At Omnia Family Wealth, you keep your clients close and your family even closer.
The multi-family office manages $1.7 billion in assets for just 50 ultra-high-net-worth clients, and at the heart of the firm is father-and-son duo Steven and Michael Wagner. Steven, the father, and Michael, the son, have worked together since the latter graduated from Brandeis University in 2006. Together, they have made career jumps from UBS to Merrill Lynch in 2009 and from Merrill to independence in 2015, when they launched Omnia Family Wealth with the backing of Dynasty Financial Partners.
For Michael, the chance to join his father in Aventura, Florida represented much more than just an escape from the harsh New England winters. It was an opportunity to pursue his newfound passion, having switched majors from computer science to economics while he was still an undergrad.
‘I had some luck in terms of my timing in the business, as I was able to be on a team at a firm and witness the financial crisis. I got to study how people responded in that sort of scenario,’ recalls Michael, the firm’s co-founder and managing director of investment management. ‘I think that sort of tempered everything for me. That’s how I got my start in this business.’
Joining the dynasty
Michael was the only one of Steven’s four children that decided to join the business. ‘I’m fortunate that I have one who had any interest at all in what I do,’ jokes his father, the co-founder and chief executive officer of Omnia Family Wealth.
When Michael interned at the firm while still at school, Steven made sure to give him plenty of analysis to do, offering him a genuine opportunity to decide whether or not he liked his father’s line of work. Clearly, the lesson stuck.
‘That was just my way of throwing things at him that he might be doing later on if he decided he wanted to do this kind of work,’ Steven recalls. ‘I’m very blessed – I say it every day – to have my son and my surrogate son as such wonderful partners. They’re so committed to the vision that we’re trying to achieve here.’
That ‘surrogate son’ is Ivan Hernandez, co-founder and managing director of wealth structure and planning. Hernandez first met Steven while at UBS, and the two quickly built a friendship over chance meetings at the office’s Bloomberg terminal.
‘At every wirehouse, there are one or two Bloomberg terminals strewn about the office. We kept finding each other there and having nice philosophical discussions,’ Hernandez recalls. ‘Steven and I have been together for a long time.’
When he learned that Steven was working toward getting a private wealth accreditation to manage ultra-high-net-worth clients, he quickly followed suit. The two jumped to Merrill together in 2009 and later went independent.
‘Back at UBS, we saw we had a lot of philosophical alignment,’ Hernandez says. ‘Steven’s integrity and the business that he built were incredibly attractive to me, and I wanted to build something greater than even the two of us combined.’
Outside the box
Hernandez and the two Wagners and have since built an independent RIA which embodies their personalities and sense of camaraderie. Making the leap from the wirehouse model was an opportunity to remove one more barrier that separated them from their clients.
‘We looked at the landscape of the industry and what had been taking place in the consolidation of all the firms and the banks. That had created larger and larger institutions,’ Steven says. ‘Quite frankly, we all understand that larger institutions mean more bureaucracy and less ability to navigate the intricacies of some of our families. We wanted to do things that were outside of that box, so to speak.’
The firm’s clients are almost exclusively what Steven refers to as ‘wealth creators’ – typically first-generation entrepreneurs. The firm also serves hedge fund managers and venture capital investors, and the average net worth of an Omnia client is $50 million.
‘For a lot of them, they’ve built a business and then woke up one day and found that they were very wealthy,’ Steven says. ‘But the passion is in building the business.’
Each of Omnia’s clients has a unique set of needs, often revolving around succession planning and philanthropy. With its top team spanning three different generations, the firm considers itself well-equipped to deal with any challenge it encounters.
‘Between myself, Ivan and Michael, we actually cover three generations. Baby boomer, Gen X and millennial,’ Steven says. ‘The families we work with really appreciate that because, quite frankly, different generations communicate differently – they look at people differently. Millennials don’t want to be talking to me. They want to talk to Michael.’
The family recipe
Omnia Family Wealth totally avoids model portfolios when building investment roadmaps for clients. The firm creates an individual blend of actively and passively managed stock and bond funds for each client, giving them the chance to invest directly in alternatives such as private equity funds, esoteric hedge funds and real estate. The firm uses a third party to carry out a quantitative tax-loss harvesting strategy for clients that expect to face large capital gains tax bills.
Client money is invested in around seven mutual funds across fixed income and equities, five or six hedge funds, and five or six private equity funds, along with a handful of real estate vehicles.
In equities, around 60% of assets are invested passively. The remaining 40% is invested in actively managed strategies – largely in international markets, where the trio believes active managers can really add value.
‘We’re believers, generally, in emerging markets,’ Michael says. ‘So if you look at US equities, I think you’re a lot less likely to find an active manager worth that increased expense. If you’re looking at emerging markets – especially from the debt side, let’s say – I’d argue that the markets are less efficient, so a smart manager can have an edge. We’re much more likely to use active management there.’
No longer restricted to a wirehouse platform, the Wagners and Hernandez have turned a critical and clinical eye to the alternative vehicles now open to them, thanks to their multi-family office structure.
Around 20% of assets are in hedge funds chosen for their low beta, including fixed income relative value, market-neutral equity and volatility arbitrage. A further 15% of assets are in private equity and private real estate strategies.
‘We believe that a lot of the hedge fund industry today is uninvestable. There are a lot of guys out there who are charging pretty high fees and aren’t delivering any value. There’s too much beta in the investments,’ Steven says. ‘Some of the consultants that we work with are now putting together a group of managers to achieve a specific investment objective: no beta in the market and an independent source of returns.
‘With interest rates trending higher, we believe that the possibility exists for both equities and fixed income to move together in a negative direction. We have been investing heavily in hedge fund strategies that have little or no beta in the markets,’ he adds.
Big names, small fees
When it comes to managing money passively in the public markets, the team turns to some more familiar names.
‘On the passive side, we go for firms such as Vanguard, with high tax efficiency and extremely low expense ratios. Charles Schwab is another one that has come down in its expense ratios,’ Steven says. ‘It has been a race to the bottom in indexing, and that’s been quite beneficial for clients.’
With such a small number of clients and a tight-knit office, every jolt to the market feels that much tougher, and every correct call feels that much sweeter. ‘We know every day whether we’re succeeding or not,’ Steven says.