Money manager a ‘Renaissance guy’
David Steele has just left J.P. Morgan Securities in San Francisco to start an independent wealth management firm, which is not so unusual these days. But he’s not your typical investment adviser.
He is also founder and managing partner of seven San Francisco restaurants including Flour + Water, Central Kitchen and Trick Dog. He owns two (soon to be three) Moxie Yoga & Fitness Studios in the city. He is managing partner of Noise Pop, which promotes music festivals and books the Swedish American Hall music venue. He is cowriting a play called “Vignettes on Love” and co-authoring a book about how does all this in 40 hours per week.
“He’s definitely a kind of Renaissance guy, he has his hands in so many different areas,” said Jim Kleinmann, artistic director of PlayGround, a playwright incubator that is helping get Steele’s play staged in the Bay Area next year. “His attitude is go big or go home.”
Steele worked in fine restaurants throughout high school and college, and opening his own “scratched an itch,” he said. But managing money is his “primary career.” He’s been with brokerage firms for 24 years, the last 18 with J.P. Morgan Securities.
“I’m an entrepreneur,”
Steele said. But he was not an entrepreneur “in the thing that mattered to me most,” he said. That was the genesis of his new firm, One Wealth Advisors.
At J.P. Morgan he led a team of five, including his brother Jonathan, who have all joined his firm. The team was managing about $300 million at J.P. Morgan and advising some $200 million held outside the company. As an independent firm, that would be considered small to mid-size. Steele said he expects the “overwhelming majority” of clients will follow him.
Crucial distinction
The main reason he left was to “create a platform tailored to the clients I want to work with,” he said. He also wanted to be able to tell clients he was working with them as a fiduciary, a distinction that is becoming more important to investors who understand it.
At J.P. Morgan, he was registered as both a broker and an investment adviser, which have different responsibilities when working with clients.
Brokers are salespeople who earn commissions or fees on products they sell. They don’t have to sell the best or cheapest products, as long as they are suitable for the client. They do not have a fiduciary duty to act in the client’s best interests.
Investment advisers always have that fiduciary duty. They typically earn a fee for giving investment advice, but don’t sell commissionbased products.
It’s common these days for brokerage firms to have employees register as both brokers and investment advisers and call them something generic, such as financial advisers. But clients rarely know which hat they are wearing, said Mercer Bullard, an investor advocate and president of Fund Democracy. This confusion is at the heart of a debate raging over the U.S. Department of Labor’s proposal to make all retirement-account advice subject to the fiduciary standard.
“Even though I always felt I abided by a fiduciary standard (at J.P. Morgan), I could not technically tell clients I was their legal fiduciary” because he was also a registered broker, Steele said.
When he left J.P. Morgan on Sept. 4, he gave up his broker’s license.
About 60 to 70 percent of his clients at J.P. Morgan were upper-level executives at startups or medium-size technology companies. “We started focusing on that during the dot-com boom,” he said. “We were successful at diversifying client assets before the bubble burst, thereby protecting their assets and having a book of business that extended to today.”
He opened his new office on Market Street near Twitter and Uber to be in the city’s growing tech hub. His views on tech today “are not black and white. I think there are way too many companies getting funding right now that probably don’t deserve it,” he said. But “I don’t think this is a bubble. I think we are in the epicenter of the next industrial revolution.”
That said, “Anyone who comes to us with a huge concentrated position in a company, we are still going to advise strongly that they diversify.”
His investment philosophy favors “simplicity and low cost over complexity and high cost. We will rarely consider hedge funds or venture capital funds.” His firm requires at least $1 million investable assets but will take clients with less if they have a “wealth event” in their near future, Steele said.
Integrated approach
Like most wealth management firms, his will work with estate lawyers, CPAs and other outside experts to provide a more integrated approach.
So how does Steele, who is 48 and never married, find time to manage money when he also has restaurants, yoga studios and music events?
“I think about my restaurant company (Ne Timeas) as one company. Yoga is one company. Noise Pop is one company. Those are three important clients of mine. I treat them the same way I treat my wealth advisory clients. I’m involved in planning, strategy, cash flow analysis, trying to understand the culture and organization.” But “I don’t have an active operational role.”
He also believes in partnership and collaboration, allowing for “personal scalability.” This is the subject of the book he is writing with organizational development expert Michael Gaines (not the same Michael Gaines who was a chef at Central Kitchen).
Steele started his company with the help of Dynasty Financial Partners, which provides consulting and backoffice services (such as bookkeeping and compliance) for investment advisers who want to break away from large firms. He chose Fidelity to be his custodian, Callan Associates to help with investment selection and Envestnet to provide portfolio management and reporting tools.
“There have been a lot of break-offs” by advisers who want to set their own compensation structure and in some cases clear up the fiduciary confusion, Bullard said.