In 1996, Rich Todd’s Wall Street firm went through a merger that shifted the company culture. Disillusioned by the new dynamics, Todd left his position as managing director and cofounded his own investment firm. Innovest Portfolio Solutions LLC was founded with the goal of creating a client-centered, risk-focused, and performance-driven culture. Celebrating its 16th anniversary this year, Todd shares with Profile the highs and lows his Denver-based company has experienced since its inception.
I was driven to start my own firm when my previous firm went through a merger and the culture changed. It was clear to us the firm was motivated to generate commissions, which was contrary to what we believed was right for the client. Three of us left to start our own firm. We felt being independent was right for our culture and for our clients so Innovest was founded in 1996 as a fee-only firm.
I think we have been successful because we set out with purpose. We began by knowing we wanted to provide forward-looking research as we helped clients navigate the market through our portfolio construction and manager strategies. We developed a team of professionals inside Innovest that are complementary so, as we’ve grown and evolved, we brought together people from many different backgrounds. It has allowed us to be better partners with our clients. The third component to our success is being team-based in our approach to consulting. We discuss clients, managers, products, and strategies at investment committee meetings every week and we really do our best work with our clients in a collegial environment.
The biggest challenge in starting our own firm was juggling all the components and managing and growing a business, we were also taking care of our existing clients, doing the investment research, providing client reporting, handling the marketing, trying to run the office, and everything else that goes along with operating a small business. Now that we’ve grown into a larger firm, we can hire employees to help with human-resource matters, to manage the office needs, and to market our firm so we can concentrate on delivering great service and advice to clients. I think the quality of what we deliver today is much better because we are bigger and much more experienced.
One of the greatest lessons we’ve learned in the last 15 years is to focus on the culture of the firm. Early on we got caught up solely reviewing résumés to find the people we wanted to hire as opposed to focusing on character. We’ve made mistakes but we’ve always learned from our mistakes. Our experience tells us if we concentrate on hiring people that are a great fit within our firm, and have the highest integrity, we are going to be a lot more successful.
Looking back, if we could have done anything differently, it would have been to establish a flatter corporate structure from the beginning. Today our team, which includes nine partners and 26 employees, has more buy-in and ownership in the decisions made by the firm. We believe that has enhanced our culture and in hindsight we should have done that earlier rather than later. When analyzing our market, about 60 percent of our business is institutional, which includes retirement and foundation clients, while the remaining is families. Our roots are institutional, but we’ve found it very rewarding to work with high-net-worth clients. That is a market we may have entered earlier had we known.
We continue to offer custom-designed portfolios because we believe that is what our clients need to be more successful. There was a time we thought about setting up models for smaller clients and in the end we didn’t feel it was right for the client, it may have only been right for us. We survey our clients every year and last year on a scale of 5.0, our clients gave us a 4.7. We are proud of that and use the survey as a tool to get better. Last year was our best in history. We currently have approximately 185 clients and manage about $5 billion.