are you finding that the amount of clients is related to how many people can afford to participate in such programs because of annual incomes with little leeway for anything else?
SMITH: While the recent economic environment has put financial pressure on many people, the reality is that changes in our society have moved the burden of preparing for our financial futures to the shoulders of individuals and away from corporations. In many cases individuals come to the conclusion that they do not have the time or expertise to take on this responsibility alone and they look for help. At Rockland Trust, our goal is to become a trusted advisor to our clients and help them with all of their financial affairs.
PBN: You have 60 seconds to present your best advice on wealth management. What is it?
SMITH: Do not let emotion get in the way of making sound, logical financial decisions. Our instincts can often work against us in making investment decisions. For example, most people I interacted with in 2009 were very leery about maintaining or making new investments in stocks. The headlines were ugly and the stock market had a very significant correction. Had people listened to their instincts, they would likely have missed the more than 100 percent increase in the stock market’s recovery between then and now.