When Tom Lydon's receptionist told me that he was on the phone and would have to call me back, I couldn't have been more surprised. As a journalist who's refrained from the "gotcha" reporting so rampant in the mainstream media these days, I've gotten kind of used to people wanting to talk to me, either to tell me how great they and their business are, or at least to tell their side of a controversial story. But more than that, in the many years I've known Lydon, I've never known him to miss an appointment or blow off a call. So, when I called for our scheduled interview, it never occurred to me that he wouldn't take the call.
He phoned back a few moments later, very apologetic, explaining that he had gotten a call from a prospective client with an $8 million portfolio formerly managed by three brokers. He'd seen Lydon on CNBC, liked what he heard, and logged onto Lydon's Web site, and liked what he saw even better. After getting the names of some current clients he could talk to, the guy was calling back with just one question: "How soon can you send me the paperwork to move my accounts?" Okay, so maybe that was more important than a call with me.
Probably the best part of being a journalist is getting to write about the success of old friends. I met Tom Lydon so long ago I can't even remember when it was–probably on a golf course while we were both playing hooky from an industry conference in some warm, sunny location (aren't they all?). Over the years, we've played a lot of golf together, while I've followed Tom's career building his advisory practice–Global Trends Investments in Newport Beach, California–and becoming one of the most respected and possibly the nicest financial advisor in the country (and that's saying something, in a profession largely made up of incredibly nice women and men).
A compulsive joiner and natural leader, Tom is one of Schwab Institutional's leading advisors, a founding member of an organization now known as the National Association of Active Investment Managers (NAAIM, formerly SAAFTI, for those keeping acronym score), serves on the board of directors of US Global Advisors and Rydex Investments, sits on PIMCOs's advisory board, and is one of a handful of advisors invited to participate in Chip Roame's CEO Summits.
Yet as seems to be more the rule than the exception, popularity and stature within the advisory profession don't always translate into a successful practice. Lydon's is one of those not-infrequent cases where it took him 25 years to become an overnight success: within the past two years, his client assets under management have increased 50% at a time when many advisory portfolios are experiencing a similar change but in the other direction. Tom's story is more than one of simply being in the right place at the right time: His continuing search to find better ways to manage client money–and better tools with which to do it–offers a model for many advisors today who are searching for new strategies to restore client confidence and perhaps manage downside risk a bit more effectively.
An Early ETF Adopter
Always an active manager, Lydon was one of the first independent advisors to grasp the advantages of exchange traded funds–primarily lower costs, greater liquidity, and a broader range of asset classes–and to pass those along to his clients by using them in his portfolios. Through years of sometimes painful experience, he learned that despite what Modern Portfolio Theory and the clients themselves may tell us, many clients just aren't comfortable riding out the kind of volatility that most investment markets experience from time to time.
So in the late '90s he devised a disciplined strategy using ETFs aimed at avoiding the most severe downturns. The results can only be considered successful: down 3.7% vs. -38.4% over the past three years through March 31, 2009; and up 25.3% versus -39.6% since inception in December 31, 2000, through the first quarter of this year.
