Many of Rod Westmoreland’s clients have more than 30 times what it costs them to live, so they generally aren’t getting hung up on pandemic-driven market swings or the woes of perpetually low interest rates. They are, however, highly focused on legacy planning.
“With everything that has been going on for the last four or five months, clients are really reflecting on what they want to do with the rest of their lives,” says Westmoreland, whose team of 20 at Merrill Private Wealth Management manages $6 billion across 130 client households, with an average net worth of $50 million.
Speaking with Barron’s Advisor, Westmoreland discusses building a legacy, the challenges of working as a team remotely and the importance of asset allocation.
Q: You started your wealth management career in 1978 and you’ve been with Merrill in Atlanta the entire time. How did you first get into the business?
A: My dad was in the Navy for 30 years, so he convinced me that I should go to college on a Navy ROTC scholarship. After graduating from Georgia Institute of Technology, I spent almost five years in the Navy, three of which were stationed on a destroyer off the East Coast. When it came time to decide where to go next, I chose Atlanta, which I knew from my college days. I took a job with Merrill Lynch as a financial advisor and spent my early years with the firm just dialing people on the phone, trying to get them to be clients. I never dreamed that someday our team would be Barron’s top-ranked private wealth management team in the Southeast.
Q: Did you always know you wanted to be in wealth management?
A: No. Honestly, I was just looking for a job when I got out of the Navy, and Merrill Lynch had an opening. At the time, they were paying people around a thousand dollars a month and the opportunity seemed really great. As it turns out, I love what I do and I love Merrill Lynch, which is why I’m still here 42 years later.
Q: How, if at all, did your Navy training help you in your financial advisory career?
A: Being a Supply Corps officer was a phenomenal experience. On the ship I had 75 or 80 people, all various ages and from different backgrounds, who reported to me. They couldn’t fire me, and I couldn’t fire them, so we had to find a way to work together. That experience was invaluable when I started my career at Merrill Lynch.
Q: You work primarily first- and second-generation wealth creators, or C-suite executives. What are their primary concerns these days?
A: First and foremost, people’s primary concern is the health and safety of their families during this difficult period. Short-term volatility can certainly make some clients anxious; however, the vast majority of the families we work with are focused on longer-term goals and objectives. One blessing of the pandemic is that it has brought a lot of families closer together under one roof. As they reassess values and long-term goals, we find ourselves having more qualitative conversations, such as how they can spend more time together. Just recently, for example, I spoke to a client whose whole family has been gathered together for months due to the pandemic. The whole family hasn’t been together like this since the children were in high school, and they’ve all really enjoyed it. They are going to buy a new vacation home just to have a place where all the family can get together in the future. Another prospective client told us recently that his main concern is making sure that his teenage and college-age children become good stewards of their family’s wealth. He wants to make sure that his children turn out to be responsible, grateful and ambitious individuals, and not just trust fund children. It’s a real concern for many of our clients.
Q: With legacy planning so important, how do you bridge the gap between younger and older clients?
A: By design, our team is comprised of people in their 20s, 30s, 40s, 50s and 60s, which allows us to match up really well with clients of diverse ages. Many wealthy people are very private and are almost embarrassed by their wealth, so they need help becoming comfortable enjoying the success that they have created. Their children often need help learning how to navigate the complexities of their wealth appropriately, as well. We frequently facilitate family meetings with parents and their children to help them work through these kinds of issues.
Our team has eight senior client managers, each of whom works with about 15 to 18 families. This high-touch service model really allows the client managers to get to know, not only the wealth creator themselves, but also their families, thereby creating a great client experience across generations.
Q: You work with a lot of small businesses. How are they faring?
A: We have seen everything. Some of our clients’ businesses have certainly struggled through this period, however, others are surviving, and some are even thriving. A lot of it depends on the industry. For example, we have a client who owns an air conditioning business, which has been unaffected during this period. Air conditioners are still breaking down, and they still need replacing.
Q: What are your thoughts on investing these days?
A: Long-term we are bullish on the U.S. markets, but right now, we’re more focused on ensuring our clients are properly allocated according to their risk profile and time horizon. Historically, around 90% of returns are based on asset allocations while less than 10% of returns are based on what you actually select within those asset classes. We’re also focused on making sure that clients are comfortable with what’s taking place in the market and making sure people have sufficient cash reserves for whatever happens.
Most of our clients with a 10-year time horizon would be happy making inflation plus 5%. Forty years ago, you could put all your money in bonds and cash and make a 7% return, but today it takes a very different asset allocation. Currently, with most money markets and 10-year Treasuries at record lows, people are looking for alternatives.
Q: What is an ideal allocation for your clients, given what’s been happening in the markets?
For our universe of clients who have more than 30 times what it costs them to live, have at least a 10-year time horizon, think on a multigenerational basis and have an appropriate risk tolerance, our current asset allocation to stimulate further conversation with a client would look something like: 70% fully diversified equities; 25% private placements (includes private debt, real estate and private equity) and 5% cash/fixed income. Of course, we make adjustments to suit our clients’ needs and requirements.
Q: Do you look at alternatives?
A: Private placements are ideal for a lot of our qualified clients because of their long-term investment time frame. Our average client has more than $10 million of assets and a 10-year time horizon, so they are really investing for the long-term rather than focusing on what’s going to happen this month or next quarter. This matches well with what the asset class has to offer.
Q: Besides the pandemic, what are your biggest challenges as an advisor these days?
A: Training from a distance is not ideal, but we’re managing, and it gets easier every day. We do a team call every day at 8:30 a.m. and 4:30 p.m. just to catch up on the highlights of what’s going on and to keep everybody as together as possible. We’re a close-knit group, and we miss being together. I consider my colleagues my second family. Many of our team members have worked together for decades, so I miss the personal connectivity of seeing them face to face. The same goes for the clients we work with.
Q: Your wife is a senior client manager on your team. Does that present challenges in the office and at home?
A: My wife, Kelly, has been at Merrill Lynch for 26 years. We were friends before we were partners. Believe it or not, it’s really nice because we totally understand each other and the challenges we face both in and out of the office. When I’ve had a tough day, or vice versa, we know what each other is going through.
Q: How do you relax outside of work?
A: My real joy in life is sharing good food and wine with friends and family. I’ve been collecting wine for over 30 years, and I also love to cook. While the current environment is not conducive to gatherings, I’m still spending my time trying new recipes and perfecting the old ones.
Q: You’ll be 68 in a couple of weeks. Any plans to retire?
A: In November, I will have been at Merrill for 42 years, and I plan to keep working as long as I’m healthy. I love what I do and the relationships I’ve built over the decades. I know I won’t live forever, which is why, out of advocacy for our clients, I’ve intentionally built a multigenerational team of professionals, so we can take care of our clients and their families even after I’m gone.
Q: Thanks, Rod.
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Merrill Private Wealth Management’s Rod Westmoreland on Emphasizing the Long-Term View. - Barron's
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