In 2013, Brian Boughner, a financial services industry veteran, made the leap to launch his own shop in Greenville, South Carolina. He named it Parallel Financial, with the idea that the firm’s and its clients’ interests would never be at cross purposes. While his original concept was to build model portfolios for other RIAs, he soon found himself managing client assets directly as well. Today these continue to be the central business strands of the company’s $230 million under management. A couple years after founding Parallel, Brian recruited a former colleague, Greg Towner, a fellow CFA charterholder, as CIO. Today a team of ten work to provide risk-managed portfolios and comprehensive financial advice in service of their high-net worth individuals, with a particular concentration of small business owners. They apply a similar philosophy to the model portfolios they build and run for other RIAs. We spoke with Brian and Greg to find out more about their successful business, their investment philosophy and how they integrate technology, including Blaze software, into their practice.
Blaze: Brian, Greg, what inspired you to first get into asset management and then to start your own firm?
Brian: It wasn’t a straight path, although I did major in business at Florida State. I started working at Schwab in 1999, the same year Greg got into the business. In fact, that’s where we originally met. Getting into the investing world at the height of the tech boom was a formative experience for both of us. We had a firsthand view of risk — and it was only eight years later when we saw it again in the financial crisis.
Greg: My undergraduate degree was in sports management — I thought I might be working in the front office of the Knicks someday. I was managing a fitness club in Orlando in the 1990s and we had a lot of clients who were in the money management business. We were in the midst of the tech bubble and conversations naturally gravitated to stocks and investing and I sort of caught the bug. I got my MBA and joined Schwab the same year.
Brian: In terms of starting Parallel, up until then I’d worked for large organizations, which had its plusses. But I’d also developed my own ideas about risk management and optimal portfolio construction which I was not able to fully implement. I’d seen a lot of financial damage in the bursting of the tech bubble and in the market collapse in 2008-09 and thought there was a better way.
Blaze: How have you grown your business?
Brian: To start with we had a lot of industry contacts. But like most RIAs, most of our expansion has come from referrals, which shows in our geographic footprint. The bulk of our high net worth business is within our Southeast region. Our RIA portfolio business tends to be wider spread, but still has a East Coast weighting. We do regular outreach through webinars and LinkedIn networking, both of which produce new leads and clients. In the end it’s all about building trust and credibility which only develop over time, but which then become the foundation of referrals.
Networking is also important. I’ve started and helped lead two RIA mastermind groups. It’s helped connect some interesting folks in our business and made some great friendships. There are always better ways to do things and I’ve found that meeting folks and talking it out can be a great help. We do monthly, informal video calls to stay in touch and trade ideas. For instance, I’ve had some success doing webinars, and now another guy in the group has started doing the same in his market.
Blaze: Tell us more about your investment approach.
Greg: Both of us are CFA charterholders as well as CMTs, Chartered Market Technicians. We believe strongly in a systematic, methodical approach that doesn’t rely on just one tool or method. From the start we wanted to attack the emotional side of investing. It’s in the title of a paper we wrote a few years ago called “The Greatest Obstacle to Investing is Emotional Behavior.” We try to mediate this. This involves security selection, where we have developed extensive quality screens. We believe owning companies with solid balance sheets and enduring business models will serve our investors over time by providing a less volatile, smoother investment experience. We add a rules based strategy which prompts us to reduce equity exposure when stocks trip a preset level of loss. We aren’t going all in or out of the market, but on the margins we try to smooth out volatility.
Brian: We summarize our approach as our QRLT system: Quality holdings, Rules based, Liquid and Low cost and Tax sensitive.
Blaze: Providing asset management to other RIAs seems like an unusual business model. Can you expand on what you do?
Brian: You’re right — it is unusual. But keep in mind we came into the RIA business as money managers. That was our expertise and perspective. We knew that many RIAs do not want to be portfolio managers, yet many of the available options add significant expenses. As a small, lean shop we believe we could provide an array of quality portfolios for less. This was really Parallel’s original business — we got into comprehensive financial advice only later.
Blaze: How is technology important to your practice?
Brian: Scale. When I first started I would spend half a day executing trades while still trying to attend to clients, business management and marketing. Now using BlazePortfolio we can make these kinds of trades quickly and efficiently across platforms. Managing money for third parties has all sorts of complications. RIAs will give us a certain timeframe for transitioning a new client. We will get specific security requirements, for instance when a client already owns a substantial amount of a given security. Managing all these exemptions would be impossible without rebalancing software. Honestly, it’s been a godsend. Technology has also been essential to us through this COVID-19 period. Thankfully we’ve been using virtual meetings through Zoom for many years now. Even before COVID a lot of our local clients opted for the convenience of meeting online. We were also perfectly set up for remote operation. Greg, for instance, always has worked remotely. We not only had everyone on laptops, but we were immediately attracted to solutions like Blaze because they are cloud-based. We don’t have to download software. We’ve never had our own server. We couldn’t have imagined that this flexibility would be tested by a pandemic, but it’s certainly shown its benefits over the first half of 2020.
Blaze: The COVID-19 crash in March and the subsequent volatility must have really tested your discipline. How have things been working out?
Greg: We’ve gotten through this so far in good shape. Most of our investors are old enough to have lived through previous periods of market losses and many of them gravitated to us because they, particularly retirees, don’t believe they can weather another one of those. While many RIAs have firm allocation disciplines or believe in buy and hold through every crisis, we are willing to judiciously use stop losses, to raise cash and try to soften the downside. It’s really reduced the sort of panicky calls which seem to be prevalent in markets like we’ve had. Fear and greed are ever present. We try to reduce these primal instincts, but you can’t eliminate them entirely.
Brian: Which is not to say our system is perfect. We beat our benchmarks in March, but raising cash meant slightly trailing the subsequent steep recovery which has surprised a lot of investors, including us. But we’re willing to give up some of this sharp upside for a smoother ride overall.