Change of Focus Brings Profitable Business
That time-worn adage: “Change is inevitable,” is certainly an overworked, road-weary cliché. But when applied to economics, those changes might reflect these lyrics instead, “A change is gonna do me good,” popularized by songs credited to Etta James and Elton John. At least, that’s what Dave Barton, President and CEO of Mercer Advisors in Santa Barbara, CA, will tell you.
The Great Recession forced Barton to revamp what was once a successful business model – one that had worked since 1985. Prior to 2010, Mercer Advisors had focused solely on advising dental practices. But when the economy developed a gaping financial cavity, the pain was as real as a flaring root canal.
“It was a tough time for dentists. It was a tough time for us from a client standpoint and it really challenged our
business model,” Barton said. “As a high percentage of all dental care is discretionary, its expense was an obvious one to defer during the Great Recession,” Barton explained. What many high net worth individuals and families felt they couldn’t afford to take out of their budgets, however, was comprehensive financial planning. That’s where Barton and Mercer Advisors turned in 2010 – and made their mark.
“We increased our staff and began delivering comprehensive, customized financial plans through certified financial planners,” Barton said, adding that estate planning, asset protection, tax planning and succession planning were new areas of expertise which Mercer Advisors opted to include. “We wanted to bring a full suite of professional services, under one roof, to clientele.”
Today, Barton proudly points out that altering the business focus to a full suite of financial solutions was admittedly a big risk – but was also one that has paid off. Today Mercer Advisors has more than $5.7 billion in assets under management spread across its 15 offices nationwide, serving 4,200 clients. In the past three years, Mercer Advisors added seven new offices and 1,200 new clients, and has nearly doubled their assets under management since 2008.
Barton described his firm’s approach to investing as a scientific one, utilizing the four-factor model within the
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context of modern portfolio theory and global asset allocation. Rather than chasing returns through stock picking or market timing which more often are not winning strategies, Barton said that Mercer Advisors opts instead for overweighting or tilting their portfolios towards scientifically validated areas of higher expected return, and then systematically filter out stocks that do not meet the firm’s pre-established holding criteria. He is not a believer in trusting gut instincts; he just doesn’t believe advisors are always right in their human analysis.
“If you look at some of the recent surveys, they indicate that 65 percent of active managers fail to meet or exceed their own benchmarks over a one-year period,” Barton said. “And 75 percent fail to meet or exceed their benchmark over a five-year period. That is not a great batting average.” Our scientific approach to investing consistently beats our benchmarks, produces great returns, without risking our clients’ nest eggs.