Present at NAPFA’s Beginning 

Michael Leonetti of Fairport Wealth/Leonetti & Associates

By Kevin Adler

Ever wonder why NAPFA is based in the Chicago area? You can thank Michael Leonetti, CFP^®, CFS^®, AIF^®.

When NAPFA started in 1983, Leonetti was among the founding members. By the time he became the organization’s third president in 1985, the board realized it had a logistical problem. “The headquarters location changed with each president every year,” Leonetti says. “This caused confusion for our members, and finding us was driving the press crazy.”

Leonetti’s firm, which he opened in February 1982, was doing quite well, and he’d recently decided to rent a larger suite in Buffalo Grove, IL, a suburb 35 miles northwest of Chicago. He gave NAPFA space within his suite, and the organization later sublet from him and then moved into its own space in the same building. NAPFA has been in the Chicago area ever since.

That’s one of many examples of the can-do approach that drove NAPFA in those early years, as members used whatever expertise and resources they had to develop and promote Fee-Only financial planning (see “Now, Let’s Talk About VEBAs” below).

Growth and Evolution

The evolution of Leonetti and Associates parallels NAPFA’s, in that it’s grown remarkably and adjusted to changes in the financial planning world while staying true to its principles.

“I wanted to build a firm that’s big enough so there was support and backup for everyone in the office,” Leonetti says. “I wanted to build an organization with a reputation for high-quality service and that also gave everybody a life beyond work.”

Today, he’s the managing director of Fairport Wealth/Leonetti & Associates, which has $665 million in AUM. It’s still located in Buffalo Grove and has a team of 10 professionals who are wealth advisors and client service members. Firm loyalty is off the charts, as managing director Deborah Feldman, CFP^®, has been on board since 1984, and several others have been there for more than 20 years.

Staff has stayed with Leonetti in the Buffalo Grove branch through a series of ownership transactions that began in 2008, when Leonetti sold partial ownership of his firm to Sanders Morris Harris. After a series of transactions over more than a decade, the firm reached its current status as 100% owned by Hightower Advisors LLC, an SEC-registered investment advisor. Hightower had acquired Fairport Wealth in 2017, then Leonetti and Associates in 2019, and other RIAs more recently. Leonetti says he’s been pleased with the ability to retain autonomy in attracting and working with clients while benefiting from the scale and scope of a larger firm.

Fairport Wealth’s investment team now leads the investment strategy, and Leonetti says that the tactics differ slightly from how his Buffalo Grove team practiced. For fixed income, Leonetti and Associates mostly used individual bonds (high-yield corporates and Treasuries). Fairport introduced more ETFs and bond funds into clients’ portfolios. During 2022, the value of the bond funds dipped because interest rates increased, and Leonetti says his wealth advisors explained to clients the source of the volatility compared to straight bond purchases.

On the equities side, Fairport’s tactics also differ slightly. Leonetti “put our best picks in” and used ETFs for the remainder, while Fairport has a larger number of individual stocks, though they each make up only 1% or 2% of a client’s portfolio.

Fortunately, Fairport Wealth/Leonetti & Associates has the right people in the right positions to make those investment and planning decisions. This is a legacy of Leonetti’s practice of hiring in advance of need “because you don’t have time to hire and train people right when you’re overloaded.”

Proper staffing also is smart business, he explains. “When I was the sole owner and hired someone, I was making a decision to make less money,” Leonetti says. “The profit would take a little hit, but then it would go back up when we got more volume.”

Yet, finding the right person is never easy, Leonetti says, and he lists staffing as the biggest challenge the firm faces today.

Sticky Client Relationships

Investing with the long term in mind has enabled the Buffalo Grove office to build a roster of about 400 high-net-worth clients. “They need their questions answered, how to best position their money to achieve their goals, a trusted source who knows them, and a plan for now and the future,” he says.

Nothing is more important than being that trusted resource, Leonetti says. “Our retention ratio historically has been over 99%, and most of those losses were due to death. We believe in building that relationship and making it sticky,” he says.

Stickiness starts with great communication. The firm produces a quarterly client newsletter and provides other regular updates, but Leonetti says it takes much more. “Getting to the trust level is not just giving good advice—but giving it in a way the client can understand. They can call you and be confident you can explain how they can achieve what they want to achieve,” he says.

Sometimes, being a trusted advisor means saying no. Leonetti recalls a recent conversation with a widowed client who wanted to take an extra vacation this year. Given the decline in her portfolio due to the overall market downturn, Leonetti advised her to wait. “I told her we’ve lost some of the cushion that you had before,” he says. “She then sent me an email to say thank you. She had felt like that was the situation but needed somebody to confirm it.”

Client service can go even further. One time, both members of a couple that was a longtime client of Leonetti & Associates became seriously ill. One of the firm’s senior client services staff members started making a few dinners for them and driving them to the couple’s home in the evening. “They were friends already, and they became even closer friends,” Leonetti says.

The reputation for exceptional service has its rewards in referrals, too. For example, a few years ago, a CPA brought to the firm a couple in which the husband was terminally ill. “I met him only once,” Leonetti says, “but we continue to be the advisors for his wife and daughters.”

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Now, Let’s Talk about VEBAs NAPFA’s creation can be traced to the Society of Independent Financial Advisors (SIFA). In 1982, some SIFA members decided that they wanted to work together to develop a financial planning model that did not rely on selling investment and insurance products. This led to the meeting in 1983, at an Atlanta airport motel conference room, of what became NAPFA (for more on that meeting, see “The Beginning Of NAPFA” in the April NAPFA Advisor). Michael Leonetti was at that seminal event, which was attended by about 125 people, and he particularly recalls one incident. “The night before the meeting, I was talking with John Sestina, Jim Schwartz, and Bob Underwood, and they asked if anybody knew about VEBAs, which are voluntary employees’ beneficiary associations. I said yes, and we talked a little more. They said they had an open speaker’s slot and asked if I could do a presentation on VEBAs,” Leonetti says. “This was about 10:30 pm, and the session was the next day. I just winged it and answered questions as best as I could.” That’s pretty much what NAPFA was in the early days—whoever had knowledge, skill, or resources shared them with the group. Everyone pitched in. “It was a great group of people,” Leonetti says. “They all had an interest in doing the best thing they could for their clients. Nobody talked about products or sales or even revenue. They just wanted to know ‘can we form a group, who we can we trust, and who our clients can trust.’”

 

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Fairport Wealth/Leonetti & Associates

Location: Buffalo Grove, IL

Website: FairportWealth.com 

Year founded: 1982 

Number of staff: 10 in Buffalo Grove office; 54 across the Fairport Wealth enterprise

Number of clients: 400 served by Buffalo Grove; 3,000 across the Fairport Wealth enterprise 

Total assets under management: $665 million served by Buffalo Grove; $3.7 billion across the Fairport Wealth enterprise 

Typical client needs: “How to best position their money to achieve their goals, a plan for now and the future. Clients have questions that need to be answered, and they want a trusted source who knows them.” 

Typical investments: Mixes of equities, fixed income, alternatives, and cash, depending on the client’s goals, time horizon, risk tolerance, and risk capacity. 

Favorite financial planning websites: Kitces.com and the DACFP.com (Digital Assets Council of Financial Professionals, founded by Ric Edelman) 

Piece of advice to fellow NAPFA members: “If you focus on the client, your business will succeed. That is what NAPFA is all about. People are paying you for advice, not to sell you more insurance. You want those people to feel confident and comfortable.”