David Hou
Senior Vice President, Merrill Lynch, Los Angeles
Age: 41
Education: B.A., economics; M.B.A., UCLA
Team Assets: $7 billion
Typical Account: $25 million
Years in Business: 14
Quote: “We don’t use off the shelf anything.”
Mark Sear
Senior Vice President, Merrill Lynch, Los Angeles
Age:
43
Education:
B.A., business, University of thePacific; M.B.A., Santa Clara University
Team Assets:
$7 billion
Typical Account:
$25 million
Years in Business:
14
Quote:
“Our goal is to get clients the best guys in alternative investments, the best guys in commodities and best guys in all the other areas.”
Not surprisingly customer satisfaction is a high priority for Merrill Lynch senior vice presidents David Hou and Mark Sear, who work as partners.
Their wealth advising team has a roster of over 250 clients including some of the region’s wealthiest individuals, six of whom are billionaires making an appearance on Forbes magazine’s list of the 400 richest Americans.
Calls to the group’s office are picked up no later than the second ring. Voicemail is a no-no during market hours.
And when it comes to advising clients, they structure plans specifically tailored to the needs and desires of each person, relying on a cadre of talented, outside investment managers.
“Our goal is to get clients the best guys in alternative investments, the best guys in commodities and best guys in all the other areas,” Hou said.
But their desire to cater to their multimillionaire and billionaire clients has its limits, such as several years ago when a client wanted them to invest his entire $25 million portfolio with the group in the technology sector. “He is now an ex-client,” Hou said. “There are times you can’t be all things to all people.”
Putting a client’s entire portfolio in a single, although booming, sector of the market was too risky and contrary to the group’s overall strategy. The goal is to deliver positive rates of return with diversified investments over a three- to five-year time horizon. It’s a goal they have continually met for clients.
“If we started to include people who don’t subscribe to this philosophy,” Sear, 43, said, “it takes away from our other clients.”
Currently, the group is overweight in large caps and underweight in small and mid caps, given the high multiples smaller companies are commanding. They also have about 5 percent of assets in international real estate, even as they shun domestic real estate investment trusts as too expensive. Another favorite current investment: “anything related to energy.”
Their diversified investment strategy, like that of other highly rated analysts, paid off during the tech bust of 2000 to 2002 when the Standard & Poor’s 500 was on its way to losing nearly half its value. Their client roster, along with their relationship with existing clients, actually expanded. While the group’s returns were modest, the figures were spectacular in comparison to the negative returns being delivered by others.
“We grew because our clients were saying, ‘I’m not doing that badly,'” Hou, said.
Over the past 10 years the total amount managed by the group has grown from $1 billion to $7 billion. “The problem today is that there is too much money out there,” Sear said. “Access to the best money managers is really tough and the guys who have the best returns are usually the hardest to get.”
The group is able to provide this access to their clients based on the influence that comes with having a long-term focus and the relationships they have established over the course of their 14 years in the business.
Hou and Sear started their group with partner Alan Zafran at Goldman Sachs in the early 1990s. In 1997 the group moved to Merrill Lynch Private Banking and Investment Group.
Sear, who received his M.B.A. from Santa Clara University, gravitated to a career in wealth management because it combined his “fascination with financial markets” and offered the opportunity to engage people. “Having personal relationships was important to me,” he said.
As a graduate student at UCLA’s Anderson School of Management, Hou focused on other areas of the financial services industry such as investment banking, but decided to give wealth management a try at the suggestion of a classmate.
He initially hesitated about pursing a career in private banking because, “Who in the world would give me $10 million to manage?”
Today clients give him a lot more than $10 million. The firm’s largest individual client portfolio totals $600 million and the average account size is $25 million.
The majority of the group’s clients are based in either northern or southern California, but clients are also based in Nevada, Arizona and Colorado. Much of the wealth managed by the group derives from the sale of a business.
