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Ronald G. Albahary

BIOGRAPHY

Ron Albahary has spent his entire 29-year career as a wealth management “designer.” He wakes up every morning passionate about helping clients crystallize their objectives and tailoring solutions for virtually all types of clients and their goals.

In 2018, Ron joined Legacy Advisors, LLC, as the firm’s Chief Executive Officer. The 35-person firm, headquartered in Plymouth Meeting, PA, works with 130 families and family business owners specializing in complex financial, estate and business continuity planning. Legacy manages approximately $1.7 billion assets under management and another $1 billion in assets under advisement.

As CEO, Ron is charged with formulating and executing the firm’s overall business strategy and works closely with the heads of the firm’s client service, operations, technology, compliance, marketing, investment and insurance focusing on enhancing the infrastructure and ecosystem required to grow the firm. Since joining, he has executed a new organizational design centered on groups of subject matter experts in wealth and estate planning, insurance and investment strategy that advisors can leverage to better service clients.

Prior to joining Legacy Advisors, Ron served as executive committee member and chief investment officer (CIO) of Threshold Group, an independent wealth management company serving eighty high net worth individuals, multigenerational families, and foundations overseeing approximately $3.4 billion in assets under management. As a member of the four person executive committee, he focused on developing and executing the strategy of the firm. As CIO, he was responsible for investment strategy and process, thematic development, asset allocation, portfolio construction, manager selection, risk management and macroeconomic research. Additionally, he designed and executed the strategic vision to build an impact investing platform enabling Threshold Group to become the widely recognized leader in the impact investing advisory.

Ron has also been a featured speaker at many industry events and serves as a regular source and commentator for financial news media including the Wall Street Journal, Washington Post, and CNBC, among others. Ron earned a Bachelor of Science degree in Economics from the Wharton School of the University of Pennsylvania. He is a CFA® charter holder and is a member of the Chartered Financial Analyst Society of Philadelphia.


THE INTERVIEW

Q.When you look at your career, you've been in significant leadership roles with large and mid-cap, publicly traded companies as well as boutique firms, culminating now with your current role as the CEO of a closely held RIA. How do you compare the challenges and notable differences or maybe similarities between some of the larger bureaucracies and smaller closely held companies?

A. That's a great question. If you look at the progression of my career actually, and this was not intentional, I worked at my largest firm coming out of school and I have worked at smaller firms in a linear progression ever since. Starting with the larger wirehouse and private banking firms than progressively getting smaller within the registered investment advisor world was a great education and helped me pick the best from each in terms of what it takes to be successful within the Ultra-High Net Worth market. I also learned ultra-high net worth clients are more likely better served by smaller, independent registered investment advisors since the larger firms aren't as nimble and adaptive as smaller firms to meet the complex planning and investment needs faced by the ultra-high net worth. When you're at a larger firm, it's all about scale, operating efficiency, and, in the case of public companies, an eye toward maximizing earnings per share and supporting the stock price versus putting client needs first. While I recognize that is a broad generalization, those firms would have a difficult time arguing with the notion that resource allocation to atypical client needs is constrained by the desire for scale and the resulting profits. Working at a boutique, Ultra-High Net Worth multifamily office shop, we don't have the constraints of dealing with quarterly earnings announcements and their effects on share price. At Legacy Advisors, our central mandate and focus is to put the clients' interests first- helping our clients in their desire to achieve peace of mind by serving them with the integrity, ensuring that their lifetime, philanthropic, business, estate and investment affairs are in order, and helping them create a lasting legacy that embraces their value system, love of family and commitment to their community which means we are able to be creative when we are presented with a client whose objectives and needs are different than the others.

Q.In my experience, there’s a really small subset of executives who are good at both the Chief Investment Officer role and the Chief Executive Officer function. What are the key attributes that lead to success in each role? And are there any similarities?

A. Let's start out with the CIO role. To me, the Chief Investment Officer is not only an investment leader of the firm, but he or she needs to be a business leader of the firm; at least that's what distinguished my approach to the CIO role. Generally, what you find in that CIO role is someone who has a great passion for investments and has solely focused on developing their investment acumen during the course of their career. When those folks finally attain the role, oftentimes, they bring to bear somewhat of an “ivory tower mentality”. What do I mean? Well, as technicians, many CIOs will envision what is theoretically good for clients from an investment standpoint and may actually gravitate toward the tantalizingly sophisticated strategy because it compels them to exercise their intellectual muscles. As an investment/business hybrid, I always took a more pragmatic approach. What do our clients need based on their objectives, tax situation, preferences, and biases as well as what investment solution can meet the needs at the cheapest cost to the client and the easiest to understand and implement. In that role, taking a practical, business minded approach is the intersection with the CEO job. Every member of the C-suite, regardless of their subject matter expertise, needs to be thinking about: “How can we serve our clients better and more efficiently?” “How do we grow this enterprise into a sustainable business and create a great culture to ensure we can continue to invest in the business by hiring and retaining exceptional talent to, in turn, serve our clients with excellence for multiple generations?&rdqho; Similar to the team building I engaged in as CIO, as CEO, I need to enable each teammate to spend most of their time on what they do best and what they are passionate about and reduce those low value, time consuming activities that slow them down and drain their energy and productivity. If I can get to the point where every associate is playing to their strengths every day and minimizing their time spent on areas where they're adding little value, people will feel fulfilled and we'll be delivering excellent service to our clients.

Q.Going down the Legacy path, in my experience, most all RIAs and wealth advisors and financial planners say they do “quote unquote financial planning” when what many of them do is asset allocation. How do you define financial planning at Legacy and what are the differentiators?

A. First, I would reaffirm your initial statement, which is, you're right. I think most of our industry has grown up as investment centric. And so planning, any form of planning, is really more of an add-on to an investment proposition for most advisors. Legacy Advisors, whose history goes back forty years, started out as a comprehensive planning first firm focused on family business owners’ complex set of sophisticated issues and objectives and only took on the investment management responsibilities fifteen years ago due to clients’ repeated requests to do so.

We take the time to know our clients at a deeper level. We not only know their entire financial picture, we know what’s in their head and what’s in their heart. From here we can build a holistic and highly customized plan helping our clients in their desire to achieve peace of mind by serving them with the highest level of integrity, ensuring that their lifetime, philanthropic, business, estate and investment affairs are in order. We're looking at all facets of a client's financial life and we are focused on providing an integrated solution across all of those areas. Building a relationship at such a deep level with our clients allows us to design and deliver truly integrated solutions across the landscape of multifaceted issues and is a major differentiator. Having been in the industry for nearly 30 years, I've seen at least a thousand different advisors, if not more, attempt to practice planning. Ultimately, where most advisors value proposition breaks down is the actual execution of the plan. We are not afraid to roll up our sleeves and get deep into the most sophisticated and complicated matters. Additionally, given our resident subject matter experts, we easily work with the client’s other advisors, like their accountants and attorneys. Most importantly, we get the job done. We take pride in distinguishing ourselves on that front. When we bring on new clients, we often hear that some planning was done but the plan was never fully implemented—papers piled up and follow ups didn’t get done. Our desire and ability to get the job done is very much rooted in our blue collar mindset that no detail is too mundane or too minor. Truly taking responsibility and accountability for reducing the burden on the client to quarterback the execution of the plan provides such a high value to our clients in terms of creating the peace of mind they seek.

As a subset to what you just said, it would seem to me though that unfortunately it falls upon deaf ears a lot with clients because everyone says they do planning. It's a little bit ethereal, it's hard to sort of show that it's bigger than a breadbox or what it looks like because it's customized to each client. So it has to be a little bit of a challenge to convince clients that you really are different, I would think.

A. Well you're absolutely right. One of our industry's biggest issues is the fact that we all sound and look the same on the surface to clients and prospective clients because we use some of the same words and terminology. When I entered this business 30 years ago and started in the financial planning department of a major wire-house, financial planning was a relatively new concept back then and not widely available. Today, most advisors say they offer “goals-based advice”. So, how do we distinguish ourselves and go deeper than the actual words in order for a prospective clients to appreciate how we're different? I'll tell a couple of stories to illustrate that.

First, at this January’s all associates annual meeting, I thought it be a great idea to invite a client to the meeting and ask them to tell the story of their entrepreneurial journey and to our people why they ended up choosing Legacy Advisors when they were considering selling their business. Every associate is vital to the client relationship but many of them, who operate behind the curtain, don't get a chance to talk or hear from our clients. Needless to say, the session was extremely well received. Our client’s recounting of the birth and growth of their business was moving. If they had stopped there, I know our associates would have walked away more than inspired. But they didn’t—no, they proceeded to explain that, at one point, they were thinking of selling the business and, with an imminent liquidity event on the horizon, starting to prepare themselves by searching for a wealth advisor. They said they spoke to a number of the brand names, like Goldman Sachs and JP Morgan, but somebody in their network suggested they also speak to this boutique firm called Legacy Advisors. So why did they choose us versus the so-called titans of our industry? As the client put it, every other firm in that initial meeting spent most of the meeting telling the client what they could do for the client. Legacy Advisors was the only firm that came in and spent the entire time asking the client questions about their goals and objectives; what they cared about and what their passions were. We were the only firm whose advisors actually listened and seemed to truly care as opposed to promoting all of the things we could possibly do for the client. We have an entirely different philosophy regarding how we engage clients and that comes through loudly and clearly in the very first meeting.

Story number two. In the past year since I joined Legacy Advisors, we have had three situations in which we had been advising a small business owner on their planning matters for years, in some cases, decades. In those situations our mandate was to help them crystallize their objectives, design a plan, execute it and engage them on a regular basis on any and all financial issues that might come across the transom over the years. There was no investment mandate on all three of these situations. In all three situations when the family decided they wanted to transition the business either via an outright sale, taking on a private equity investor, or turn the business over to their kids, their Legacy Advisors received the first call from the client asking, “Can you help us go through this process of deciding what is the best path?” And in all three cases, the best path ended up being to sell the business for a variety of reasons. Most importantly, it was a Legacy advisor who led the process, meaning we brought two or three investment bankers to the table; guided them through the due diligence process; and helped them evaluate which one was most appropriate. Furthermore, since each client saw us as the lead advisor with their best interests at heart, they relied on us not only to partner with them to move the process along but each family member, experiencing their own emotions, turned to their Legacy Advisor as an important pillar of emotional support. The Legacy Advisor seemed to be the glue--the key person each family member trusted their Legacy Advisor to honor and advocate for each of their individual interests equally when disagreements between family members emerged. To me, that's quite a differentiator. To be the “trusted advisor” (a highly overused term) is not about beating investment benchmarks—that’s just a means to an end. It’s about helping the families manage through various transitions, because of the trust and expertise that we have. I think those examples probably illustrate why our approach to planning is different.

Q.As a subset to what you just said, it would seem to me though that unfortunately it falls upon deaf ears a lot with clients because everyone says they do planning. It's a little bit ethereal, it's hard to sort of show that it's bigger than a breadbox or what it looks like because it's customized to each client. So it has to be a little bit of a challenge to convince clients that you really are different, I would think. Speaking of some of your Ultra-High Net Worth client base, let's focus in on the first generation, Ultra-High Net Worth client. You know, the scion of the family, the founder. Is it fair to say that a significant number of your clients resemble that?

A. Yes

Q.Having observed these folks both at Legacy and in your other jobs, what behavioral characteristics do these super successful first-generation Ultra-High Net Worth folks have in common regardless of their age?

A. First, they tend to be intelligent risk takers. Two, they have an unparalleled work ethic. Three, they tend to really care about the people that work in the business-their employees; they care about their families and they care about the community. The common theme is clear-the most successful first-generation leaders we've worked with really care about people. Four, they are driven and have personalities who don't accept failure as an outcome but see it as a learning opportunity. So if they stumble or hit an obstacle, they dust themselves off and keep persevering.

Q.Great. So, you know, none of us has a crystal ball, but we're, you know, we're setting new records every day on the Dow and other indexes (NOTE: Interview was conducted prior to the August 2019 correction). How do you as the CEO and overseeing your investment function at your company, how do you look around the corner for managing your Client's risk assets?

A. Our clients are Ultra-High Net Worth meaning they're already wealthy. With that group, there are two mindsets. We have clients who stay in that risk-taking mindset I referred to previously when they become liquid and want to take risks in their portfolios. And then you have the other group of clients who gain that liquidity from their business and they want to focus on preserving their wealth. We work easily with both perspectives. Our job, is to tailor portfolios to accomplish their objectives, align with their intrinsic tolerance for risk wherever they happen to fall on the risk spectrum. The end goal is to build a portfolio in which the client is getting adequately compensated or rewarded for the risk that they're actually taking. Unfortunately most of the industry approaches the investment proposition in terms of maximizing returns with risk being a secondary consideration. That’s completely upside down. Mathematically, losses are far more damaging than gains are beneficial to a portfolio—the laws of compounding clearly illustrate this.

You had asked about “looking around the corner.” We tune out the noise coming from daily fluctuation in markets and tweets and spend our energy defining thematic views on opportunities and risks and researching ways we can express those views in portfolios. While getting the asset allocation right for our clients is a key driver in determining the success the portfolio can have in achieving their financial goals, we are firm believers that we can't sit on our hands and just solely rely on a strategic allocation. We live in a world in which most investors have access to the same tools and information making achieving excess returns (i.e. beating market benchmarks) elusive. The edge I believe we have is our creativity in the portfolio design process. We see investment strategies as simply ingredients and our role is put them together in various, innovative ways to take advantage of opportunities and to mitigate risks. To that end our client portfolios are infused with groups of exposures we have compiled to reflect a variety of themes we believe can continue to affect markets for years to come.

One overarching theme is our belief that we have transitioned out of a low volatility environment period to a higher volatility regime where there's likely an increased probability of more frequent, deeper and protracted risk asset drawdowns. With that in mind, we drafted a blueprint for a solution that, in an elevated volatility environment, can complement traditional equity and fixed income exposures. When times are good (i.e. markets are rising), the strategies in the solution would be expected to generate a return between stocks and bonds and, when markets are volatile and investors are generally taking risk off the table; the solution would contain strategies focused on being opportunistic -picking up dislocated high quality assets at a good price. The key to designing this solution, prepared for whatever is around the corner was to free ourselves from the constraints of filling asset class buckets but, instead, we paid little to no attention to what strategies called themselves and almost exclusively focused on what attributes each ingredient (i.e. strategy) could contribute to the overall objective of the solution

Q.How do you assess your client's risk tolerance? Do you use any sort of industry software programs or a Socratic question and answer process that you weigh the answers to? Do you size them up in your discovery when you're doing their planning?

A. In nearly thirty years of investing client assets, I have found risk assessment tests, historically, have done a poor job of truly understanding a person's risk tolerance. And one last point on that is most of those risk tolerance questionnaires will ask questions related to a client's willingness to tolerate percentage declines in their portfolio as one aspect. And people in my experience don't think in terms of percentages, they think in terms of dollars. About 15 years ago, I asked a prospect the following question; “If we were privileged enough to manage your $20 million portfolio and over a year from now, we sit down and I say that you're down 10%, how would you feel?” And her response was, “I think I could tolerate that kind of risk.” I said, “Great. So let me, if I may, ask you a follow up question. The same scenario occurs- you entrust us with your $20 million. We fast forward a year from now and you're down $2 million. How would you feel about that?” And, without hesitation, she said “I couldn't tolerate that kind of loss.” She rediscovered her math skills and thought, “Wow, $2 million is almost four years of my lifestyle!” And so if I stopped by just asking her the first question and build a portfolio that will draw down about 10% a year from now, I would have likely been fired. The art of asking the right question and also asking the same question in different ways and understanding a client's psychology is paramount in terms of coming up with solutions that make sense for them as opposed to just applying the academic approach to building portfolios.

So, getting back to your question--I would say our process resembles the Socratic method (sans the debate and argumentative aspects). We ask an exhaustive amount of questions related to our clients’ objectives, needs, biases, aspirations, and fears. During what we call the DATA process, we get a very deep understanding of how the client thinks or what drives them in terms of decision making. Once we have helped the client crystallize and define their goals, we create portfolio buckets (applying Dr. Richard Thaler’s theory of mental accounting) targeting each specific goal that considers both the client's intrinsic sense of risk and calibrates the risk needed in order to achieve the goal for each bucket.

Ron, tell us about your most important business mentor or mentors with or without attribution. Someone who taught you things that you think about even today or someone who just made you better in a business context.

I'm happy to do that. I’ve been very blessed along the way to know and work with some really great people who were willing to take a chance on and invest in me. In 1990, after graduating from the University of Pennsylvania’s Wharton School, I was hired into an executive management development program in the Merrill Lynch home office in Plainsboro, NJ. It was a 2 year program in which I was assigned to a mentor, Mitch Farkas. I could not have asked for a better initial mentor as I became Mitch’s go-to person on anything and everything he worked on from strategic planning, new product creation and delivery, forecasting and budgeting. In the first 2 years of working I was on the ground floor and deeply involved in a number of important and innovative strategic initiatives with ML’s Private Client Group whose solutions ultimately became industry groundbreakings such as a financial planning service for Merrill Lynch Financial Advisors turning them from brokers into planners and an interactive planning software in the early to mid 1990’s, delivered on CDs, a business plan for managed accounts of mutual funds in 1991, and private placements for ultra-high net worth individuals just to name a few.

Q. Terrific. So just two more questions by the way. You've been gracious. Thank you. And these are common questions I ask all my Power Players. So, the first one is, in a macro business context, what if anything keeps you up at night?

A. : Well my kids, they keep me up at night on occasion! From a business perspective, I cannot say I lose sleep over anything as I am fortunate to work a firm with an exceptionally strong value system. With that said there are a few macro business topics I wrestle with quite often. One is, we can never sit on our laurels in terms of relying on what we did to get to where we are today and believing what's generated our success over the past 40 years is going to be the same formula over the next generation. We would be making a mistake thinking that we have the secret sauce and it doesn't need to change for the next generation of growth. We need to be very thoughtful about understanding industry trends, understanding trends related to client needs and the evolution of those client needs as wealth is transferred from Baby Boomers to Generation X and the Millennials. We need to be innovative, nimble, creative and adapt over time to ensure that we continue not only to be relevant, but to become the recognized brand within the wealth management space known for the complex work with we do for small to mid-sized family business owners.

Next, I think about how can we continue to growth the business, at an above industry rate, to ensure we are sustainable and successful across multiple generations. Growth is not the end but a means to an end which is to provide the means to attract, retain great people and to attract and retain great clients through continued investment in the business.

Also, we operate in a highly regulated industry and I'm very passionate about ensuring that we practice the highest quality of compliance oversight on our business. Compliance is one of the five pillars of a successful RIA (The Five Pillars are Growth, Productivity, Profitability, People and Compliance and I have actually added a sixth one—Innovation). We make that very clear to our associates. A tangential issue to Compliance but equally important is staying on top of Cybersecurity. The team at Legacy has invested a lot of time, effort and money in this space including the hiring an outside firm that specializes in Cybersecurity to advise us and keep us current.

I won’t tell you I lose sleep over these issues, but they are certainly top of mind.

Q.But it’s a challenge because really good people don’t necessarily like to take their helmet off and let someone else run the plays, right?

A. Yes, do I have moments of reign and desire for control? Absolutely! But I’m pretty good about being consistent; I’m a pretty consistent manager, having learned that from Sokolowsky, and so once I’ve put my head around the fact that one of the things I need to do (which is a more recent phenomenon in the last year or so) is to have more people take bigger parts of the company to run and see how they do. What I need to do, really, is be a good portfolio manager –my job is to make sure the resources are where they need to be, that we’re bringing on the type of talent that we need to bring on, and that we’re building a good set of businesses. As you know, LPL was 95% maybe even 98% focused on Independent Advisors, a great business, but we need to have a broader range of clients. It’s good for everybody that we do that and it’s inevitable for every company that you need to expand into new types of clients.

Great. Last question. If Legacy were to be an automobile, what model and make would it be? I don't know if you're a car guy, but I'd love to hear your thoughts on that.

A. I was a car guy before I had kids and now cars are secondary. To answer this question adequately, I need to select more than one car as our firm is multifaceted.

We pride ourselves on our blue collar work ethic and as I mentioned earlier, where most advisors engage in some form of planning fall down is the fact that they don't get the job done. We get the job done no matter how complex or how much we need to follow up with a client or the client's advisors, we grind it out. Since we work with multigenerational families, I thought of a Ford pickup truck. I think it checks a lot of the boxes; blue collar, it's big, grinds it out. Ford is a firm that is also multigenerational- members of the Ford family are still involved in the business. That's one aspect. When I think of our technical expertise, my first thought is to compare us to Mercedes, a luxury brand known for its engineering. And finally, since our clients are at the epicenter of what we do and their experience with us is of the utmost importance, Lexus comes to mind. Lexus was recently rated as the top rated luxury car brand in terms of service excellence. Having asked many of our clients about their experience with Legacy, I can tell you they are passionate about how much we will bend over backwards and do anything and everything in order to ensure that they are served well.

So you're not a car, you're a fleet!

: A diversified fleet of cars.

Terrific. All Right Ron, well this was fantastic. Thank you.

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