For the past six years, Henry Zabarsky, now an independent LPL advisor who is forging relationships with banks, has been catering to an orthodox Jewish community in Brooklyn, N.Y. While he never intended to work with this group, he turns out to be a perfect fit.
Borough Park is a center of the rapidly expanding community of Hasidic Jews, an insular sect founded in the 18th century that focuses on Jewish mysticism. While Zabarsky is not Hasidic, he is an observant Jew born of Russian émigrés to Far Rockaway in nearby Queens, N.Y. "My parents sent me to a Yeshiva, an orthodox school, for a better education and there I learned about Judaism and to speak Hebrew," he says. "Through that education I learned the mind-set, language and culture that would help me out in my future career." Even better, Zabarsky speaks Russian, which helps him with many community members who are recent immigrants from the Eastern bloc.
Zabarsky now works with 220 households, which include some older Italians and an increasing number of Bangladeshi families who have moved into the area. But his clients are primarily Jewish, some who survived the Holocaust. "In the summer when the men are wearing short-sleeved shirts you can see the number tattooed on their arms," he says.
This can be an issue when it comes to investing in German companies, says Zabarsky. He recently took a shine to Fresenius, a German company that makes dialysis machines, for which the U.S. government pays through Medicare. "I let my clients know, especially the Holocaust survivors, that this is a German company," he says. "Many of them had their whole families wiped out. But Fresenius' service is vital and I'm sure some members of the community use it." Client reaction varies: Some wouldn't even consider it, but others say, 'If you think this is the correct place to invest, let's do it.'"
Generally, however, Zabarsky's Hasidic clients are as conservative financially as they are religiously. They typically don't like investments that fluctuate—not even relatively sedate variable products such as structured CDs. So bonds are a big part of Zabarsky's product mix. "I don't get paid much on bonds, but they're right for clients, who then bring more money to me," he says.
It's not a wealthy community nor a financially sophisticated one, he says. Hasids only study religious material and so may be poorly prepared for secular affairs. Often clients will come in wanting to invest $10,000 from a son's recent bar mitzvah, or rite of manhood. "We sit down and [the client] doesn't know what to do," Zabarsky says. "I say that I realize the next time the money will be spent is in five or six years when his son marries and needs to buy a house. People have a lot of children and orthodox life is very expensive—Kosher food is significantly more expensive and they have to pay for the Yeshiva, so there isn't that much money left over."
A situation that requires more planning is when a client wants to take an Aliyah, or pilgrimage to Israel, for religious study. "That might require a couple of hundred thousand dollars because people need an income to live on, so I'll do a combination of fixed- income products, with 60% in a laddered bond portfolio, 30% in alternatives such as a mutual funds invested in commodities or foreign currencies and 10% in a growth fund if possible," he says. "And I always try to introduce equities as one slice of the asset allocation." Zabarsky meets with his clients on a quarterly basis and is sure to ask for referrals each time. That has paid off in that referrals account for 35% of his new business.
Zabarsky didn't start out in Borough Park. He started as a trainee at Morgan Stanley Dean Witter in 1996 and over four years rose to assistant branch manager. He was working at the headquarters in the World Trade Center on Sept. 11, 2001 when his life changed. "I had to walk down 73 flights of stairs," he says. "I saw suicides; it left an indelible imprint." Zabarsky was moved to different offices, and in 2003 was recruited to JP Morgan Chase for a deal that sounded much better than it turned out to be.
In 2004, a recruiter from Washington Mutual called, looking for someone Jewish to work in Brooklyn's Borough Park at a branch of what was then Dime Savings Bank. It was a long-standing local powerhouse, even with 15 competitors in a 10-block radius. The first felicitous event that occurred was that when Zabarsky came in to meet the local branch manager, he turned out to be an old acquaintance. The two men realized they lived in the same neighborhood and basically picked up where they'd left off.
Zabarsky inherited a $40 million book and took over the securities business at the $400 million branch. But he didn't just sit back and wait for referrals, he called on people to open accounts, and by his second year at the bank, was already WaMu's third-best producer in the Northeast. "I had a lot of flexibility, and management allowed me to do what I wanted, which planted the seeds of going independent," he says. Zabarsky's investing acumen protected his WaMu clients from their bank's subsequent demise: He sold his bank stocks to buy gold in 2006, he says. "I realized back then that the housing market was deteriorating."
When WaMu was absorbed by JP Morgan Chase in September 2008, Zabarsky was again unhappy. "One-third of my business is in stocks and Chase doesn't compensate you for that," he says. "Plus there were no referrals from the bank and there's a haircut on variable annuities," which many of Zabarsky's clients like because of their guarantees.
Wanting to stay in Borough Park, in June 2009, the advisor moved again, to Astoria Federal Credit Union, which is where he first became affiliated with LPL. He considered going independent, but then the Bernie Madoff scandal broke and it didn't seem like the best time. Zabarsky had attended a few of Madoff's parties through a friend who lost his entire savings to the now-notorious swindler. Most of Madoff's victims were conservative Jews on Long Island, N.Y., and in Florida, not from the Hasidic community. But scams happen with alarming frequency among the financially naÃ¯ve ultra-orthodox, he says. "They happen all the time because people here receive a theological education, not a secular one."
Going It Alone
After a year at Astoria Federal, LPL bought out the brokerage division, turning the dual-employee program into a managed program. They then consolidated it with several other local programs and sold it to Financial Resources Group. At 39, Zabarsky had had enough of moving around so last August, instead of going through yet another merger, he joined LPL's independent platform. That doesn't mean he's abandoning banks. "Sovereign Bank and Astoria Federal Credit Union are both in the neighborhood and use LPL, so their clients are already familiar with the name, and that helps when I'm prospecting," Zabarsky says.
Among the 15 different banks in the neighborhood are Citibank, TD Bank (which recently ditched its brokerage program), New York Community Bank and Valley National. Zabarsky has already set up meetings with some of the smaller ones to talk about offering them an extra revenue stream. After seven years in the community, they already share many clients.
"Business is doing really well, though, so I'm not desperate," he says. The biggest buzz for Zabarsky is helping out a community that doesn't have the kind of education you need to navigate the murky world of investing. "One great thing I enjoy is feeling like I'm doing a Mitzvah," Zabarsky says. "My father was a doctor and his joy was curing people. I think of myself as a financial doctor."
Name: Henry Zabarsky
2010 production: $300,000
2009 production: $300,000 (Zabarsky notes both 2009 and 2010 were transition years; he produced $500,000 in 2008 and is on track to beat that next year)
2010 AUM: $23 million
2009 AUM: $75 million
Product mix: 30% equities, 30% annuities, 30% mutual funds, 10% insurance.
No. of clients: 220
No. of branches: Zabarsky is working on relationships with two community banks.