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Hefren-Tillotson Progresses Even in Difficult Financial Times

Kim Tillotson Fleming earned an economics degree from a prestigious university and held high-profile jobs at two major financial institutions before she returned to Pittsburgh to join the family business in 1987.

She went to work at Hefren-Tillotson Inc., the Downtown-based investment advisory and wealth management firm, barely two months before Oct. 19, 1987 the day the Dow Jones industrial average plunged nearly 23 percent.

My introduction to clients was holding their hands on Black Monday, Fleming said in a recent interview. Nothing like a market crash to increase your learning curve.

More than 20 years later, Hefren-Tillotson has weathered the 2008 financial crisis as many larger investment companies cut employees and lost clients. It did not lay off anyone in 2008 or 2009, and since then has hired more than 20.

Since late 2009, Hefren-Tillotson’s assets under management have grown to about $7.5 billion from $5.5 billion. More than half of that added value came from new client inflows, versus merely market appreciation, Fleming said.

In June, Hefren-Tillotson, which has more than 10,000 individual, business and foundation clients, opened an office in Greensburg, its sixth.

People have found the need for more comprehensive financial planning, rather than just playing the markets, Fleming said. We take a look at clients’ estate planning, insurance needs, investments, retirement planning, business succession … all of it. That’s all part of what we call master planning, which my dad started in the 1960s.

Fleming, 53, joined the company founded by her late father, Willard Bill Tillotson Jr., years after graduating from Northwestern University, where she also found time to obtain her license to sell securities. She then became an equity analyst at Duff & Phelps and portfolio manager at Bank of America, before returning to Pittsburgh in 1987.

In 1995, Fleming was named president. In December 2010, she was elected chief executive and chairman. That was three months after the death of her father, then 82, who as chairman was still coming into the office on occasion.

Last fall, clients Renny and Linda Clark put a home-buying decision into Fleming’s hands. The Squirrel Hill couple contemplated building a house in North Carolina’s Outer Banks, where they’d vacationed for years.

We said, Kim, can we afford this?’ Renny Clark, 69, recalled. And she came back and said, yes.

Part of Hefren-Tillotson’s success during down markets is that it avoids putting clients in risky and volatile investments, such as mortgage-backed securities or collateralized debt obligations.

We’ve stuck to plain vanilla investments, said Fleming. If we don’t understand it, we don’t recommend it.

The firm has no proprietary funds of its own, but rather places clients in mutual funds of other firms, such as Pimco, or American Funds. The strategy, however, has its detractors.

If you ask clients how much risk they are willing to tolerate, you also have to know how much risk there is in the investment you’re recommending, said Ronald Heakins, president of Oaktree Investment Advisors, Shadyside.

The growth of clients and assets under management at smaller investment advisory firms following the 2008 financial crisis outstripped that of major, full-service, brokerage firms, said research from Aite Group in Boston.

Managed assets grew by 24 percent at smaller firms in 2009, by 16 percent in 2010, and by 3.3 percent last year. The big firms’ managed assets grew by 13 percent in 2009 and by 8 percent in 2010, but shrank by 2.2 percent last year.

We’re still seeing (client defection) from the big firms, like Merrill Lynch and Morgan Stanley, said Sophie Schmitt, senior analyst for Aite.

The big investment banks were the most heavily involved in the financial crisis, packaging problem assets that were sold, she said. So, being affiliated with those investment banks tarnished the larger (investment advisory) firms.

Marvin Tuttle Jr., CEO of the Financial Planning Association in Denver, said smaller firms won money management business because of their comprehensive approach to financial planning.

It’s about understanding financial planning relationships and that service is … being (clients’) partner for life, Tuttle said.

There was more of a cookie-cutter approach at other firms we’d looked at, said Clark, vice chancellor of community initiatives at the University of Pittsburgh, contrasting the styles of other, unnamed money managers with Hefren-Tillotson’s.

Thomas Olson is a staff writer for Trib Total Media. He can be reached a 412-320-7854 or at tolson@tribweb.com.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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