Adviser seeks slice of settlement pie

Thomas Ruggie, a Florida-based investment adviser, thinks that he has identified a new target for his investment management and planning services: people who win personal-injury-lawsuit settlements, and their lawyers.

The RIA firm that he is establishing — the second he will operate — expects to collect $50 million of assets in its first year of operations, based on preliminary commitments.

“I truly believe that in two years, this will be the bigger business,” said Mr. Ruggie, whose Ruggie Wealth Management in Tavares, Fla., oversees about $250 million of client assets.

In expanding, however, the 40-year-old adviser risks offending several constituencies, including his custodian and several key clients of the business he set up less than a year ago when he converted from an independent broker-dealer affiliated with LPL Financial to a hybrid practice.

“Two of my largest clients are physicians,” said Mr. Ruggie, whose website includes a video aimed at doctors and who acknowledges that personal-injury lawyers and medical professionals are natural enemies.

RIVAL CLIENTELE

Although he has no intention of announcing his expansion plans to Ruggie Wealth clients, he has made courtesy calls to a few top clients, including dermatologist Matt Leavitt, founder of the Medical Hair Restoration chain.

“Mr. Leavitt is entrepreneurial, and from a business standpoint he agrees this is well worth doing,” Mr. Ruggie said.

“There are lots of companies with physician niches,” he said. “I don’t believe there are many going after personal-injury attorneys. The top one-third of them do extremely well.”

When it came to telling his custodian, Boston-based LPL, that he planned a new venture that will use the custody services of The Charles Schwab Corp. of San Francisco, Mr. Ruggie had no choice but to be direct. Custodians are required by regulation to review and approve any proposed outside business activities of their brokers and advisers.

Mr. Ruggie has already filed ADV forms with regulators through Schwab for the new RIA, which he plans to call Firewall Investments LLC. The firm will operate with Ruggie Wealth’s staff of 13 employees.

The Firewall name isn’t meant to suggest a divide between the two businesses, but the conservative strategy he hopes to market to persuade judges and the winning participants in lawsuits that he will be a sage steward for the bulk of windfall awards. It is also the reason that he says he opted for Schwab over LPL.

“Using a well-known name like Schwab should make it much easier to get judges to approve what we do,” Mr. Ruggie said. “It’s first about name recognition, and it’s second about their technology, especially the software they have for analyzing portfolios of stocks and hedge funds.”

Because personal-injury awards can be substantial, judges weigh in on whether an award will be managed soundly.

BUSINESS DECISION

“I’m sure LPL would prefer that all the business be maintained with them, but they understand that it’s a business decision, and not personal,” said Mr. Ruggie, who is a member of LPL’s Chairman’s Council, which comprises the top 2% of all its advisers. “LPL is as strong as any firm out there, but most attorneys aren’t going to do the research and analysis to learn about them.”

As a matter of policy, LPL does not comment on its advisers’ business plans, said Joseph Kuo, a company spokesman. The company’s RIA platform, launched last summer with Mr. Ruggie as a client, uses “leading-edge technology, a widely recognized fact as evidenced in the strong and continued growth of this platform,” Mr. Kuo said.

LPL’s hybrid RIA platform has attracted almost $2 billion of assets since its official launch late last year.

Mr. Ruggie, who is a chartered financial consultant and certified financial planner, credits mezzanine hedge fund manager Seth Ellis with coming up with the idea for Firewall. The former accountant, who will be president of the new firm and share a 50-50 ownership stake with Mr. Ruggie, is well-connected with personal-injury attorneys.

Indeed, Firewall is working closely with settlement planners Jason Lazarus of St. Petersburg, Fla., and Michael Upchurch of Jacksonville, Fla., who specialize in selling annuities to help winning plaintiffs manage their awards.

Firewall plans to offer pooled-investment alternatives meant to match an annuity’s payout or supplement it, with the additional advantage of allowing holders to tap into their principal and have an investment that can be passed to their heirs.

Mr. Ruggie said that Mr. Lazarus and Mr. Upchurch, through their firm, Jacksonville, Fla.-based Settlement Asset Management, see the flexibility as a way to build on their practice.

E-mail Jed Horowitz at [email protected].