First Manhattan Co., a $20 billion, privately owned wealth manager in New York, is bucking an industry norm and looking for financial advisors who can cherry-pick stocks and deliver excess returns for their clients.
Because brokerages have eliminated trading commissions and thus lowered the cost of building an investment portfolio with individual stocks, customized portfolios designed to boost returns, lower taxes, or cater to a client’s preferences are now in vogue. But some say that the newfound interest in separately managed accounts and direct indexing is overhyped, and that the vast majority of wealth management firms and practices are ill-equipped to build custom portfolios for clients and should instead continue to lean on mutual funds and ETFs.
Zac Wydra, a portfolio manager and the CEO at First Manhattan, says his company is on the shrinking list of wealth managers who are still willing and able to deliver alpha.
“We’ve always led with the portfolio management and the research, and I think that will very much continue to be our ethos and our primary focus,” Wydra told RIA Intel. “However, we have a real sense of urgency about adding value…whether it be better stock pickers, holistic planning, [or] better infrastructure.”
The independent wealth management firm has been building portfolios with individual stocks and bonds for wealthy families and institutions since 1964, and today it believes in the practice as much as ever. First Manhattan now has 120 employees, and only about half are primarily client-facing. The others are in-house researchers who span all market sectors and operations professionals who support the advisors.
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Wydra said that to retain its existing advisors and attract new ones, First Manhattan has been investing in its infrastructure, technology, and services. Advisors are now expected to have thorough financial planning skills, so First Manhattan has hired certified financial planners and other professionals, which allows advisors who manage portfolios to focus on that task and maintain an edge.
Matt Greenberg, founder and president of MRJ Capital, a $168 million RIA, recently joined the firm for that reason. He founded MRJ Capital in 2013 after a stint as a managing director and investment analyst at Iridian Asset Management, where he spent over a decade co-managing institutional large-cap portfolios.
“I am thrilled to join First Manhattan, a premier firm and manager of choice in the wealth management industry,” Greenberg said in a statement. “First Manhattan’s client-focused platform, tremendously talented team, and extensive network make this a perfect fit for my team and our clients. I look forward to leveraging my expertise to help the firm continue its strong and consistent growth trajectory and create value for our clients for years to come.”
First Manhattan has tucked in other advisors and firms in the past and is currently making a concerted effort to find more of them. But the company isn’t interested in becoming a massive organization with thousands of employees. “We’re definitely not just rolling up RIAs for the sake of rolling up RIAs,” Wydra said.
He explained that there are many advantages to keeping the company relatively small. “As the CEO, I still actually interview every single person that we hire,” he said. “Anyone can walk over to my office anytime they want, and I welcome it.”
Wydra added that there are several ongoing discussions with advisors interested in joining First Manhattan in New York, but that he would consider others from outside the New York City area. He said that while he firmly believes there are benefits to having employees back in the office, where they can sit around a table and discuss companies and investment ideas, the company is more flexible about where people work than it used to be. The Covid-19 pandemic proved that good stock picking, among other jobs, can be done remotely.
Michael Thrasher (@Mike_Thrasher) is the editor of RIA Intel and based in New York City.