Company Profiles

EXCLUSIVE INTERVIEW: Clients Must Drop Investment Assumptions To Protect Wealth - Presidio Group

Tom Burroughes Group Editor in San Francisco 19 October 2012

EXCLUSIVE INTERVIEW: Clients Must Drop Investment Assumptions To Protect Wealth - Presidio Group

Wealthy individuals and their advisors must realize that volatility is not the same as risk and accept that market gyrations can be a price worth paying if it means avoiding permanent losses, says Presidio Group.

Wealthy individuals and their advisors must realize that volatility is not the same as risk and accept that some market gyrations are a price worth paying if it means avoiding permanent losses in the long run, according to Presidio Group.

It is a mistake for advisors – or their clients – to confuse volatility with risk, although this is a common assumption, Mark Palmer, managing director and head of wealth advisory at Presidio Group, told this publication during an interview at his offices in San Francisco.

“We have done a poor job as an industry in explaining to people what risk is – it is the risk of permanent loss of capital. People may have to take on more volatility to reduce risk of such a permanent loss,” Palmer, who has been at the firm for two years, said.

He also noted that there is a lot that wealth managers can learn from the endowment and retirement sectors in terms of how to think about long-term asset allocation, risk management and wealth structuring.

“There is no reason that a large family shouldn’t get the same approach that an endowment gets, albeit tailored to their own needs,” Palmer continued.

He warmed to the theme that the long-term perspective of clients in family offices and similar institutions has a great deal in common – with some caveats – with the retirement fund sector, for example. There is a need for more sharing of views and insights between such organizations, he said.


Palmer spoke as Presidio, founded in 1997, has been developing its work with endowments. In April this year, the firm launched an investment advisory service for endowments and foundations, led by Peter Stein, who joined the firm from Pacific Alternative Asset Management Company. According to the most recent figures, Presidio Group has around $4 billion in client assets, and runs investment banking, private equity, and capital advisory units through its offices in San Francisco, CA; Dallas, TX; and Chicago, IL. Palmer comes with plenty of experience; in his previous career, he has worked at firms such as Charles Schwab, focusing on its relationships within the RIA space.

The move into the endowment space is an example of how the kind of issues that touch ultra high net worth individuals apply to such institutions as well, Palmer said.

“Historically, we started on the entrepreneur segment, on what we call 'active wealth builders'.” Clients are typically $10 million or above in terms of investable wealth, he said.

Palmer heads up the capital advisors group at the firm – which accounts for about two-thirds of Presidio’s revenues; the other two segments are private equity and mergers and acquisitions, he said.

High conviction

In a crowded market, such firms have to work hard to put that “unique selling point” up where it is visible. When asked what the USP of Presidio Group is, Palmer cited the example of the firm’s strong, high-conviction investment management approach. Another USP is the firm’s transparency on issues such as costs and accountability, Palmer said.

“Transparency is almost a buzzword. It is now easier for people to get information and understand what is going on,” he said.

“One important question is how trust is evolving. We should be holding ourselves accountable and give clients tools to hold you accountable,” he said.

“We help the clients answer the question as to what their real needs are,” he continued. “To be effectively trusted, that means you can tell them [clients] things they might not always want to hear. Good advice is most needed at the top and the bottom of the cycle,” Palmer said.

Avoiding conflicts

As a standalone business – Presidio Group is not part of a large bank – the firm is able to demonstrate a lack of conflict of interest to clients, which is very important in the wake of the recent financial turmoil, he said.

“We are going to have problems with large organizations that insist on being manufacturers of products and distributors of product trying to put on the hat of also being advisors. The turmoil inside those organizations causes a lot of the concerns that lead to regulations. That does not put much attention on the value that clients should be getting. The fiduciary responsibility is to their shareholders and that will continue to be an issue,” he said.

 “We will continue to see a flow of the advisors moving from that fractured model to a model were they can give best advice,” Palmer added.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes