When Robert Balentine opened Balentine two years ago with 10 capitally invested partners, he knew as much about what he wanted as he did about what he didn’t want in an independent investment firm. He didn’t want a corporate agenda driving client goals, but wanted an employee-ownership model to incentivize staff to do what’s best for each client. He didn’t want a commission-based revenue structure, but rather, preferred to base the business on fees tied to growth. And he didn’t want every employee to have the same MBA background and job experience because that, he felt, would always lead to the same answers. To drive true creative thinking, he wanted to build a firm with a wide berth of cultural and experiential diversity. To date, all three strategies are paying off.
Balentine is actually the third iteration of the company. He and his father, Bob, started their own firm, Balentine & Company, in February 1987. When the firm was sold to Wilmington Trust in 2002, it was the largest privately owned investment management firm in the southeast. Balentine and his employees served as Wilmington Trust’s investment strategy team; Balentine became CEO of Wilmington Trust Investment Management. Over time, he felt that the reality of working in a large publicly traded company had strayed too far from his dream, so in July 2009, he left, and opened his company’s doors the following January. Today, Balentine’s clients include entrepreneurs, endowments, foundations, and pension funds. The firm already manages more than $1 billion in assets and grows almost entirely through client referrals. “What’s unique about our model,” Balentine says, “is that the only revenue we make is a fee based on a percentage of the client’s assets, where the percentage decreases as the size of the relationship increases and most importantly, implementation costs remain separate from the fee we charge to manage a client’s portfolio. This model fuels our incentive to grow clients’ money, and if we do that successfully, we’re rewarded by their loyalty and their willingness to refer others.”
Making the best decisions, Balentine feels, requires knowledge of other markets and industries, and that’s where the company’s diversity gives them a competitive advantage. More than one-third of Balentine’s staff either grew up, worked, or was educated abroad and more than half are women. In addition, many of them come from industries outside of financial services. “We believe that diverse backgrounds and experiences help us avoid ‘group think,’” explains Tonia Edwards, PhD, communications and marketing manager, who taught at the Univérsité de Paris X before coming to Balentine & Co. and has a doctorate degree in film and media. “We feel group think led to a lot of the problems of 2008. Conversely, diversity allows us to bring in outside innovation and look at investments in new ways.”
The team feels the management of risk is more important than the management of return and diversity helps with that, as well. Balentine uses a model called STEEP to manage risk, looking at sociological, technological, economic, environmental, and political trends and issues such as the Middle East and the European debt crises.
Diversity also allows people to “see where the ball is going, not where it’s been,” adds Joe Stallings, director of communications, who came to Balentine from Electronic Arts, a software entertainment company. “I spent three years in British Columbia, which has a publicly funded health-care program. Living and breathing it gave me a perspective on the health-care debate that someone who hasn’t lived it can’t provide.”
Balentine calls their independent business model the best of both the consultative and money- manager styles. “A traditional consultant provides a neutral, objective, and transparent approach to the management of a client’s portfolio. However, the flaw in that model is consultants often only meet with clients quarterly, sometimes missing critical opportunities throughout the year to manage both growth and risk,” he says. “In addition, they have no responsibility for the outcome. On the other hand, a money manager can operate with discretion, making changes to a portfolio as necessary, and is responsible for results. Our model, the outsourced chief investment officer, combines the neutrality of the former with the responsibility of the latter.”
To keep a fresh perspective, the company will continue to seek out the best and brightest, Balentine says. “We’re already strong in investment knowledge. As the firm grows, we’ll hire additional relationship managers—people who are in day-to-day contact with clients—to further strengthen our already robust client-service model. We have a centralized investment process, so each of our clients get the best of our thinking, and a partner is assigned to each client. We are always looking for ways to improve that
process.”
