David L. Bahnsen runs a business that isn’t politically correct.
The owner of Bahnsen Group, a 2-year-old Newport Beach-based wealth management firm, often bashes Democrats and the economic policies of Barack Obama. In a speech this year, he called the “liberal” media corrupt and evil.
He has introduced famous conservative speakers like Karl Rove and “dearest friend” Larry Kudlow at events sponsored by Republican business group the Lincoln Club.
Yet the conservative is not one-sided, as he often criticizes Donald Trump, calling the president’s tweets “god-awful and embarrassing.” While Barbara Streisand isn’t an investor, Bahnsen said some of his clients are liberal.
“Left-wing investors may be turned off by some of my views, but they admire the fact that I am authentic, that I don’t feel the need to straddle the fence,” Bahnsen said during an interview in his fifth-floor office.
“I’ll tell you a secret about left-wing people. They also want their money to grow.”
As corporations nowadays try to stay neutral in political debates so as not to offend half of the population, Bahnsen takes the opposite approach to his namesake firm at Fashion Island, a stone’s throw from investment giants Pacific Life Insurance Co. and Pacific Investment Management Co.
Since launching the company in 2015 with the affiliation of HighTower Securities LLC, assets under management have almost doubled to $1.1 billion.
“His chosen strategy is working extremely well by virtue of having a billion dollars under management,” said Scott Baugh, former chairman of the Orange County Republican Party and a fellow board member at Pacifica Christian High School in Newport Beach.
“There are a whole lot of people with casual opinions,” Baugh said. “David Bahnsen doesn’t have casual opinions.
His opinions are arrived at after reading and researching an inordinate amount of data that the average person wouldn’t even dare to undertake, he said.
“Because of all that, he speaks with precision and clarity on financial and political matters.”
Son of a Preacherman
Bahnsen is the son of a Protestant pastor who preached at a small Orange County church and traveled the world speaking on philosophy. His father, who died at age 47, “was my hero.”
Like his father, Bahnsen is a “workaholic,” often putting in 18 to 20 hour days. He and his wife, Joleen, have three children. Besides starting a company, that same year he also helped found nondenominational evangelical Pacifica Christian High School in Newport Beach.
A graduate of the University of Southern California, Bahnsen is a disciple of economist Milton Friedman, a big fan of Ronald Reagan and a “National Review kind of conservative.” In fact, he’s on the board of trustees of the National Review, one of the country’s most eminent conservative publications, founded by late conservative totem William F. Buckley.
Wall Street Insider
Bahnsen knows Wall Street well, having served as a managing director at Morgan Stanley for almost a decade.
When he left at age 40 to begin his own company , clients with $575 million in assets followed him out the door.
“Morgan Stanley wasn’t happy, but we handled it above board,” Bahnsen said.
He wanted his own firm so as to be at the forefront of an emerging trend of registered investment advisers, also known as RIAs. In the 1970s and 1980s, the advisers were perceived as insurance salesmen who didn’t give top-notch financial advice, he said.
Improving technology has provided RIAs with sophisticated tools once common only to larger institutional investors, he said. Big Wall Street firms nowadays are managing about 40% of the public’s investments, down from 50% a few years ago, said Bahnsen, who doesn’t see it slowing down.
“Over the next 10 years, the investment advice that the public receives is going to be categorically different.” RIAs are “really going to change the landscape.”
As a former insider, Bahnsen can expertly point out the conflicts of interests, such as big firms generating profits in about nine hidden ways, including mutual funds paying hundreds of millions of dollars for shelf space to appear as products before clients.
“My problem is that the clients don’t know,” Bahnsen said. “The model has been unbelievably and purposely confusing for years.”
Consigliere Advice
His firm can legally make money only one way: a fee for advice. He charges about 70 to 75 basis points, which should generate around $7.5 million on assets of $1.1 billion, Bahnsen said. He has a staff of 14. Half of his clients are in Orange County, the remainder in 39 other states. He recently opened an office in Manhattan.
As for investments, he favors stocks with increasing dividends. He advocates an allocation of 50% to 70% in equity, 30% to 35% in bonds with low duration, and 10% to 15% in alternatives, like hedge funds. Currently, he favors certain sectors, including energy and financials, rather than the broad-based S&P 500. While his office is next-door to PIMCO, he doesn’t have holdings there because that company, with $1.6 trillion in assets, is so gigantic.
Another one of his firm’s key selling points, he said, is offering a “financial consigliere” where clients are pointed toward the best recommendations on a variety of fields, such as chartering a plane, adopting children in Russia or defending against lawsuits.
Publicity Master
Speaking in public or writing blogs, tweets and white papers are ways his firm generates new business from potential clients at churches, political groups and alumni associations, he said.
When Bahnsen decided to express his conservative views publicly, he was initially nervous it would damage his business.
“It took courage to get over the hump, but once I did, I couldn’t believe what I found,” he said. “Investors want their advisers to have convictions, to be thoughtful, to be engaged.”
In a recent example of his strategy’s effectiveness, he recently asked Trump to pardon Michael Milken, a request so unusual that it generated an interview on Bloomberg TV and an article in the Los Angeles Times.
Bahsen said he’s never met Milken but was inspired to write the letter after seeing Tesla Inc. raise $1.5 billion in the high-yield market rather than dilute the stock with more shares. He said he believes Milken was unfairly demonized for high-yield bonds “that have proven to be great.”
While he believes his letter will eventually be shown to Trump, whom he called charming in private settings—yes, he’s met him—he’s not a fan, saying “President Trump is his own worst enemy.”
Bahnsen said he knows he embarrasses fellow Republicans, such as when he introduced a speaker this year at the Lincoln Club.
“Half of the audience that night was very worried when I went up on stage, because the Lincoln Club is largely pro-Trump, and they know I’m not. I behaved myself, but I got my point across.”
