Eric Kittner had a front-row seat for one of the biggest corporate calamities in U.S. business history. At the time he was a staff accountant for Arthur Andersen, the $8 billion accounting and consulting giant, when one of its most high-profile clients, Enron Corp., went into full collapse, filing for the largest bankruptcy in U.S. history at the time. Enron shareholders filed a $40 billion lawsuit against the company after Enron’s stock prices plunged from a high of $90.75 per share in mid-2000 to less than $1 by the end of November 2001.
Meanwhile, it took less than nine months for Arthur Andersen to be convicted of obstruction of justice for shredding and doctoring documents related to Enron audits, prompting the federal government to forcibly disband the 89-year-old, 28,000-employee firm.
“It was probably the most eye-opening experience of my professional life, given the size and scale and success of the firm,” says Kittner, now managing partner and chairman of Moneta, the $20 billon (AUM) registered investment advisory firm. “It pretty much all went away overnight.”
All was not lost, however, as Kittner came away with knowledge and experiences he has moved forward with.
“One of the things, from a cultural perspective, that stood out to me was Arthur Andersen’s commitment to training and development,” he says. “They had bought a university in Chicago and used it as their training facility. There was very much a culture of development, and that commitment was impressive from a cultural perspective and because of the number of dollars they invested.”
Fortunately for Kittner, he never intended to spend the totality of his professional career as an accountant or auditor, so the Arthur Andersen implosion never knocked him off stride. The Andersen disbandment was followed by stints at Ernst & Young, an archrival of Arthur Andersen’s, and at the regional accounting firm of RubinBrown.
Then he came across Joe Sheehan, managing partner of Moneta at the time, who knew Kittner was not motivated by the accounting profession. Sheehan suggested a meeting.
“We started talking,” Kittner says. “At the time Joe was the COO and managing partner of the firm. I didn’t really know much about the profession, so I began talking with Joe and learned more about Moneta and the profession and decided it was the right fit for me.”
He joined the Sheehan adviser team at Moneta, which is organized differently than most RIAs. The firm’s client relationships reside with the adviser teams rather than the firm. Kitt-ner explained that if, for any reason, Moneta ever ceased to be the right fit, he could walk away with his 175 client families. Kittner considers the arrangement a more entrepreneurial way to organize the firm’s professionals, as each team makes its own determinations about how to build and manage its respective groups of clients.
“When I joined the firm, I joined Joe Sheehan’s client practice,” he explains. “Day in and day out we spent time together, and he taught me the business — how to run the business, client service, training. He was my business mentor. We built the business over a number of years.”
Sheehan has since retired and Kittner is three years into a buyout of Sheehan’s half of the practice.
The things that lead many clients to the firm’s office doors are big financial and life decisions, such as sending children to college, a career change, marriage, divorce, retirement, death of a spouse or other family member.
“More often than not we find that folks come to us because there was some sort of triggering event,” he says.
A ROLLING STONE-STYLE LESSON
Kittner hails from Newton Square, Pa., a small Philadelphia suburb, where he stayed active playing sports, particularly baseball. He was a pitcher who liked throwing off-speed pitches, so the changeup became a favorite.
“People don’t appreciate the effect a change in speed has on batters,” he observes.
His performance on the mound was good enough to get recruited by the manager of the Princeton University’s baseball team, which was the precise institution of higher learning Kitt-ner dreamed of attending. Alas, the university’s baseball manager did not have sufficient pull to land his new recruit, as Princeton turned down Kittner’s application.
“I was strong academically, but not Princeton strong,” he says. “I can remember the day news came that I didn’t get in. It was very humbling for me and a really good life lesson that you can’t always get what you want no matter how hard you work.”
The lesson Kittner says he came away with was to always have a contingency plan in the event things do not go according to plan. In this case the contingency was The Catholic University of America in Washington, D.C., where Kittner majored in communications, a default course of study until he figured out what he truly wanted to do professionally. About a year into his education, Kittner discussed his indecisiveness with his father. This much Kittner knew: He wanted to own some kind of business, which prompted his father to suggest a degree in accounting as good background for such an aspiration.
“My father is a pretty smart guy and had some successful businesses,” Kittner explains. “So I decided that is probably pretty good advice. I followed it and the theory was if I could account for the revenue and expenses, if I knew a balance sheet and income statement, all the things required to run a business, it would be a pretty good background.”
The accounting degree led him to Arthur Andersen where, as mentioned above, he bore witness to business history. The other thing that stood out from Kittner’s experience at Arthur Andersen was the sheer number of hours he worked.
“I can remember multiple days going in and turning on the switch and turning it off at night,” he says. “Those were long days.”
ROCKY MOUNTAIN WAY
Moneta (Latin for “money”) is counting on using both organic and inorganic strategies to fuel its future growth. As an example, Kittner points to the St. Louis-based firm’s decision to open a Denver office, then acquire a local competitor and recruit additional advisers from the market.
“We have a very good recipe for building sustainable businesses for our clients, and we believe it will resonate with other folks in the industry,” he says. “Opening new markets will lead to a combination of organic and inorganic growth.”
Denver was selected as the initial step toward a larger footprint because the firm already had about $600 million of assets under management in the metro. Kittner says the firm’s vision statement targets expansion into a third market by the end of 2020, and a fourth market by 2025. Those new markets will most likely be located in the Midwest, he says.
“Our firm’s five-year vision statement, from Jan. 1, 2018, said we would expand to two new cities in the next five years,” says Kittner. “With our next location likely occurring in 2020, we’ll likely look to update our vision statement. In 10 years you will see us, hopefully, having more of a national presence. We want to build the size and scale. But most important is getting the first couple right and successful and culturally aligned.”
That would also put Moneta in alignment with what Kittner deems one of the most exciting trends in the RIA business: The creation of large, successful firms creating national brands with “significant scale and service.”
MINDING THE RATIO
As the organization continues its expansion, Kittner says Moneta looks to surround itself with people who bring to the organization a desire to serve others, as well as an entrepreneurial mentality, people “who come in and ask, ‘how can we adapt the business, how can we do things in a new way? How do we grow the business?’” Kittner adds, “Find great people, train and develop them, teach them how to go develop new business and grow the firm.”
And a significant number of new hires might be required if Moneta is going to continue priding itself on its low clients-to-
adviser ratio (about 45-1) as the firm expands into new markets.
“That is very intentional,” says Kittner in reference to that ratio. “We know the solutions we are driving require a very high level of service, so we have designed our business that way.”
The solutions he refers to are “flexible” and “progressive” client plans and portfolios.
“Our plans are incredibly flexible,” he says. “In fact, we don’t say can’t do something, we don’t have a model, so to speak.”
Another component of the Moneta culture is its training and development program focused on technical and non-technical aspects of the business, such as providing tax advice and efficiency to clients, retirement and distribution solutions, estate planning and even how to deal with conflict and other difficult situations.
“It has been part of our culture from day one. We have developed a training and development program inside the firm and call it Moneta University. It really is impressive and helps set us apart.”
But what Kittner says he is most excited about is the amount of young talent the firm has been able to attract. To underscore the firm’s commitment to young professionals and a youthful environment, he cites his own elevation to Moneta’s managing partner and chairman of the board at age 39.
“There are very few firms of our size — or even small firms — that would be willing to take that giant leap of faith to turn the leadership over to a 39-year-old,” says Kittner, now 41 years old.
Even as he occupies the top rank at the firm, Kittner dispels the notion of management.
“I don’t want to be a manager. I don’t want to manage anybody. I don’t want to tell people what to do. The right people manage themselves. I want to be more of a leader, which is set the vision, set the strategy, energize people to follow it. Hire great people and let them do what you hired them to do.”
Mike Consol (firstname.lastname@example.org) is editor of Real Assets Adviser. Follow him on Twitter
@mikeconsol to read his latest postings.