An Advisor's Edge: An Open Mind

Editor's note: This originally appeared in the fourth-quarter issue of Morningstar Magazine. Charles Keenan is a freelance financial journalist.

Well before this summer’s protests over police brutality, Allan Boomer, who runs the New York City-based wealth-management firm Momentum Advisors, started bringing up the topic of race and money to listeners on his satellite radio show and on social media. One question for investors: “Who is managing your money?”

Typically, it’s not handled by people of color or women. Firms owned by minorities or women managed a mere 1.3% of the $69 trillion in assets in the United States, according to a 2018 study by Bella Private Markets commissioned by the John S. and James L. Knight Foundation. Yet their performance was not statistically different from the industry as a whole, the study found.

“Why are these groups skipped over when it comes to the professional money management industry?” Boomer asks. “It made us really ask the question, ‘Is it because our money's racist and sexist, and we just don’t think about it?’”

Yet as the Black Lives Matter movement gains momentum, investors are thinking more about how their money is handled and where it goes. The topic comes up almost always with Boomer’s potential clients. “Nearly 100% of these prospects are enticed by and interested in this concept of matching their money with their mission,” he says. “We are having a conversation about racial equity, not just justice.”

Over the years, Boomer has worked to assemble an option for his clients to invest their money with minority- and women-owned firms and to find investments that meet standards of racial and gender equity. By eschewing “old” investment-firm search criteria, such as a minimum 10-year track record and high levels of dollars under management, Boomer has unearthed outperforming minority-owned firms that might have been missed with traditional searches. “We were looking to just open up our minds to firms that might be newer in nature, and it's one of the ways that we pull away from these industry tactics that are inherently biased.”

Diversity's Advantage The same goes for his own firm. As Boomer has built his team over its eight years, he has hired a staff of Black, Latinx, white, and Asian professionals. They also stand out for their ages: Boomer is one of the oldest on the team, at 43, and most of the others are in their 30s and 40s.

“Talent in the world is evenly distributed, but opportunity is not,” Boomer says. “Because Wall Street has historically done poorly with diversity, the industry has missed out on a lot of talent.”

Yet it has been shown that diverse firms outperform homogeneous ones. For example, companies with above-average diversity scores derive 45% of their total revenue from new products and services launched over the past three years compared with 26% of revenue for businesses with below-average diversity scores, according to a 2017 study by Boston Consulting Group.

“Diverse teams make better decisions, period,” Boomer says. “Nondiverse firms are the horse and buggies of our industry. Diversity is a huge part of our competitive advantage.”

Boomer’s success only adds to the evidence: As of August, his firm had amassed $233 million in assets under management, split roughly between private and institutional clients. The firm also has $170 million in assets under advisement for institutions.

Momentum Advisors generally works with clients with $250,000 in assets or more, providing a full range of financial planning for multigenerational families, entrepreneurs, board members, endowments, foundations, pensions, defined-contribution plans, and charitable organizations. His book of business also includes athletes, such as former professional football players. The firm also has a brokerage that sells insurance to his clients, under the name Momentum Risk Management, and works with clients with excess capital to invest in alternative assets, such as real estate, private equity, and franchise opportunities.

Entrepreneurship Started Young Boomer grew up in Somerset, New Jersey, about 35 miles southwest of New York City. He embraced entrepreneurship at an early age, selling Blow Pops out of his locker in seventh grade. When he turned 16, his parents told him he would have to earn his own spending money, so he went to work, getting his first job at Roy Rogers, frying chicken and flipping burgers.

He went to Morgan State University, a historically Black college in Baltimore, Maryland, where he earned cash giving $5 haircuts in his dorm. He then formed a barbershop by recruiting friends and earning a cut of their proceeds. He and his friends also sold roses on the street on Valentine’s Day, then parlayed the proceeds into organizing parties and charging admission. That led to organizing bus trips for spring break at Daytona Beach, Florida, packing four students to a room and grossing around $50,000. In the process, Boomer liked being his own boss. “We could print money through entrepreneurship,” he says.

After graduating, he worked at Merrill Lynch, yet also moonlighted doing people’s tax returns. He later got his MBA at New York University’s Stern School of Business, then joined Goldman Sachs Group, working as a wealth manager, where he accumulated assets, making roughly 20 cold calls a day from 2005 to 2007. By 2010, he was managing $400 million in assets, $250 million of which he brought into the firm himself. He left that year to work with a mentor at Fiduciary Management Group, taking only $7 million with him, as most clients stayed behind.

When he set out on his own in 2012, his book of business was about $25 million. He had a mission based on a Maya Angelou quote: “Don’t make money your goal. Instead, pursue the things you love doing, and then do them so well people can’t take their eyes off you.”

Another motivation came from an earlier experience in his career, when one day a white, senior, gray-haired advisor asked him, “Why would somebody choose you?” Boomer didn’t answer the question out loud. But every day since then, he says he answers the question in his head, telling the gentleman that he would outwork him, coming in earlier and leaving later.

Using Tech to Level the Field Beyond grit, he knew he could level the playing field with the big firms with the right technology. He chose Morningstar's Office suite. The platform allowed him to construct portfolios, model portfolio retirement cash flow, research mutual fund and separate account managers, and offer portfolio performance tools. (Recently, he added an Office feature that allows clients to run their own reports.) "I was promising a Goldman-caliber experience for folks who don't have Goldman money--that was my initial tag line--and I can't do that unless my technology makes me look a certain way."

Assets started accumulating, allowing Boomer to recruit his diverse team over the years. He hired partners Tiffany McGhee, who is Black, in 2013, and William Platt, who is white, in 2014. Tiffany Hawkins, who is Black and who hosts The Momentum Advisors on SiriusXM with Boomer, came on board in 2014 and serves as chief operating officer. Earl Carr, who is of Chinese and Jamaican descent, joined in 2014 to help build the firm’s reach to international clients. Sylvia Alston, who is Black, joined Momentum Risk Management as its managing partner in August.

As the firm expanded, Boomer assembled investment options to allow his clients to put their assets with money managers that have minority or women ownership. For minority-owned options, Momentum’s equities lineup includes Impact Shares NAACP Minority Empowerment ETF NACP, which tracks the Morningstar Minority Empowerment Index. Other options include funds from Brown Capital Management, Ariel Investments, and Edgar Lomax. For separate accounts and fixed income, he’s a fan of Earnest Partners. Infinity Q can be used for liquid alternative strategies.

Picking from this lineup, clients have plenty of good options, including Brown Capital Management Small Company BCSIX, which has a Morningstar Analyst Rating of Gold, and Infinity Q Diversified Alpha Investor IQDAX, which is rated 5 stars. The Impact Shares NAACP Minority Empowerment ETF is not yet rated by Morningstar’s analysts, and it doesn’t have a Morningstar Rating, or star rating. The fund has gotten off to a good start. For the trailing one year through Sept. 30, the fund’s return lands in the fifth percentile of the large-blend Morningstar Category.

It’s more proof that diversity pays off. “My belief is, you'll find talented people in every country of every race and every gender,” Boomer says. “Financial services has historically not made opportunity equally distributed, and there's a large group of people who have been skipped over. If you skip over systematically a group of people, you're also missing out on a big part of the talent pool.”