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Sunday, May 26, 2024

Set for Growth

In the early 1990s, Mark Pettinga was a financial advisor in Indianapolis when his wife, Gayle Gerling Pettinga, received a call from her father, Gary Gerling. He offered her the chance to lead his Evansville law firm, an organization Gerling founded in 1963. Gerling Pettinga worked long hours as an attorney for Eli Lilly & Co., a large pharmaceutical company. The lure of her hometown with the added opportunity of someday owning her father’s law firm convinced the couple to accept the offer.

His wife’s entrepreneurial opportunity left Pettinga few options. He had met his wife in law school where he admits he had little aspiration for becoming a practicing attorney. “I went to law school,” says Pettinga, “more than anything because I thought having a law degree would be good training for whatever I might want to do.” The graduate of Indiana University’s undergraduate business school had a “fascination with current events,” he says, “especially in the financial marketplace.” Armed with his juris doctorate, Pettinga landed a position in the Trust and Asset Management Group at Bank One in Indianapolis. He handled trusts and estates and a bit of investing. Nearly two years later in 1989, Pettinga sat behind a desk in the then-Big Eight accounting firm, Ernst & Whinney (now Ernst & Young). There, he was the “financial planning guy,” Pettinga says, “for one of the largest tax practices in the state of Indiana.” At Ernst, he learned to number crunch for CEOs of major corporations in Central Indiana. “That’s where I got my analytical background,” Pettinga says. 

In 1992, Pettinga joined Oxford Financial Advisors (now Oxford Financial Group), a large independent financial advisory firm in Indianapolis. There, he became a top financial advisor.

But two years later, Pettinga was unemployed in Evansville. “It was one of those situations where the ultimate success was bred out of necessity,” he says. He leased a small office space in the Court Building Downtown. Pettinga had a folding table, a laptop, a portable printer, and a handful of clients from Indianapolis and Fort Wayne, Ind. He was the receptionist, office manager, financial advisor, and owner; his loaded workdays began at 7 a.m. and often ended at 2 a.m. After six months, he added a receptionist. The difference between the receptionist and Pettinga? The receptionist had a salary, and Pettinga did not. Still, he was making progress, earning more clients, and expanding his reach. 

After one year in business, Matt Volkman called. The Evansville native wanted to join the young venture. Volkman was working at an Indianapolis investment firm but was interested in relocating to his hometown. One interview later, Volkman landed the role of partner. “I was nervous all over again,” Pettinga says. “I had to meet a two-person payroll, and I hadn’t even paid myself yet.” This was the beginning of his $600 million investment firm, and late last year, Pettinga made a major deal that ensured his business, Pettinga Financial Advisors, will last long after he retires. Given the financial crisis, it was almost the deal that never was.

The United States continues to recover two years after the collapse of Lehman Brothers, one of the nation’s investment giants, set off a series of federal interventions that made the government a large lender. Tagged a “financial meltdown” of sorts, the situation was so complex that numerous writers, bloggers, and TV analysts offered panic-inducing commentary on the national economy. 

It was a crisis that put an opportunity on hold for Pettinga. Back in 2006, when the global economy was a happier subject, Pettinga received a call from John Palmer of Focus Financial Partners, a firm founded in New York City in January 2006 with $3.5 billion in assets. Palmer wasn’t looking for a deal right away. “For years, he was just someone on the other end of a telephone,” Pettinga says. “It was very superficial.” Palmer simply was curious. He wanted to know about Pettinga, learn how he views investments, and understand his philosophy. 

Pettinga credits his late father, Cornelius, as the role model who shaped his work ethic. “My father was not a flashy man,” Pettinga says. Cornelius earned a doctorate in chemistry and headed manufacturing and research development for Eli Lilly for decades. Among his hobbies was collecting art, figurines, and knickknacks shaped like turtles. The lore of the turtle appealed to Cornelius. They were creatures, Pettinga says, that “kept their nose to the grindstone,” and Cornelius believed “staying the course, being diligent, and doing what’s right means you’ll end up winning the race,” his son says. After Pettinga launched his business, the turtle became the company’s symbol, a tribute to his father and a reminder of his philosophy. “T. Rowe Price has the ram. The Hartford has the elk — big and stately,” says Pettinga, “and I just have a turtle.”


Palmer loved this approach, and his colleagues at Focus Financial did, too. They contemplated plans for an acquisition. Then, the financial meltdown halted talks of mergers or acquisitions by anyone in the industry. It also prevented Pettinga from recommending that clients put money into stocks, and if clients don’t put money into stocks, Pettinga can’t charge them fees for managing their wealth. If the whole idea sounds counterproductive to making money, it is. “These past 10 years have been the most rewarding, not because people have said, ‘You’ve made me money hand-over-fist.’ More than anything, what we’ve done is saved people from financial disaster,” says Pettinga. “We make certain the people who could already afford to be retired can continue to afford to be retired or people who were saving for retirement are still on track for retirement. Our bottom line is we didn’t blow it for our clients.”
    Pettinga’s decision to protect clients during what was largely considered the worst economic downturn since the Great Depression was another achievement that leaders at Focus Financial noticed. “The firm’s high organic growth rate — particularly fostered by their care of client assets in market downturns — and extremely high client retention rates make them a standout in this industry,” says Vamsi Yadlapati, vice president of Focus Financial. “Pettinga is one of the largest and most successful fee-only RIAs (registered investment advisors) in the region.”

Once the troubled economic waters began to show signs of calming in late 2009, Pettinga was attracting numerous businesses interested in his firm, but the deals they offered didn’t help him. “To these firms, it was all about the deal,” Pettinga says. “They just wanted to acquire the assets. They didn’t care about the clients. We are more than just financial advisors. We end up counseling (clients) not just on financial matters. We share their hopes, dreams, successes, and failures. In many cases, we become part of their extended family.” 

What Focus Financial offered Pettinga was a great business model, and the two companies sealed the deal on Dec. 31, 2010. “Frankly, they are better at business than we are,” says Pettinga, “because that’s all they do.” Focus Financial has $40 billion in assets with 18 partner firms and two further affiliates, operating in a total of 44 states and employing nearly 700 people. “What they’re doing,” says Pettinga, “is taking the best practices at each of those firms and sharing those practices with us. That is making us better.”

One such practice brings a deeper reserve of resources for the Security Exchange Commission’s compliance issues. “The compliance and regulatory environment is incredibly complex, very expensive to meet, and changes almost on a daily basis,” Pettinga says. His seven-person staff has a full workload, and Focus Financial leaders have employees dedicated solely to compliance issues. They offer suggestions for better record keeping and making certain every compliance-related issue is addressed.  

Clients of Pettinga Financial may not notice a change in business, considering each Pettinga advisor continues to nurture client relationships and manage client assets as they always have. Focus Financial’s involvement also ensures Pettinga Financial can exist long after Pettinga, Volkman, and the third partner, Brian Goebel, retire (whenever they so choose to). “In many cases, the financial advisory firms die when the founders retire,” Pettinga says. In cases where a second generation of advisors buys out the founders, the transition often takes years to complete. The deal with Focus Financial gives Pettinga the option for a clean transition. “Joining Focus gave us institutional strength and ensures our firm’s perpetual existence,” he says. “I can now tell my clients, ‘Pettinga is no longer about me, Matt, and Brian. Pettinga (Financial Advisors) is an institution.’”

Not that the 51-year-old plans to retire this decade. Instead, Pettinga is thinking big picture, and much of that has to do with recent hire Tonya Borders, the company’s chief financial and compliance officer. The former chief operating officer for the private wealth division of Integra Bank came to Pettinga’s attention when she appeared in a magazine article. He contacted her, and regardless what happened with the Focus deal, Pettinga wanted Borders to work for his company. He needed a professional manager; Borders’ primary responsibility is day-to-day operations and assisting Pettinga’s implementation of longer-term strategies. This frees up Pettinga to do what he does best and enjoys the most: serving his clients, he says.

With the added financial strength of Focus behind him, Pettinga is now in a position to look at acquiring other financial advisory firms in this region. He plans to add an additional advisory firm in the next year. Within five years, he hopes to open offices in Indianapolis, Louisville, Nashville, or Fort Wayne.

Regardless of where the future may take Pettinga Financial, the firm remains a local company with professionals and staff committed to serving their clients as they always have. “One of the most critical elements of the (Focus) deal,” Pettinga says, “is that Focus does not have a blueprint that they are forcing on us.” Leaders at Focus just want to help Pettinga grow faster. “Now,” Pettinga says, “we just move forward.”

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