In Your Best Interest: An ALM First Podcast

1. Introducing In Your Best Interest with Emily Hollis

August 10, 2020 ALM First Season 1 Episode 1
In Your Best Interest: An ALM First Podcast
1. Introducing In Your Best Interest with Emily Hollis
Show Notes Transcript

In the premiere episode of In Your Best Interest, we sit down with ALM First CEO, Emily Hollis. Emily joins us to discuss the history and leadership of ALM First. The company celebrates its 25th year in business and we dive into how ALM First got started and the future of the business as it looks ahead. 

Emily Hollis, CFA:

I truly believed in our vision. I truly believed that being a fee based advisor and not having the capabilities of marking up bonds was the way to go. And the persistence and dedication really paid off. Now, let me tell you, it was very difficult the first 10 years with me and my family, but, it again, really paid off.

Mike Ensweiler:

Thank you to everyone joining us today for the premiere episode of In Your Best Interest the ALM First podcast. My name is Mike Ensweiler, and I will be your podcast host. I am a principal at ALM First and oversee our business development, marketing, client relations functions, as well as our educational offerings. Someone recently asked me,"Why start a podcast?" Well, the simple answer is that it stems from our clients. We share a lot of information through a variety of educational offerings, including webinars, research pieces, conferences, speaking engagements, and so forth. With so many people working from home these days distracted throughout the day, and looking for meaningful information and insight, this is another channel for us to deliver timely and relevant content in a more relaxed fashion, and have a little fun along the way. So what better way to kick everything off than with the person who started it all for ALM First, our CEO, Emily Hollis. Prior to ALM First, Ms. Hollis was Vice President for Kidder Peabody Asset Management, Chief Investment Officer for a large wholesale financial institution and an Investment Trader for a New York stock exchange t raded company. Since ALM First was established in 1995, under her leadership, the company has steadily grown to a client base of more than 300 financial institutions, which represent more than$680 billion in assets. I'm very excited for us to talk with Emily about the lessons she's learned throughout her journey this far a nd the successful 25 year history of the f irm. Thank you so much, Emily, for joining us today. We're really excited to have you on our first podcast. You know, we've gotten to know each other pretty well, and I know that you don't always have, or didn't always have ambitions about starting a RIA. In fact, many people don't know that very early on in your career, you were extremely successful in an entirely different industry, which was also featured several times in the CFA magazine. I know you don't like to talk about it much, but it is so impressive to me how someone can be so talented, both left brain and right brain. Before we really dig in, would you be willing to share a little bit of your path that led you to graduate school?

Emily Hollis, CFA:

Thank you, Mike. Yes, I was an extremely talented child. I was sent to New York, at a very early age because I had a great talent in both piano and ballet. I was offered a scholarship actually to the Julliard Arts Academy in New York City of which I turned down because I was also offered a professional position in a ballet company. So I did that for four years and realized that it wasn't really my passion, uh, touring and constantly hurting.

Mike Ensweiler:

Yeah, I can imagine.

Emily Hollis, CFA:

So, fast forward and I had a fantastic opportunity at SMU. They offered me a full ride, a scholarship to get a dual master's, an MBA and a MA. And, because I had really high scores on the math section of the GMAT and because of my arts background and I took it. And as I was studying for the dual masters, I realized there's no way I'm going to use the art side of the degree, the MA degree, because I absolutely loved my math classes. I loved the finance courses, my real estate finance, and it got me really excited. So, that's how I ended up in MBA school and finishing off in the finance area.

Mike Ensweiler:

Is that what really got you interested in finance?

Emily Hollis, CFA:

Yes, it did, and couple that with my father, he was in the stock market every day and in the old days without computers, I used to watch him, you know, chart his stocks at the end of the day. And so I knew I wanted to go into investments.

Mike Ensweiler:

And so is that what prompted you to start ALM First?

Emily Hollis, CFA:

Not really. I went into a couple of positions where I was on the buy side, a big company here in Dallas. It was called Uccel it was taken over by Computer Associates. And I was in the treasury area where we did, foreign currency options and a big fixed income portfolio. And I loved it. And then I had an opportunity to go to Kidder Peabody Asset Management. It was the asset management division of Kidder Peabody. And I thought that would be my absolute dream job because it was supposed to be in the mutual fund management area, but lo and behold, nine months into it, Joe Jet, the rogue trader from Kidder brought the whole company down with the$310 million loss. And we had a gentleman by the name of Tom Manley and I had, contracts. We had, positions offered to us from Mitchell Hutchins, which is the Paine Webber division, the asset management division of Paine Webber? And if we were to be fired without cause we would be paid out. And at the time we were seeing all these brokers selling credit unions who were very, very unsophisticated at the time. All these CMO's, remember the days of the CFO's and the, you know, mid 1990's, so the support tranches and marking them up like crazy. So we thought we're going to start our own company where it's fee-based asset management and save the credit unions from these rogue brokers. And we just had to be fired by Kidder Peabody, which we were without cause, got the money and started ALM First.

Mike Ensweiler:

So how did you come up with the name ALM First?

Emily Hollis, CFA:

Great question. We started off the company with the name Strategic Advisors and we're not getting much business. So we thought when we were building the investment strategies that we really need to know, we really needed to know what was inherent in the balance sheet of the organizations that we were putting an investment strategy together for. So we were doing ALM reports. So it dawned on us that that to differentiate ourselves in the marketplace was to have the name ALM First Investment Advisors. So we then changed our name and promoted what we were doing with the philosophy of doing ALM first and then building an investment strategy. In subsequent years, we changed our name again to ALM First Financial Advisors as we developed more, u m, financial type of business'.

Mike Ensweiler:

Yeah. It seems like it's evolved over time from more than investment advisory to full balance sheet consulting. And it seems like having that framework, understanding the interest rate risk position where the risks are in the balance sheet makes a whole lot more sense than trying to do that in a vacuum, so to speak.

Emily Hollis, CFA:

Absolutely, and we evolved because of our clients and their needs. It's been, awesome to watch.

Mike Ensweiler:

So currently ALM First works with credit unions, banks, non-depository mortgage originators, soon to be some insurance companies. But we're known primarily for working with credit unions. How did ALM First, or how did you get started with credit unions?

Emily Hollis, CFA:

Great question. I forgot to mention this because starting off in several jobs is probably too lengthy, but in between computer associates and Kidder I had a brief stay at Southwest Corporate where I was the Chief Investment Officer and met people in the credit union industry and one person that I have to give huge recognition is Jane Sansone, the CEO of EasCorp. She actually helped fund the company when we started it. And she greatly believed in the idea of an advisory company like ALM First and she helped sell our first few clients. So I really have to give her so much thanks. But that really helped us get into the credit union industry in the beginning.

Mike Ensweiler:

All right. We just talked about how you got started in credit unions. How has the firm diversified from credit unions?

Emily Hollis, CFA:

Basically clients left the credit union industry. They saw value in what we did and they took us with them. Most of our business in the early years, coming from clients, moving from institution to another. And of course by word of mouth. Our core competencies are very scalable to all depositories. And as we look on the rising, our ability to grow and add even greater value will come from having a larger client base.

Mike Ensweiler:

What are some of the key lessons that you've learned throughout your professional journey thus far?

Emily Hollis, CFA:

Probably the most important lesson I learned was persistence. We almost went bankrupt a couple of times, as you can imagine, early on. But I truly believed in our vision. I truly believed that being a fee based advisor and not having the capabilities of m arking up bonds was the way to go. And the persistence and dedication really paid off. Now, let me tell you, it was very difficult the first 10 years with me and my family, but it again really paid off. Other things are listening to your employees, you can learn so much by being open minded. I realized early that I had to gain trust in my employees so that they would see the vision than I did to know that this is going to work. We're really g onna make this work. Finding the smartest people you can. Surrounding you. That I think is a great lesson. Another one that somebody told me was, and I remember talking to this g entleman c ause I was scared all the time and he said, that's good. Be scared, even be frantic, but never ever show it. And I think that's what I did, especially early on.

Mike Ensweiler:

Yeah. There's a saying that complacency kills in having that edge, having that little bit of fear is a great motivator.

Emily Hollis, CFA:

Correct. It's an awesome motivator.

Mike Ensweiler:

So why do you think having an unbiased strategic partner like ALM First is so important for depository institutions?

Emily Hollis, CFA:

A fee based advisor is just a different model. And of course I believe it is beneficial, because it's exactly what the vision was because we are in biased. Brokers, they have a purpose, but their incentive is to buy and sell bonds. But if they don't, they don't make any money. Our purpose as a fee based advisor is to be held to a much higher standard as a fiduciary. We're SEC registered, we're SEC examined, they're our examiners and it is a higher standard. So it's definitely beneficial to work with us because of our expertise in investment management. And now that we have$30 billion under management, it even is more beneficial because of execution alone.

Mike Ensweiler:

Yeah. Smaller credit unions or smaller institution portfolios are able to benefit by having larger volumes, larger trades that are 30 plus billion dollar asset manager brings to the table.

Emily Hollis, CFA:

Absolutely.

Mike Ensweiler:

So looking back on your journey, is there anything you'd change or do differently?

Emily Hollis, CFA:

That's a hard question. Um, generally, no, but there were a couple of things in ALM First where I wish I would have failed a little bit quicker.

Mike Ensweiler:

It's tough. You know, you've been extremely successful and you always have a, can do attitude. I'm going to make this happen. I'm going to get it done. So that's great advice fail quickly. And don't, you know, spend more resources, time and energy than you need to, if you know that it's not going to be successful.

Emily Hollis, CFA:

You're absolutely right. And entrepreneurs tend to have that drive. We're gonna make this work. And that was a hard lesson to learn. But I think now it's so much easier.

Mike Ensweiler:

Yeah. So what other advice do you have for entrepreneurs or aspiring leaders who are just starting out in their careers?

Emily Hollis, CFA:

You have to be the hardest working person in your organization. I think that's where I see some young entrepreneurs just failing. They want to get wealthy quick and they have unrealistic goals and timelines, and it just takes a lot of work. You have to be prepared to give up so much in your life if you truly want to be successful and always know that you need to practice the behavior that you want your employees to have. So that would be my advice.

Mike Ensweiler:

Leading by example.

Emily Hollis, CFA:

Exactly.

Mike Ensweiler:

So you've been featured in a number of women in banking, conferences and publications in recent years. Would you share some of your experience and the message that you're telling up and coming professional women?

Emily Hollis, CFA:

Things have changed dramatically since I started my career. Thank God, but we still have a long way to go. Women as a group, I would say, keep fighting, fight for equal pay and support and mentor other women, that report to you or that you see coming up in the organization. I think that's really important. For the individual woman, I will say, I know it can be done.

Mike Ensweiler:

So Emily, you're an inspiration to so many people. What inspires you?

Emily Hollis, CFA:

It inspires me to lead people and watch them become better as a result. That is so exciting. The excitement of my staff it's contagious at times. And of course being creative.

Mike Ensweiler:

Well to this point, Emily, we've been talking about the past. Can you share a little bit about what the future holds for ALM first and the direction we're heading?

Emily Hollis, CFA:

Absolutely. It's very exciting. In the last few years, we've developed a couple of, great products. The Loan Transaction Network, the Mortgage Pipeline Hedging, Capital Stress Testing, and a Merger Valuation and complete merger team. Specifically on the Loan Transaction Network. What we found was that it was right in our wheelhouse because we were seeing and modeling all these loans from our client financial institutions. And then we had other institutions that wanted to incorporate these loans into their balance sheets. It was a natural for us to be in that business of introducing one to the other and circumventing the higher broker commissions that were in the industry. So right in our wheelhouse in our vision.

Mike Ensweiler:

So bringing some price transparency to that whole transaction.

Emily Hollis, CFA:

Absolutely. Same with the Mortgage Pipeline Hedging. We do what's called shorting the TBA MBS's by using a more economically efficient hedging vehicle which to hedge. And then our financial institutions can keep the funded locked loans on their balance sheet and earn additional income. Which is fantastic in that product.

Mike Ensweiler:

And one of the things that we to the table, I think, is the strategy around the pipeline hedging. In addition to the mechanics of hedging, that pipeline, it's the strategy for depositories, where if they have capacity on their balance sheet to portfolio these things or warehouse them for a period of time, they're able to clip the coupon and thereby generate additional profits. Then just perhaps, you know, doing mandatory or best effort commitments with the agencies.

Emily Hollis, CFA:

Absolutely. It's a very exciting product. Capital Stress Test is becoming very popular because of the COVID-19 issues. A lot of stress testing, the NEV reports only take care of interest rate risk, so the capital stress test, we do the DFAST, the Dodd-Frank Act Stress Tests for those credit unions and the financial institutions that are over$10 billion, but we're starting to do capital stress tests that incorporate credit stress components and macro economic factors to stress the capital. So those are becoming really popular.

Mike Ensweiler:

Yeah, especially with institutions under$10 billion, right. As they start approaching that threshold, I'm just getting an idea of what this might look like as well as just the capital planning in general. It seems like credit is, especially in this environment has become much more front and center than maybe it was a few years ago.

Emily Hollis, CFA:

Absolutely. And of course the last broader product that we brought in just last year to finish it off. We've always done merger valuations, or I shouldn't say always, we've done them for about 10 years, but we have now got a full merger group where they go and look for institutions to be acquired and do the whole process from start to finish. And we still do the back end with all the accounting. So it's very, very exciting to see our entire merger group. Now that's been developed.

Mike Ensweiler:

Yeah. A turnkey product, so to speak, you know, this is one of the exciting things for me is that rather than, you know, it's another case where a client came to us and said, hey, can you help me find a partner even on the acquire or acquired side. But rather than just try to start it ourselves and not have it the best in breed type product. The exciting thing for me, and hopefully for our clients too, is that we were able to find David Ritter who's been extremely successful in this area and bring him in so that we can start day one so to speak with someone who's tried, true and very good at what he does.

Emily Hollis, CFA:

Exactly. And this leads back to one of the earlier questions of, what do you say to young entrepreneurs is you listen to your clients. I mean, these have all been born from client needs and things that we can really help them. So we listened to our employees, we listened to our clients. We grow from that.

Mike Ensweiler:

So I know it's, it hasn't been that long, but we are running out of time. So are there any closing thoughts that you want to leave people with Emily?

Emily Hollis, CFA:

Well, we have built a fantastic company. We have incredible people, great systems, but at the end of the day, the firm is predicated on service and building lasting relationships. Trust is such a big factor here and it will always be front and center.

Mike Ensweiler:

Thank you so much, Emily, for taking time out of your busy day. This was a lot of fun and I really appreciate you being here.

Emily Hollis, CFA:

Thank you, Mike.

Speaker 1:

[ Transition Music].

Mike Ensweiler:

Thank you again, Emily, for joining us today, your energy drive and passion are contagious. To learn more about our upcoming podcasts or any of the ALM First educational offerings. Please visit our website at www.almfirst.com. If you have questions, the easiest way to contact us is at podcast@almfirst.com. As always stay safe, stay healthy. And thank you for listening to In Your Best Interest an ALM First podcast.

ALM First:

The content in this podcast is provided for informational purposes and should not be relied upon as recommendations or financial planning advice. We encourage you to seek personalized advice from qualified professionals regarding all investment decisions. Current and future holdings are subject to risk and past performance is no guarantee of future results. Podcasts should not be copied, distributed, published, or reproduced, in whole or in part. Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. The views and opinions expressed by the ALM First Financial Advisors’ speakers are their own as of the date of the recording. Any such views are subject to change at any time based upon market or other conditions and ALM First Financial Advisors disclaims any responsibility to update such views. These views should not be relied on as investment advice, and because investment decisions are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any ALM First Financial Advisors product. Neither ALM First Financial Advisors nor the speaker can be held responsible for any direct or incidental loss incurred by applying any of the information offered. ALM First Financial Advisors is an SEC registered investment advisor with a fiduciary duty that requires it to act in the best interests of clients and to place the interests of clients before its own; however, registration as an investment advisor does not imply any level of skill or training.