Jacob Walthour, the 54-year-old co-founder and chief executive officer of Blueprint Capital Advisors, says he was not “a traditional candidate for Wall Street.”
When he started his career with an internship at Lehman Brothers in 1989, there were few Black people working in the wealth management industry. Today, he is one of only 5% of Black wealth management professionals in the U.S., according to data from the House Financial Services Committee in a December 2021 report.
The Black Lives Matter movement and the murder of George Floyd by a Minneapolis police officer have shone lights on the racial disparities still prevalent in the country, including in financial services. Walthour himself is embroiled in a lawsuit against the state of New Jersey, which he says denied Blueprint work because he is Black. The allegations, now tied up in court for a year and a half, say that the state looked over a Blueprint-developed asset management plan and then had BlackRock implement it.
“Blueprint is the poster child for systemic racism and the inherent biases that go into manager selection,” Walthour said. “We are pursuing our rights, but this is important to pursue because it has and will have a lasting impact on the investment industry.”
He said his aim is to make the industry more diverse and inclusive so that more people of color might find sustainable careers in wealth management and, like him, have the opportunity to build their own firms.
An analysis by the Knight Foundation shows that only 1.4% of all the assets under management in the U.S. was managed by a minority- or woman-owned firm as of September 2021, and that there has not been much change for the past 10 years.
Walthour’s career was launched by the nonprofit Sponsors for Educational Opportunity. Through that organization, he landed that internship at Lehman Brothers, where after graduation he became an analyst in the investment banking division. His 32-year career has also taken him to Citadel Investment Group, where he was a partner and managing director and managed the firm’s North American distribution effort. He has also held senior roles at Moore Capital Management and Morgan Stanley, where he found a couple of key mentors in Bill Lewis, the first Black managing director there, now at Apollo Global Management, and the late Jim Allwin, also of Morgan Stanley.
Walthour has also been vice chairman of product and business development in the investment management division of Cowen & Company. There he helped the firm seed alternative investment firms. At Cliffwater LLC he was a managing director responsible for client consulting on alternative investments.
FP spoke with Walthour about his career, the fight for racial equality in the industry, and giving back to the community.
FP: The pandemic has been with us for two full years now. How has it affected your business, if it has?
Walthour: Since the pandemic, we have actually been very busy. We took over a business development corporation that had loans in media, healthcare, transportation and real estate — troubled loans. We took that distressed portfolio and helped the companies within it restore themselves in terms of their balance sheet and debt. The most prime transaction was Ebony Media. We became the senior lender to Ebony.
We were able to take a company that had pretty much lost all of its revenues — at one point it had $12 million, but it had less than $1 million when we stepped in. We stabilized it and sold it for twice what someone paid when revenues were $12 million. In the process, we saved an iconic Black brand and put it in the hands of a very well-funded and capable entrepreneur in former NBA star, Ulysses “Junior” Bridgeman.
FP: What is your investment philosophy? It sounds like it is suited to situations such as that one.
Walthour: We look for situations that are not over-capitalized, that don’t require leverage. At heart, we are patient, fundamental investors. Investors should not come to us if they are looking to achieve unreasonable results, like with early-stage venture capital. We look to deliver a consistent 8-12% return to our investors. We look at supply-demand imbalances and other drivers of business to be good indicators. While we like to think we are hip and cool, on the cutting edge, we’re really patient.
FP: What about the lawsuit you filed against New Jersey’s pension office in June 2020? Where does that stand?
Walthour: Due to COVID, the courts are very backed up in New Jersey, but we’re patient, just waiting for our court date, and our day in court.
We are still 100% committed to the litigation we filed against New Jersey, BlackRock and Cliffwater LLC (the firm Walthour worked at a number of years ago which in 2016 was helping the state’s pension office with investment decisions.) This is a case study in what has been happening in the industry for a long time.
The suit alleges that our proprietary information, including details of our product design and execution, was fraudulently secured from us by representatives of the New Jersey Division of Investment. They then passed that information along to their personal friends at BlackRock to position BlackRock to execute the strategy we had designed. We were told by Chris McDonough, then (in 2016) the director of New Jersey’s Division of Investment, that he could not get us approved as a woman- and minority-owned firm. And he has never publicly denied saying this. (McDonough did not respond to a request for comment.) We said we can change our technology, compliance, hire more people, but the one thing I can’t do anything about is the fact that I was born Black.
New Jersey had a terrible track record in terms of hiring women- and minority-owned firms. So in 2019, before we filed suit, the legislature passed a law mandating that the Division of Investment invest with minority asset managers and use minority brokers in the execution of trades. (The law requires that the Division of Investment give more opportunities to firms owned by minorities and women to manage investments and provide brokerage services to the state.) Twenty-four months after passage, Gov. (Phil) Murphy was still struggling to hire minority managers. Our suit gave him the push he needed, but to him and staff, it was window dressing. Do they fundamentally agree with their own policy? Let’s wait for it.
Blueprint is the poster child for systemic racism and the inherent biases that go into manager selection. We are pursuing our rights, but this is important to pursue because it has and will have a lasting impact on the investment industry.
FP: Do you think the answer here is increased regulation?
Walthour: Maybe more proactive enforcement of discrimination laws is needed. Blueprint shouldn’t have to point out by filing a lawsuit that women and minority-owned firms manage only about one and a half percent of US assets. And we shouldn’t have to tell a “progressive” politician that their lack of allocations to minority firms is simply wrong and unfair.
We are in a highly regulated industry. As a business owner, the cost of compliance with regulation is increasing every year. It’s the fastest-growing area of expenditure we face as business owners. It has spawned many firms that didn’t exist 10 years ago. Very often, women and minorities were tracked into compliance. It’s not sexy, not front line, you’re in the back where no one can really see you. But now they are the most valuable people in their organizations. Their expertise is needed. It was an accident, but I’m happy to see women- and minority-owned
compliance shops being formed and profiting in ways no one really foresaw.
FP: A broad question, but a chance to weigh in on any areas you want. What are your feelings about the overall direction of the industry?
Walthour: We’ve gotten to the point where the industry has produced more products than it needs. We produce products, and the product has so many fees and expenses embedded into it that the investor doesn’t understand what they’re paying. I try to give guidance to people, especially those who don’t have enough for wealth management services, on how to do stuff on their own, to keep the profits they’ve earned on their money. Sometimes the gross-to-net spread is so wide the investor receives far less for their risk capital than they bargained for. We have not gotten to that point yet where fees are truly disclosed — like the surgeon general’s warning on cigarettes.
FP: People in the business talk a lot these days about the war for talent. Is there really a war going on?
Walthour: It’s real. You’re seeing advertisements like never before on social media, LinkedIn. They’re now advertising that you don’t even need industry experience, just come in, we’ll train you. Wall Street has always been the kind of place where you have apprenticeships, then there are promotions, etc. So now the war for talent is opening up to outsiders with different experiences. It’s a healthy thing. People bring best practices from other industries and businesses. For far too long, (Wall Street) has been stodgy, clubby, resistant to change.
FP: Did you think Black professionals and other minorities would by now be in a better situation than they are on Wall Street?
Walthour: There are plenty of success stories. Mellody (Mellody Hobson, the president and co-CEO of Ariel Investments, and the chairwoman of Starbucks Corporation), John Rogers (the founder of Ariel Capital Management, now Ariel Investments), Eddie Brown, Brown Capital Management, these are the people at the top of the game, but that’s not enough. The industry has the ability to support a significant number of asset managers such as John, Eddie, Mellody, and Robert (Robert Smith, the founder and CEO of Vista Equity Partners).
The sacrifice George Floyd made focused attention on diversity and inclusion in a way I never expected. There are countless examples of unarmed Blacks killed by police officers and others going back to the slavery era and Reconstruction, but I never thought his ultimate human sacrifice would be what it would take to turn the page. It is clear to me that we are at a moment in time where my expectations and what I’m seeing are aligned. I look at what Citi, Goldman, Bridgewater and other top-tier firms are doing to increase their focus on recruiting people of color and women, and I am excited. Now is a good time to transition from another industry to doing this. I don’t think there’s been a point in time when the industry has been more accepting and supportive.
FP: Given that, what advice do you have for Black people entering or who want to enter wealth management?
Walthour: It’s a very attractive option for young people. When they look at people who are successful, you’re well-compensated even at lower levels. That can be game-changing for their families. From that perspective, I hope more kids are willing to pursue a career in investment banking, wealth management. And there is a ripple effect. They can contribute to causes, charities, colleges and other institutions that are working to bring about change and equity. And it’s important to latch on to good mentors. Without having that kind of support, it could be a struggle. People say, “I’m gonna go do something else.” I can’t stress enough that mentorship is incredibly important to help us survive what we face.
Some of my mentors were the late Jim Allwin at Morgan Stanley, Bill Lewis, the first Black managing director at Morgan Stanley — he’s now senior at Apollo. They taught me how to handle situations, how to avoid making the mistakes they made in their careers. You can avoid the potholes if people tell you where they are. When you decide to take on this career, the saying, “It takes a village to raise a child,” really applies.
