The following conversation was conducted over email and edited for flow and clarity.
Acquania Escarne of Wealth Noir (WN): Keith, I am so glad to be able to interview you for our Wealth Noir readers. Before we dive into how you help your clients build wealth, can you share more about yourself?
Keith Beverly of GRID 202 Partners: I’m Keith Beverly and I am the Managing Partner and Chief Investment Officer of GRID 202 Partners, an independent black-owned Registered Investment Adviser (RIA) firm. We have offices in Washington, D.C., and North Carolina and offer comprehensive financial planning, investment management and tax planning to clients throughout the country.
WN: So, how did you get started in the personal finance space?
Keith Beverly of GRID 202 Partners: I’ve been passionate about wealth for as long as I can remember. From collecting 50-cent pieces and dollar coins in elementary school to buying my first stock in high school, the idea of building assets always intrigued me.
When I was in college, I started an investment club for students on campus and honestly have never considered a career where I wasn’t actively involved in the financial markets.
When I was growing up in D.C., my mother worked two jobs to provide for me and always stressed the importance of education. I developed an appreciation for being frugal and not wanting to ask for too much. I spent my summers reading investment books and was a frequent visitor of The Motley Fool’s website.
I came to the conclusion in my junior year of college that financial planning was one of the most important roles in the black community. I chose wealth management as a career path, and I haven’t looked back since.
WN: Since we are talking about your childhood influences, is there any particular childhood memory you remember that helped influence the person you are today?
Keith Beverly of GRID 202 Partners: When I was in third grade, my mother hired a contractor to do some work on our home. They left the house in bad shape and she had to hire another developer to finish the job. She was forced to take a second mortgage on our home to pay for the additional and unanticipated cost. Given the financial burden, she began a second job, which she kept until I graduated from high school. The situation definitely left an indelible impression on how I think about money. Despite money being scarce, I never felt directly the sacrifices she made. At my core, I am still that kid trying to make life easier for his mother financially. The conduit I use to carry out that obligation is working with GRID clients.
WN: Wow, you bought your first stock in high school. That’s impressive. What was your first investment?
Keith Beverly of GRID 202 Partners: I stumbled upon one of my father’s Charles Schwab account statements in high school and asked him about it. I told him I wanted to establish an account as well and he helped me set it up. I saved up about $750 from my summer job and plowed all of the savings into it.
I wish I could tell you I thoroughly researched the company, built a valuation model, discovered it was trading significantly below intrinsic value, and bought and held it and have generated tremendous compound returns over the past 20+ years of holding it. Unfortunately, I simply bought a tech stock my dad liked and lost most of my original investment.
It was a great motivator though. I vowed to never make an uninformed investment decision again. As investors, you will always make mistakes, but the rationale and process supporting the decision is what separates a skilled investor from a 14-year-old kid putting all of his summer earnings into a speculative tech stock.
WN: That’s a valuable lesson you learned. It’s great you learned it while you were young versus when you were older with more money on the line. So, who is your target audience for your business and why?
Keith Beverly of GRID 202 Partners: To put it bluntly, our target clients are rich people who care about poor people. I could state it more eloquently or use different language, but, fundamentally, the vast majority of our clients are households with financial means who are working in some way to make our society more equitable.
At the moment, over 40% of our clients happen to be African-American, which is a significantly higher percentage than the vast majority of independent RIA firms like ours. Our clients are lawyers at large firms working to grow the representation of black lawyers and/or are actively engaged in pro bono efforts. They’re foundations with hundreds of millions of dollars who want to better align their foundation’s assets with their programmatic efforts in communities of color. They’re women physicians who are building thriving practices and mentoring and sponsoring other women physicians as they do so.
We have seven advisors at the moment. Among the seven, we have five Certified Financial Planner (CFP) Professionals, two Chartered Financial Analysts (CFA), four with MBA Degrees and one PhD. My firm is 43% women and 57% male, and 86% African-American and 14% Caucasian. While there are many firms with comparable credentials, I have yet to come across another black-owned firm with similar characteristics. Our clients have worked extremely hard to be successful in their respective careers and we are committed to upholding the same standards for professional excellence to wealth management.
WN: I am glad you explained the composition of your firm. Can you explain for our readers, what does a CFP, CFA do?
Keith Beverly of GRID 202 Partners: I’m both a Chartered Financial Analyst and Certified Financial Planner. About 1% of financial advisors hold both credentials and I think there are probably less than 20 black advisors who hold both credentials. I started a LinkedIn thread for all of us last year that has grown to 10 (only one woman).
The world of black advisors is incredibly small; even assuming we are missing a few, I suspect 20 is an accurate number at the high end. About 1.5% of Certified Financial Planners are African-American. But those two credentials are the most respected designations our industry has for what our firm does, investment management (CFA) and financial planning (CFP). When I was in college, I set a goal to obtain both. I figured there wouldn’t be many of us, but the paucity of us, here in 2020, is at a crisis level in my opinion.
Though I love and am passionate about investing, most of our clients probably appreciate our financial planning acumen more than our investment management expertise. We want our clients to view us as their most valued resource for any financial decision they make – from refinancing student loans to doing due diligence on a prospective angel investment. We recognize we can’t be all things to all people so our model is to be the most valuable thing to a select few.
WN: How did you make the decision to go into business for yourself?
Keith Beverly of GRID 202 Partners: I’m probably the most reluctant entrepreneur you’ll ever meet! Most of my peers are on Wall Street in various finance or investment roles and those in wealth management are focused almost exclusively on ultra-high net worth clients, which most firms define as at least $10 million in investable assets.
The only constraint I placed on myself coming out of graduate school was to work somewhere where I could serve emerging professionals – high income earners in their 30’s and 40’s, which is largely my natural network. When you layer on having a meaningful percentage of your clients be households of color, there really were not many options. I consider myself an entrepreneur more by necessity than by choice. Also, working with several physicians, I rationalized the opportunity cost of not making market salary because many of my physician clients do not truly begin to gain their financial footing until their mid 30’s.
WN: Why do you think there aren’t more black-owned wealth management companies or advisors?
Keith Beverly of GRID 202 Partners: I don’t think many of us in the black community truly understand the magnitude of the racial wealth gap. If we did, we’d seek out more black advisors! For the most part, many of my peers (with the CFA designation and/or graduates of top tier MBA programs) who are in wealth management predominantly work with white clients.
The amount of white wealth truly dwarfs the amount of black wealth in this country. Consider this: for every black millionaire there are two white decamillionaires ($10million+). The most common misconceptions I see are the belief that you have to come from wealth to be in the industry; black advisors face the same financial hurdles to entrepreneurship as black founders in other sectors, though arguably there are fewer sources of capital. For example, a physician or dentist can obtain financing to launch a practice fairly easily. Similar financing options do not exist for black advisors. Lastly, many prospective clients are more comfortable working with a larger white firm to manage their assets.
WN: So, what’s the most common question you get asked by current or prospective clients?
Keith Beverly of GRID 202 Partners: Why should I work with you when I could put all my money with ______ low-cost option? Our clients come to us for a truly bespoke experience. I doubt we will ever be a firm where the client:advisor ratio is ever above 70-80 or so compared with many large firms where advisors manage 200+ relationships.
We leverage technology to be able to spend more time understanding our clients and going through the financial planning process more than the vast majority of other firms. We also are doing more due diligence on alternative investments these days on behalf of our clients, providing access they would not have outside of our firm. Given the current bull market and economic growth prospects, we believe having a meaningful allocation to alternative investments will be an important diversification tool for portfolios during the next market downturn.
WN: If you could flip a switch and get everyone to do one thing related to their personal finances, what would it be?
Keith Beverly of GRID 202 Partners: Most households have never quantified their financial goals. For example, someone may have purchased a life insurance policy because the face value amount sounds high enough without calculating what they would need to be covered if the unexpected came to pass. Simply taking inventory of where you stand is an underappreciated first step to taking ownership of your financial future.
Keith Beverly of GRID 202 Partners: I am ecstatic to announce the addition of Kamila McDonnough to the GRID team! She spent nearly 20 years in corporate America, most of which were spent working with ultra high net worth (UHNW) families and institutions. With her addition, we will place an even stronger emphasis on women of color, who happen to be the foundation of our client base. She’s also a great example of why there are so few black-owned RIA firms and black advisors working with the black community.
Many of us have to make significant financial sacrifices before we are in a position to work with black households. This is changing somewhat as different compensation models are gaining popularity, but the traditional compensation structure of charging based on assets often creates the tradeoff between financial stability and choosing to serve households of color. Throughout her career, despite working with 100+ UHNW households and tens of institutions, she never once worked with a black client. Not one.
We expect to hold several events throughout the year focused on generational wealth and particularly emphasizing women of color. We also intend to launch a podcast this year.