2 min read October 2022 — The recent stock market downturn has become a new opportunity for investors to reassess what they are doing with their investments. “Everybody needs guidance,” Robert Fragasso, chairman and CEO of Fragasso Financial Advisors, Inc told Invest:. “So, the industry has a wonderful opportunity to continue to grow.”
What have been the biggest highlights and milestones for your company during the last year?
It’s a recognition of what happened from the onset of COVID, working from home is a viable long-term model. In 2019 we entered a strengthening initiative and we needed to look at everything, not just tech, but everything we do, and how we do it. That had been an unintended benefit for us. In some ways we were already prepared for what happened in 2020 when we were working completely from home for two years and we continued to add new assets. We continued to grow at a faster pace than before the pandemic. So, the biggest highlight of the last year is looking backward and saying, “Wow, we did that.
How do you compare the amount of capital searching for investment opportunities today when compared to pre-pandemic levels?
The amount of money in the publicly traded marketplace is greater than it was before in part because of the trillions of dollars thrown by the government into our economy which has caused inflation. They’re blaming Ukraine, they’re blaming Russia, they’re blaming supply chain problems, they’re blaming the Federal Reserve for keeping interest rates too low for too long. But it’s all that money that went into the economy, the rest is just an aside.
So, we are seeing a large amount of money more so than in the past. People realize that this is a temporary phenomenon and there’s an awful lot of cash overhanging the market that’s publicly traded. On the venture capital side, I think it’s probably the same. I don’t think it’s larger. I don’t think it’s diminished. I think that there’s still an awful lot of money out there looking for productive investment opportunities.
Do you think investors are learning the lesson from the recent stock market downturn?
History just keeps repeating itself. The fact that individual investors have been able to garner increasingly sophisticated tools doesn’t mean they can avoid a market crash.
What was true way back 50 years ago, where everybody is brilliant in the bull market because they feel they make no mistakes, to where they are soundly chastised when the market reverses – that’s still true. Every time that happens people reassess how they’re handling their investments, and it may be that they were doing it themselves and feeling pretty bright.
It’s true today. So, when people experience a down market, they recognize that may not be their strong suit. And then they look for professional guidance. In all cases, the downturn is a realization incident for investors. And that will continue going forward.
What are your strategies to recruit and retain talent?
The education component has been key. All employees need to continue to educate themselves and it’s our job to provide the opportunities and the vehicles, whether it be internal or the pursuance of continuing education, whatever it might be. Retention has not been a problem. We don’t typically lose clients and we don’t typically lose employees. That means that we keep better than 95% of both categories.
We have a methodology to help someone who’s underperforming, but we also have a methodology to kindly, humanely approach the situation when an employee is no longer a fit. We have kept everybody we wanted to keep.
What do you think is the main labor challenge now?
What we’re finding is that the marketplace pricing for new employees has accelerated faster than the existing salaries, and we have increased our salaries and our bonus structure for our employees, but the effects of inflation on new pricing for employees have gone up faster. Not just the rate of inflation, the headline rate of inflation, but the actual recruitment inflation. I can bring somebody in who’s lateral to you, and I paid them more than you because of the market demand. So, what does that do to you? What happens to your supervisor when you’re starting to bump up against your supervisor? It becomes a domino effect that isn’t favorable to the bottom line. So, we’re grappling with how to do that. We don’t have an answer at this point.
How does your company differentiate from other companies in the market?
There are a lot of independents that are broken off into small firms of one or two or eight or nine and they don’t have the capital or the revenue stream to create a full range of products and services. For example, a family practice here in Pittsburgh broke off from a very large firm and does a very good job for the clients. But they are not in the retirement plan business. Well, this family practice firm contracts all of that to us and split revenue. They don’t have the capital investment or the personnel expenditure, so they use us on a user basis. They only pay for what they use. Therefore, it’s economical for them, it’s good for us. That kind of capability is what sets us apart in the market.
What is your outlook for your firm and the financial industry in Pittsburgh for the next two to three years?
The industry is going to be good because of the demographics and because there’s a tremendous transfer of wealth in the aggregate, also with the contributory retirement plans that have taken the place of defined benefit plans, employees who are retiring with a large sum of money wherein they have to roll over and make intelligent choices to self-govern how that goes. If you look at the transfer of wealth, you look at the opportunities to help people with their retirement plan assets and you look at the other pockets of wealth that we access and service, for example, in the nonprofit sector. Nonprofits have surplus capital or endowment funds, or both. Everybody needs guidance. It’s only gotten larger. So, the industry has a wonderful opportunity to continue to grow.
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