INVESTMENT CAREER

On January 18, 1966, on the first day of my career in the investment business, I walked into the offices of Hayden Miller to the cheers of an entire room of 40 brokers. The commotion had nothing to do with me. The Dow Jones Industrial Average had just hit the 1000 mark for the first time in history, only to fall back on the close of that day’s trading. It wasn’t until 1981, fifteen years later, did the index close above 1000.

In 1966, I was just 23 years old, and having spent 10 months at the Cleveland Trust Company, I knew I had no interest in banking, but on that day I was confident that my career was going to be in the investment business. I was by far the youngest broker in the room. Next youngest was a man named Don Lerner who was 29 years old (As I write this, Don had just passed away a few days ago). In fact, prior to joining Hayden Miller, I had tried to get job as a stock-broker at Merrill Lynch, and was told in no uncertain terms to come back and try again with five or six years of sales experience under my belt.

In 1966, stock brokers were expected to be salesmen, not market analysts. Back then, I rejected that premise. I believed that picking the right investments was the key to ultimate success. The problem was that Hayden Miller was part of a syndicate of brokerage firms which brought small, unproven companies to the public market. Every Tuesday morning the Hayden Miller sale manager (Keith Russell) would tout the latest underwriting of the firm. Some worked out – some didn’t. I got lucky early on. By March of 1966, I had taken and easily passed the one-hour NASD exam. Keith Russell gave me one of the many leads from individuals who filled out newspaper ads requesting information on investments. Virtually none of these resulted in a sale. But on the very next day I drove to Lodi, Ohio, met with a man who had just inherited a large sum of money. The next day I walked into the office with one of the largest mutual fund orders in Hayden Miller’s history. In March of 1966, out of some 70 brokers (Hayden Miller had many more sales personnel in satellite offices in Ohio and Michigan) I ranked number 3 in sales. Just a couple of months in, I was becoming noticed by the hierarchy of the Company.

In those days, women were not generally invited into the ranks of sales personnel and, as a consequence, virtually none were able to make a living as brokers. Even women clients preferred to deal with men for investment advice. Generally speaking, women who joined brokerage firms were either secretaries or worked in the back office or on the trading floors (where sexual harassment was an accepted practice). In fact, most women in those days joined brokerage firms to find partners and not intending on making careers.

But for reasons of which I still have no knowledge, Hayden Miller had about 10 women in sales positions. Keith had placed them in a separate room, and often made fun of their efforts. They were not allowed into main sales area of male brokers, except on Tuesday mornings during the sales meeting where the latest underwritings were touted. As fate would have it, after the meetings they would gather around my desk where I would often comment on the investment merits of the recommended offerings.

I was clearly wrong. Keith Russell was in charge of sales, and while he never tried to force me to sell any particular underwriting, my opinion should have been kept to myself. Needless to say, in spite of my early success, I was fired and unemployed before the end of the year.

It was not so much the fact that I was fired. Since I started with Hayden Miller in early 1966, I was touted by several other small investment firms to join them. At that time the city of Cleveland claimed to have had as many as 40 independent and locally owned firms selling securities. What angered me most was Keith’s efforts to blackball me by contacting a number of these organizations and filling them with false information.

In the end, J.N. Russell (no relation to Keith Russell), under the leadership of Martin Duffy, agreed to take a chance in spite of the bad rap I was getting. In return, in 1968, I provided J.N.Russell the names and backgrounds of half a dozen individuals at Hayden Miller who I encouraged to leave and who joined J.N. Russell that year.

J.N. Russell was much more accommodating to my needs. I soon became one of their top salesman and ultimately formed and headed their research department. Russell’s ultimate demise was more due to the fact that their inner circle, where important decisions were made, consisted of individuals who had never built a business and didn’t know how to react when things got tough.

And in 1971 things did begin to get tough. It was that year when I first spoke with Warren Buffet who had just decided to liquidate an investment partnership he was managing as he felt stocks were over-valued relative to their earning potential. By 1973 the handwriting was on the wall. It had been decided by the regulators that on May 1, 1975, commission of stock trades were to be open to negotiation and not fixed.

With the markets getting bad and the prospect of much lower commissions, it became clear to me that clients would be willing to pay separately for investment advice if they received much lower commissions on stock trades. In 1973, I left Russell to open Resource Management (which ultimately changed its name to the Maxus Investment Group), the first independent investment advisory firm in the city of Cleveland. At the time, while every one of my J.N. Russell partners told me I would never make it, I never had a moment of doubt.

I spoke with Buffet again in the late summer of 1974, a conversation I remember much more clearly. It was his opinion that stocks were cheap enough to buy again and he clearly intended to do so. From October through December, 1974, the DJIA reached a double bottom low around 577 and, except for some brief periods of decline, it has been going up ever since.

It was also in the summer of 1974, I began a broker/dealer alongside the investment advisory business. The combination proved to be a significant win. The broker provided very competitive commissions for investment advisory clients, and at the same time, provided fast efficient execution on the exchanges. With the addition of several large transactional partners, Maxus Securities (as it became known) grew into a major Midwest brokerage sometimes responsible for as much as 2% of the volume on the NYSE.

The Maxus Mutual Funds were added in the 1980’s and Maxus invested in a number of private investments. The private investments included initial capital in such names as Comstock Bank (now part of Wells Fargo), OfficeMax (now part of Office Depot), Donna Karen (sold to Louis Vuitton now part of G-III).

Along with some of my clients I continued to purchase meaningful ownership in a number of publicly traded companies and was able to influence final outcomes. These included Peak and Peek Recreation, Park Ohio, Rockefeller Center Properties, Mace Pepper Spray, Bull N Bear Group, and Hamilton Utility Shares. The Third Avenue Fund was established in collaboration with Martin Whitman by combining our respective ownerships. All of these efforts were intended to create value for all shareholders as opposed to many of the greenmail schemes we witness today.

In 1997, Maxus acquired Gelfand Partners, virtually doubling the size of the firm and adding fixed income as a major offering. In January of 2001, the Maxus Investment Group was acquired by Fifth Third Bank.

I became a consultant to Fifth Third Bank, and for nearly two years I continued to manage several of the mutual funds they acquired from Maxus. Then, after touting on TV that one of the Funds I managed was a Morningstar five-star Fund, I received a call from some middle manager at Fifth Third Bank advising me I was being paid too much, and that they could easily find someone at $75,000 annually to manage the Fund. Guess what?

In 2003, I formed a new investment advisor and broker/dealer named Ancora Advisors and Ancora Securities respectively. Ancora is an Italian word meaning “again” but could also be construed as French meaning “anchor.” The initial intent was to keep this organization as a friends and family office – more focused on a wide range of financial needs associated with a small group of clients.

The idea of a small highly focused organization soon lost its legs as a number of my former partners wanted to return and recreate what we had at Maxus. This time, however, they wanted greater ownership. Although a number of these former individuals became multi-millionaires with the sale of Maxus, some fell short, and all believed it could be done again under my leadership. This time, in the process of restructuring Ancora, I agreed to sell the majority of my ownership to them by 2015. In return, as was my original intention when I established Ancora, I wanted to retire quietly serving my clients and my family.

I kept my side of the agreement.