No. 8:Kevin Scott
Firm: Merrill Lynch
AUM: $1.70 billion in assets
Location: Los Angeles
Note: This profile is part of a special series devoted to On Wall Street’s Top 40 Under 40 ranking for 2012. Every day we take a look at an advisor who made the list to find out the secrets of their success.
As he makes his third appearance on this list of young, trendy investing experts, Kevin Scott's management philosophy sounds refreshingly old-fashioned.
While many advisors drop lines about post-modern portfolio theory, derivatives, managed money and hedge funds, Scott espouses Warren Buffet, Phil Fisher and Benjamin Graham's 1949 book The Intelligent Investor about determining fair stock valuations. The bread and butter of his business is betting on companies' ability to grow.
"We don't think of stocks as much as we try to think about buying businesses," Scott says. "I never thought about it that way, but I think maybe I do have an old-fashioned outlook for my being 39-years young."
Blame it on his partner and father, 45-year industry veteran Bill Scott, who is the manager of the Los Angeles-based family practice office. Kevin joined his father after working in a technology sales position following college.
"We're individual stock guys and maybe that is somewhat informed by my dad," Kevin Scott says. "He started when managed money didn't exist, mutual funds didn't exist."
Of course the father-son team now incorporates mutual funds as well as a number of other products such as bonds and real estate investment trusts to help build out their client's portfolios. Like many advisors, Scott and his father have leaned more on fixed income since 2008 (although, true to their roots, they supplement those positions with dividend income from stocks).
"[Fixed income] serves as a diversifier and hopefully a safe part of the portfolio such that if the markets do really correct dramatically like they did in 2008, there should be a part of the portfolio that's a safe harbor," Scott explains. "We have gravitated a little bit more toward a role of high quality dividends or companies that pay a healthy 3% to 4% dividends as a way to replace some of that income."
Scott sees himself wearing two hats. The first is his investing acumen. While the second is more personal; his ability to show empathy as well as his listening skills and ability to relate with clients .
"You need to be an empathetic, good listener, good question-asker and almost like an investigator to really, really understand what your client's concerns are and what their worries are," Scott says.
One reason that the duo has been so successful at that is their ability to parlay their father-son dynamic. Scott admits that he was initially cautious about going into business with his father. But the two now pool everything together and the relationship has evolved into a family perspective approach that is a strong advantage for dealing with multi-generational families.
"Our clients are multi-generational and we're a multi-generational team," Scott says. "So during meetings it's been very successful. Maybe I'm able to see the world a little bit better through the kids' eyes and my father sees the world a little better though the parents' eyes."
Having strong relationships with a manageable number of clients, coupled with the help of their two client associates, will help the business last through whatever market innovations the future holds, Scott predicts.
"Sustaining that skill set will provide some resiliency to our practice as technology in this industry and markets evolve," Scott says.