Pathfinder Awards Winner David Hou of Evoke Advisors Discusses Importance of Intellectual Capital and Private Markets Expertise in Serving Sophisticated Investors
Many financial advisors look across at their colleagues serving the high net worth (HNW), ultra-high net worth (UHNW) and institutional investor segments and wonder, “what makes them different?”
Well, let’s start with how the HNW and UHNW client segments aren’t the easiest to serve. These are clients who can be exceptionally precise and demanding of their financial advisors in terms of service experience, performance results and performance reporting, combined with very lofty expectations for frequent, proactive and highly detailed communication.
How did wealth managers successful in the HNW / UHNW space get there, and is the grass greener on that side of the fence?
Driving Exceptional Growth
Our AAPI RIA Leader of the Year, David Hou, Managing Partner at Evoke Advisors, knows this space intimately after co-founding the independent RIA firm in 2019 to serve HNW, UHNW and institutional clients across the country.
Simply looking at the growth numbers for Evoke Advisors would suggest Hou and his colleagues have cracked the UHNW code in many respects.
The firm expanded from $4.75 billion in assets at the end of 2019 to almost $26 billion by the end of 2021, driven by organic strategies as well as Evoke Advisors joining forces with ARIS, an institutional investment firm, as well as the KPB team from Bel Air Investment Advisors, both events that took place in 2020.
Moreover, Evoke also created the first-of-its-kind RPAR Risk Parity ETF, which employs risk parity to provide a balanced index strategy in a cost-efficient structure. At $1.4 billion in assets, RPAR is now the largest alternative ETF in the U.S.
Beyond the Numbers
Going beyond the numbers, perhaps one of the most impressive elements of the growth of Evoke Advisors is the fact that many of its HNW and UHNW clients are themselves highly successful investment professionals.
This means the Evoke team must operate at an especially elevated level of financial sophistication to win and build trust with their clients, who don’t shy away from asking tough questions on complex topics.
We spoke with Hou to understand the vision behind Evoke Advisors and the unique attributes that have made the firm successful, together with ways in which the broader wealth management industry can drive greater AAPI representation.
WSR: What was the Evoke founding leadership team’s vision for the firm when you all first launched in 2019? And has that vision changed since then?
Hou: When Mark Sear and I co-founded Evoke Advisors in May 2019, we shared a vision of substantially elevating the experience and outcomes we deliver to high net worth, ultra-high net worth and institutional clients across the country.
With nearly $25 billion in assets, we serve clients who are among the most discerning and sophisticated investment professionals and C-suite officers in their own right.
These are very demanding and precise clients, and we serve them effectively because Evoke Advisors is, first and foremost, a data, research and analytics organization that strives to uncover and access premier investment strategies for our clients.
Wealth management firms that lack our extent of technical expertise wouldn’t be able to identify and execute on the investment management solutions we align with our clients.
Consistent with this approach, we assembled Evoke Advisors by bringing together some of the most experienced and insightful financial advisors and research team members in our industry.
By continuously hiring and cultivating great investment talent across our team, we constantly enhance our process and portfolios for clients.
The better we execute, the more clients will find us while referring others who are of a similar background, making our platform even stronger. It’s a virtuous loop.
WSR: What makes Evoke unique in terms of capabilities and solutions for clients?
Hou: What really makes Evoke Advisors unique is our emphasis on intellectual capital. Each one of our professionals – including client-facing financial advisors – has day-to-day research and analysis responsibilities.
Why? Because we serve many of the most sophisticated investment professionals in the country, our people must be able to speak the same language as our clients.
When C-suite officers, hedge fund managers, private equity and venture capital investors understand their wealth managers can address incredibly detailed and precise questions, supplemented by constant client communication, it typically drives a sense of relief. “Great, that’s one less item of complexity in my life that I need to potentially micromanage.”
Another key differentiator for our firm is how we’ve continued to aggressively build on our early mover advantage in private market investments, which we define as investments that are generally illiquid, including hedge funds, private equity, private credit and real estate. Our strategy also includes non-correlated investments such as music royalties, healthcare royalties and life settlements.
We stand out from the pack in that many members of our leadership team were identifying and executing on private market opportunities for clients long before this segment of asset management was significantly on the radar for most wealth managers.
We also differentiate ourselves from other wealth managers involved in private market investments because we focus on the middle market, where there are more unique undiscovered and differentiated opportunities.
As just one of many examples of how we’ve continued to expand on our early mover advantage in this space, we’ve refined investing in the operating companies of alts managers, versus the LP funds that these alts managers launch.
With this approach, our clients own a part of the operating business, versus solely being an LP in the investment product. This special structure and access provides our clients improved terms on fees as well as participation in promotions typically only reserved for the GP.
None of this would be possible without our ability to research and conduct due diligence at a level of sophistication and complexity that rivals some of the largest institutions in the investment management sector.
WSR: How is the wealth management industry overall doing when it comes to promoting greater AAPI representation, and how can the industry keep improving in this regard?
Hou: There’s no question that wealth management could do better in terms of promoting greater AAPI representation.
For example, a CNBC article from May 2021 reported that Asian Americans on Wall Street felt invisible at work or perceived as permanent foreigners in the office.
And that shouldn’t be surprising when you look at how relationship-driven wealth management is generally. Asian Americans may be receiving less support internally from their firms than necessary to succeed in this profession.
But the industry can be part of the solution. In large part, this means improving AAPI representation by hiring and promoting more Asian Americans at the executive level.
At Evoke Advisors, we embrace diversity as a strength – because diversity matters for innovation, profitability and changing business needs.
We have AAPI executives at the most senior level and throughout the firm – And every day we reap the rewards of creating value, by drawing from our rich and diverse backgrounds.
Janeesa Hollingshead, Executive Editor at Wealth Solutions Report, can be reached at email@example.com