For two years in a row, something hasn’t changed on CNBC’s ranking of the top 100 financial advisors in the U.S.: Salem Investment Counselors has come in at No. 1.
CNBC spoke recently with Salem’s president, David Rea, about why he believes his firm has been ranked so highly – twice.
Salem Investment Counselors provides comprehensive financial planning and investment management to its clients, most of whom have a net worth of $ 500,000 or more. The Winston-Salem, North Carolina-based firm has more than $ 1.7 billion in assets under management and has been in business since 1979.
Rea, whose mother was a housekeeper and father worked in the steel mills in Indiana, has been serving some of his clients for close to four decades now, and often gets to know many of their children and grandchildren. He attends his clients’ weddings and funerals. Recently, when one client fell ill, Rea drove over to his house and they discussed his financial plans in his backyard, both in masks.
“In order to help people accomplish their goals, you have to really get to know them,” he said. “And they get to know you, so there’s a relationship that helps you get through the ups and downs.”
Rea has suffered his own losses. His first wife, Nancy, developed Lou Gehrig’s disease when she was 38, and died from it at 50.
“She was such a fighter,” Rea said. The two had four children together, and at the time they were all under the age of 25.
That experience helped him to become more understanding of his own clients, Rea said. “It makes you more empathetic,” he said. “You appreciate people’s struggles more.”
Eventually, Rea remarried.
In the mornings, he and wife, Martha, take a long walk or bike ride on the golf path where they live.
By around 8 a.m., Rea is at his desk. One of his favorite parts of the job, he said, is researching different companies and sectors to invest in.
“Whether it’s the aging population or the energy transition to renewables, all of these themes are interesting, and we try to think about them,” he said.
Despite the move by many firms to passive investing through index funds that mirror the market, Salem Investment Counselors still actively manages clients’ stock portfolios, and each client is typically invested in around 40 different companies at a time.
“We can bet on our themes,” said Rea, adding that doing so has worked out well for his clients.
Although the firm buys and sells individual stocks, Rea said it usually stays invested in the same companies for a long time. His hero is Warren Buffett, who has said that if you’re not comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes.
“He taught us a lot about long-term thinking,” Rea said.
Still, he acknowledged that he’s made missteps.
“You make mistakes a lot,” Rea said. “You think you’ve analyzed a company well, and they don’t execute, or the theme you’ve bet on doesn’t work and you have to move on.
“I’m not sure I ever saw the depth of what 2008 was going to be,” he added.
As for the coronavirus pandemic, Rea said “it’s been much worse than we had anticipated.”
Still, he remains hopeful about the future. Currently, his firm is paying more attention to tele-health and streaming services. And he expects the pandemic to generate many medical innovations.
“When you’re interested in the stock market, you have to be an optimist.”