THE CHRONICLES OF KIRTLAND FINANCIAL MANAGEMENT, INC. (KFM),
A REGISTERED INVESTMENT ADVISER
The Era before KFM
As a child, Mary Susan Duncan’s parents expected her to respect and genuinely interact with all of their friends; as a result, she has always related well to people from all walks of life. Perhaps her interest in business matters is rooted in the conversations she had with one of her father’s best friends, Tommy Thompson, a barber who became a “millionaire” by working hard and saving all he could and by being a great listener and investor; he was also known for encouraging others all the time. Furthermore, Mary probably developed her “bent” for working in the business world by observing the example of her mother living out the description of the noble woman described in Proverbs 31.
During her husband’s military career, Mary was primarily a homemaker; but she also found time to build her professional resume and polish her skills for the future, as well as significantly supplement the family’s income by teaching college-level business courses in nearly every place she found herself compliments of the U. S. Army. For example, she taught at Northern Virginia Community College and operated a branch office of the Pentagon Education Center in the Forrestal Building in downtown Washington, D.C. at the age of 23. From 1975 to 1978, Mary taught at Our Lady of the Lake University in San Antonio, TX while Sister Rose Anelle, Chairman of the Business Department, arranged for a baby-sitter to care for Mary's newborn daughter, Adrienne, in the office next to where Mary was teaching. From 1979 to 1982, Mary taught for the University of Maryland’s Overseas Division in Brussels, Belgium; during this period she gave birth in 1980 to her second child, daughter Meredith, when she was 31 years old. Mary taught for Christopher Newport College in Newport News, VA from 1983 to 1985; then, while living in Merritt Island, FL from 1986 to 1988, Mary had her third child, Bill “Jr.,” at the age of 37 and also taught at the north campus of Brevard Community College in nearby Titusville, FL.
Beginning in 1992, after her husband retired from the military, Mary worked as an adjunct professor at the Kendall Campus of Miami-Dade Community College during 1992 and 1993. During the summer of 1994, Mary accepted the offer of her friend Sam Townsend to work for him as an “investment adviser” in his Townsend Advisory Group (TAG). While working in Sam’s office, Mary was afforded the opportunity to grow in her knowledge of all things related to portfolio management and necessary credentials for financial advisers; in May 1996, she passed the CFP® exam and received her certification as a Certified Financial Planner®. She also made contacts and built a solid reputation in the local business community.
Along the path to starting her own business, Mary was offered a position at Marsengill Financial Services, Inc to install a new asset management division in what had historically been an “all-insurance” business. Mary began to work at MFS in Miami’s Coconut Grove Bank with a friend and highly respected financial professional Michael Marsengill, Sr. Because they needed a broker/dealer to conduct business, they aligned themselves with Raymond James Financial Services and in September, Mary passed her Series 7 exam and earned her license as a General Securities Representative. Mike and Mary judged Raymond James to be the “best fit” for them; primarily because it offered an excellent fee-based platform well suited for the independent Registered Investment Adviser business model.
In April 1999 Mary decided to take the "leap" of starting her own RIA firm. After notifying her clients of the foregoing events, Mary agreed to rent vacant space and equipment from Barry Diamond, another Raymond James associate, at his Harrison Group business location in Coral Gables, Florida. Mary and Barry hired her long time friend, Karen Risech, to work as an administrative assistant for both of them. Finally, Mary passed her Series 24 exam for her license as a General Securities Principal that allowed her to operate her own branch office of Raymond James.
The Birth of KFM
On May 5, 1999, Kirtland Financial Management, Inc. opened for business in Suite 210 at 201 Sevilla Avenue, Coral Gables, FL 33134. KFM and The Harrison Group shared a common entrance, a waiting area just inside the entrance, and another area where a receptionist could work. Inside the shared areas, Mary and Barry had separate business offices across from each other and Karen Risech provided administrative support for both advisers.
In this first year of operation, Mary’s challenge was to continue “adding value” for her clients as their financial adviser, and, at the same time, discover and implement the regulations and procedures necessary to operate a business. Although Mary and Barry had separate businesses, they “backed up” each other when needed and afforded their respective businesses an element of depth and continuity not previously possible. One of Mary’s first clients, Doug Williams, the CEO of the Doug Williams Group (a consulting firm), helped Mary develop her Client Satisfaction Survey. This served as an effective tool for her to assess client satisfaction with KFM. He also assisted in the preparation of written materials to explain the KFM mission and distinctives to existing and potential clients. Additionally, Doug helped Mary begin the process of developing the tools she would need to manage her current and future workforce; e.g., job descriptions, performance requirements, all human resource functions, etc.
In the spring of 1999, Mary attended the Raymond James National Convention in Orlando, Florida at the Coronado Springs Hotel in order to network with colleagues and vendors and to earn required continuing education credits.
For the fiscal year ending December 30, 1999, KFM had $24 million in assets under management, and 35 clients.
Year 2000
In March, a bear market that would last until October 2002 began with the Dow Jones average near 12,000 points and the NASDAQ average near 5,000 points. Although the Dow averages dropped approximately 37.5% and the NASDAQ dropped about 80% over the next two and a half years, the bear market was actually “good” for Mary’s budding business. For example, so many investors were left by their brokers to “fend for themselves” during this period, that Mary’s proactive style of asset management was just what they wanted and needed.
In the spring, Mary attended the Raymond James National Convention in Atlanta, Georgia at the Marriott Marquis Hotel. At this conference Mary was inspired to create a $1,000 college scholarship to be presented each year at the graduation ceremony for Westminster Christian High School (WCS). She stipulated that the recipient was to exhibit Christian character and testimony, earn a credible grade point average, take some of the available business/economics courses at WCS, and demonstrate an interest in pursuing a business degree and career. In May, the initial award of the Kirtland Financial Management Scholarship was made to Sam Boldenow.
Year 2001
In the spring, Mary attended the Raymond James National Convention in Las Vegas, Nevada at the Caesar’s Palace Hotel. Also in the spring, Mary accepted the invitation of Hartford Financial Services, “sponsor” the Wellington Group mutual funds, in Boston, Massachusetts; over a two-day period she completed her “due diligence” requirement with the money managers being used in the portfolios of KFM clients.
In May, the second award of the Kirtland Financial Management Scholarship was made to David Jimenez. On July 8th Mary passed her Series 51 exam for her Municipal Securities Limited Principal license. When terrorists brought down the World Trade Center buildings on September 11th, the bear market that began the previous year was driven even lower. Mary’s reaction was to make telephone calls to all of her clients the next day to reassure them that when the markets reopened she would make moves necessary to help preserve their assets; further, she encouraged her clients (and fellow churchgoers at the request of her pastor) to not panic. She made her comments after reviewing the history of the markets and concluding that economic problems like recessions and inflation has longer lasting impact on the market than did exogenous events such as war and acts of terrorism. In addition, since she already had made “defensive” moves in the accounts of her clients due to the on-going bear market she reassured them that they were not in “double jeopardy” as a result of 9/11.
Year 2002
In May, the third award of the Kirtland Financial Management Scholarship was made to Frank Feito. The bear market, which began in March 2002, reached its lowest point in October; the Dow average “bottomed out” at close to 7,500 points and NASDAQ average had declined to near 1,000 points. In this pessimistic environment, KFM continued to gain clients and stature due to Mary’s distinctive approach to asset management. That is, a reputation for giving her clients the attention they wanted and “deserved” attracted many new clients who were otherwise feeling detached from their broker.
At the end of the calendar year, KFM had $31.3 million under management.
Year 2003
Over the years, Mary realized that she had often advised some of her clients that they needed life insurance as part of their financial plan. As a result she decided that she should earn her life insurance license and did so on March 12th.
In May, the fourth award of the Kirtland Financial Management Scholarship was made to Eric Valdes. In November, KFM and The Harrison Group acquired additional office space when a law firm vacated its adjacent office space and moved out of the building. A remodeling plan was undertaken to give Mary a new, bigger office of her own; to retain her old office for use as she deemed fit; and, to give her the use of a much needed, new conference room.
In the fall, Mary attended the Raymond James National Convention in Washington, D.C. at the Marriott Wardman Park Hotel.
At the end of the calendar year, KFM had $41.1 million under management.
Year 2004
In April, Viviana Server-Medina was hired. “Viv” came to KFM and The Harrison Group highly recommended by William Dalziel, her former employer and friend of the Kirtland family. Viv came on board with her BBA degree from the University of Miami and was working on her MBA at Florida International University. She quickly assumed duties as Operations Manager and her many improvements to standard operating procedures relieved Mary of many burdensome tasks and allowed her to focus on marketing and portfolio management.
In May, the fifth award of the Kirtland Financial Management Scholarship was made to Tara Rock. In the fall, Mary attended the Raymond James National Convention in Salt Lake City, Utah at the Grand American Hotel.
At the end of the calendar year, KFM had $51.7 million under management.
Year 2005
As KFM grew, it became apparent that the research Mary had been reading was true; i.e., that when a business had $50 million under management, a second financial adviser was warranted. Mary was feeling overwhelmed by the demands of the CEO and branch manager positions, as well as with conducting client meetings and doing financial plans, etc. Fortunately, she did not have to look very far for the perfect hire. Brett Hixon was hired June 13th and came to KFM with great credentials; e.g., a BA in Economics from Columbia University, a Series 6 license for mutual funds, a strong background in annuities and health insurance (which Mary felt she did not have), an internship at Smith Barney Financial Services in Manhattan, a year of experience as an internal wholesaler at Jackson National Life, and two-thirds of the way towards earning his CFP® designation, . . . and, as her son in-law, he demonstrated an interest in an equity position with KFM in the future. With Brett on board, KFM was immediately able to give better service to clients.
In July, Brett earned a Series 7 license as a General Securities Representative and a Series 6 license as a Registered Investment Advisor Representative. Also in July, Mary and Brett attended the Raymond James National Convention in Chicago, Illinois at the Chicago Hilton Hotel. For Brett, it was a golden opportunity to get a feel for the “headquarters,” early in his career.
In September, Brett earned a Life, Health, and Variable Annuity License for the State of Florida. During the year, Mary and Brett enhanced the KFM image in the community as follows: on October 16th, Mary was featured in The Miami Herald, Money Section; and, Brett was invited to join the Coral Gables Rotary Club in December.
At the end of the year Mary observed that it had been a “sideways” market since 2000.
At the end of the calendar year, KFM had $65.4 million under management.
Year 2006
In late February, Mary attended the Raymond James National Convention in Las Vegas, Nevada at the Caesar’s Palace Hotel. At this convention, Mary was recognized, for the first time, as a member of the RJA Executive Council, a select group of $400,000+ annual producers.
On May 19th, the seventh (and final) award of the Kirtland Financial Management Scholarship was made to Crystal Van Orsdel. Westminster Christian School asked Brett to present the award after making a few comments; heretofore, a school administrator had always presented the award.
During the year, Mary was asked to serve in two important positions in the community. First, her church needed her to serve on its Finance Committee which was dealing with declining membership and giving due to a vacancy in the Senior Pastor position; several of her recommendations were quickly implemented. Second, the Board of Directors of a local School asked her to serve on its Foundation Board; in this position she worked with other board members to identify sources of funding for special projects and needs of the school (other than the school’s Capital Campaign and Annual Fund Drives) and, thereby, helped to augment the efforts of the school’s Development Director. During the year, Brett completed three more courses needed to achieve the CFP® designation; i.e., Fundamentals of Income Taxation, Fundamentals of Estate Planning, and Planning for Retirement Needs. The year was earmarked successful introduction of improved procedures and systems designed to increase the “value added” by KFM to its clients. For example, Viviana completely revised the client filing system so that needed information could be retrieved more efficiently.
At the end of the calendar year, KFM had $82.5 million under management.
Year 2007
Mary decided in January to suspend giving the Kirtland Financial Management Scholarship (at the Westminster Christian School high school graduation ceremony. Her decision was based on her desire to contribute a greater amount to the school’s Development Fund. In February, Brett passed the last of five sub-exams leading to the two-day Certified Financial Planner® (CFP®) comprehensive exam scheduled for July.
In March, Mary attended the Raymond James National Convention in San Diego, California at the Hyatt Manihester Hotel.
On April 30th, Viviana earned her MBA degree with a 3.9 grade point average (on a 4.0 scale) from Florida International University. At the same time, she enrolled in the College for Financial Planning to obtain credentials as a Registered Paraplanner®.
September was an important month at KFM. After the Dow Jones average reached a historic high of 14,000 (in July), KFM achieved over $100 million in assets under management on September 4th, a recognized industry benchmark; the exact amount was $104,277,241. Brett received the results of the CFP® comprehensive exam he had taken in July and was thrilled to learn that he had passed and could apply for the Certified Financial Planner® certificate. Having successfully met all exam, education, and experience requirements, Brett’s application to receive the CFP® certification was quickly approved. Just one week later, Viviana successfully completed her Registered Paraplanner® course and received her new designation; as a result, she was able to start working with both new and existing clients to create detailed financial plans and to annually update those already in existence while Mary and Brett were better able to do more marketing, research, investments, etc.
Also in September, Brett attended the Raymond James National Convention in Nashville, Tennessee at the Opryland Hotel. While there, Brett met and spent a significant amount of time with Morningstar’s (Morningstar is a leading provider of independent investment research in the United States and in major international markets) repeated winner of the International Mutual Fund Manager of the Year award, Jean Marie Eveillard. Jean Marie manages SoGen Global and SoGen International mutual funds and, as a French citizen, seemed to appreciate fact that Brett was able to speak fluently to him in his native tongue (and even offered Brett one of his “no filter” French cigarettes).
Year 2008
In early February, Viviana gave birth to a baby girl, Celeste, and would not be available on a full time basis to KFM until May when she returned from her maternity and other accumulated leave time. The challenge for KFM was finding the time to do the necessary market research and analysis while maintaining the high level of administrative support clients and colleagues alike had come to expect from Viviana. Janet Brito was hired in February as an Operations Assistant to provide some continuity in client services as a result of Viviana’s absence.
In late July, Mary attended the Raymond James National Regional Practice Management Conference in Amelia Island, Florida, held at the Ritz Carlton Hotel in order to learn techniques for improving KFM business operations and practice management skills.
In August, Mary also attended the Raymond James National Convention in Harbor, Maryland (near Washington, DC) at the Gaylord National Convention Center in order to acquire continuing education credits needed to maintain her CFP certification, as well as to continue networking with colleagues and vendors.
From September 2008 through the end of that year, KFM investors witnessed the worst global financial crisis since the 1930s, far surpassing the meltdown in October 1987. The subprime mortgage debacle was caused by a combination of a large increase in the percentage of subprime mortgages, the absence of underwriting standards in commercial and mortgage banks, unprecedented investor demand for the higher yields generated by securitized mortgages, the inability to value securitized pools, and lax governmental regulation. In essence, investors and underwriters alike assumed that escalating real estate prices would cure all ills.
The week of September 15th proved to be a memorable week in many ways. Monday brought the bankruptcy of Lehman Brothers, Tuesday saw AIG being approved for an emergency $85 billion dollar loan from the Federal Reserve Bank of New York. The bankruptcy of Lehman Brothers saw one of the oldest money market funds, The Reserve Primary Fund “break the buck” meaning investors would get back less than the $1 net asset value of the fund which triggered “runs” on additional money market funds. In the midst of this financial crisis, Mary and Brett, the two KFM “principals,” were also busy on September 18th at 11:30 p.m. overseeing the birth of Cooper Thomas Hixon, the first born son and grandson to Brett and Mary.
In an attempt to stimulate economic growth and inspire confidence in the financial markets, the biggest government intervention in those markets since the 1930’s occurred when, in September, Congress and the President approved the $700 billion Troubled Asset Relief Program, also known as TARP. It was originally intended to purchase illiquid, impaired securities off of banks balance sheets which would allow banks to resume lending to clients; however, as the capital markets continued to deteriorate Treasury Secretary Hank Paulson opted to inject capital directly into the biggest banks in the US rather than purchase securities from the banks. The following week the Dow Jones index of the largest companies traded on the U.S. stock market declined 22%, the worst week in the index’s 118 year history.
For its part, KFM worked “around the clock” to devise proactive responses to the series of financial failures arising from the crisis. As a result, KFM portfolios lost significantly less of their value compared to the approximately 40% drop in the S & P 500 average during this period. During the crisis, KFM continued to have confidence in the system and practiced discipline and adherence to diversified asset allocation models, as well as maintaining a conservative bias and regular communication with clients.
At the end of the calendar year, KFM had $94.5 million under management.
Year 2009
In January (after serving as Treasurer), Mary became Vice-President of the Westminster Christian School Foundation Board, and began helping the school raise funds to increase its endowments. Also in this month, Mary joined the Coral Gables Chamber of Commerce and increased the visibility of KFM while providing a valuable service to the community.
In February, Brett attended the Raymond James National Convention in Las Vegas, Nevada at the Caesar’s Palace Hotel in order to continue networking with colleagues and vendors and to earn required continuing education credits.
In August 2009 KFM moved to a new location, after 10 years at 201 Sevilla Ave, Coral Gables. The location offered advantages in terms of office space, layout, and ease of parking. While moving is never pleasant, our clients all seemed to be pleased with the improved office location.
In December, twenty-four ladies attended a client appreciation luncheon hosted jointly by KFM and Neiman Marcus of Coral Gables. The Gift Galleries at 390 San Lorenzo Avenue was the site of the affair that had a “Visions of Sugar Plums for the Holiday Season and Beyond” theme.
At the end of the calendar year, KFM had $108.8 million under management.
Year 2010
By comparison to 2008 & 2009 the year 2010 could be described as a year filled with its share of civil unrest (both here and abroad), escalation of wars, sovereign debt crises and general economic turmoil. While all of this contributed to a mid-year double-digit correction across the major equity indexes, the end-of-year result was double-digit returns for the equity markets. However on May 6th of 2010 you would have been hard pressed to predict such a strong year for stocks as on that day we experienced what is now referred to as the “Flash Crash”. On that day, the Dow Jones Industrial Average plunged about 900 points only to recover those losses within minutes. It was the second largest point swing and the biggest one-day point decline, 998.5 points, on an intraday basis in the history of the Dow Jones Industrial Average.
In April, a group of male clients attended a customer appreciation event hosted by KFM. At 7:30 p.m. the men were treated to a baseball game between the University of Miami and the University of North Carolina. The site of the affair was Alex Rodriguez Stadium on the UM campus and refreshments were served to the clients in the "VIP club seats" behind home plate; the group was recognized to the crowd by an announcement on the scoreboard; the 'Canes won the ball game, 7-5.
On May 10th, Mary’s membership in the Financial Planner’s Association (FPA) of Miami-Dade County led to her participation in a community outreach program sponsored by the local (Channel 4) affiliate of CBS television; the television program was appropriately named “4 Your Money Phone Bank”. Mary was very actively involved (on television) in fielding questions from Channel 4 viewers on all aspects of financial decision making; e.g., investments, markets, etc.
From May 24-27, Mary attended the Raymond James National Conference in Nashville, TN at the Gaylord Opryland Hotel in order to continue networking with colleagues and vendors and to earn required continuing education credits. The following week, the Cumberland River overflowed its banks (due to heavy rain and a dam that failed) and guests at the Gaylord Hotel had to be evacuated to a local high school when ten feet of water flooded the hotel.
During this year another son was born to Brett, Reid Charles Hixon, on June 30th.
In October, Brett attended the Financial Planning Association national conference in Denver, Colorado. This conference is the single largest gathering of financial planning professionals in the world. Hosted by the FPA, it is a one-stop-shop for resources that provides high-quality education in many topic areas that are important for financial planners and their clients, i.e. health care reform, estate tax issues, investment strategies, financial regulatory reform, and much more.
At the end of the calendar year, KFM had $124.3 million under management.
Year 2011
On January 10th, Mary’s membership in the Financial Planner’s Association (FPA) of Miami-Dade County led to her participation in a community outreach program sponsored by the local (Channel 4) affiliate of CBS television; the television program was appropriately named “4 Your Money Phone Bank”. She was very actively involved (on television) in fielding questions from Channel 4 viewers on all aspects of financial decision making; e.g., investments, markets, etc.
Melanie Ramsay was hired as a part-time receptionist in February. After just a few months, Melanie moved to New York and ended Mary's effort to hire a worker and help reduce the nation's lingering 9% unemployment rate.
The 2011 RJFS National Conference for Professional Development was held May 2nd-5th at the Venetian and Palazzo Resort HotelCasino in Las Vegas, Nevada. Actually, this conference was sandwiched between two trips to Buford (Atlanta suburb), Georgia, to celebrate the birth of Mary's third grandchild; i.e., Mason William Marzano, on April 26th.
Cooper, Mason, Reid
From August 16th-18th, Mary attended the Raymond James Regional Conference (emphasizing "practice management") in Newport, Rhode Island. During the conference at the Viking Hotel, Mary committed to working with Rico Casares from the Raymond James Headquarters in order to"polish" some key components of KFM’s client services. Immediately, Mary focused on evaluating the effectiveness of her meetings with new clients when it comes to discovering what "needs" they have and which need to be considered as KFM makes investment recommendations and decisions. As a result, a new presentation was developed shortly after the conference that presents a more comprehensive overview to prospective clients of the KFM approach to financial planning and investment management.
Even though there were some encouraging signs of economic growth early in the year, by October 1st, the hoped economic recovery began reversing (from a high on the Dow of 12,226) due to a disastrous tsunami in Japan which severely impacted the ability of various industries in the US to obtain needed parts and supplies, declining US consumer confidence and spending, political unrest (in Tunisia, Egypt, Syria, and Libya) during an "Arab spring" that pushed gasoline prices to record highs, unresolved US political and policy issues relating to the growing National debt levels ($14+ trillion) and the historic downgrading of its credit rating (from AAA to AA+) by Standard and Poor's Rating Services, further decline in the U.S.housing market, and continued non-resolution of the European (Greece in particular) debt crisis which threatened a default on government bonds and failure of banks. As the calendar year's fourth quarter began, the Dow was struggling to "hold the line" at the 11,000 level.
In spite of the bleak economic climate, Mary was chosen by high-ranking Raymond James officers for membership in this year's Leaders Council*. For perspective, only 134 advisors were included on this year's Leaders Council; this group represented roughly 4% of the advisors affiliated with Raymond James Financial Services. Although Mary was the one recognized by Raymond James, she attributed the award and the recognition to the hard work, dedication, and sacrifice of both Brett and Viviana, both of whom have the reputation of never "leaving their work at the office."
At the end of the calendar year, KFM had $135 million under management and 115 client relationships.
*Membership is based mainly on assets under management, education, credentials and fiscal year production. Re-qualification is required annually.
(to be continued with the passage of time!!)
