Robert Fragasso, Chairman & CEO, Fragasso Financial Advisors, Inc.

In an interview with Invest:, Robert Fragasso, chairman and CEO of Fragasso Financial Advisors, discussed the firm’s strategic shifts and operational refinements, and how technology has helped advance its business. “Technology like AI is an opportunity, not a challenge,” he said.

Reflecting on the past year, what have been the most significant achievements for Fragasso Financial Advisors? 

There have been several achievements worth mentioning. The first is that we evaluated our client model. We are structured differently than most investment firms as we do not bring in advisers who have their own book of business and then have them clear through us, which is the more typical model. Instead, we have one book of business, and portions of it are assigned to our financial advisers and their teams. We all work together, with everyone on salary, a firmwide bonus, and an achievement bonus based on gaining new assets and retaining assets under management.

With that as a backdrop, we have an executive team that determines our strategic direction, as well as operational managers. This may sound elaborate for a 40 to 45-person company, but we believe this structure is necessary. The executive team evaluates where we are taking the firm. They have oversight over operational management. I am involved due to my institutional knowledge after 53 years in the business.

The executive team guides the firm forward, and over the past couple of years, we made a major decision to focus on high-net-worth and ultra-high-net-worth clients. While many firms claim to target this segment, we restructured our client base to align with this focus. We brought on two independent associate advisers to handle the lower-asset end of the book, which significantly improved our cost structure and increased the average assets per household we attract. This was a major strategic shift. At this point, we have $2.5 billion in assets under management, even after reallocating some assets to other teams.

The second major achievement relates to our office footprint. We previously owned an office in downtown Pittsburgh, but due to escalating crime and homelessness, particularly drug dealers operating outside our building, our employees and clients refused to come downtown. We made the difficult decision to close our downtown office after 50 years of presence there.

We also consolidated other offices. We had five locations: one in Beaver, Pennsylvania, where we had hoped to capitalize on the $2 billion cracker plant development; two in the South Hills; one in the North Hills; and one downtown. We folded the Beaver office into our North Hills location, moved it to Sewickley, which is an upscale suburban neighborhood, combined our South Hills offices, and closed downtown entirely. This reduced our footprint from five offices to two magnet offices without disrupting operations. Our advanced IT infrastructure and process-driven approach allowed us to continue growing assets even during lockdowns.

The refining of our client focus, optimizing our office locations, and enhancing our technology have positioned us for continued success, and it has been a very eventful two years.

What about your firm’s structure has made it possible to execute this strategy so effectively and nimbly?

Our model is the key differentiator. We have one centralized book of business, salaried employees with performance-based bonuses, and an Employee Stock Ownership Plan (ESOP) structure. Unlike some firms where advisers own their own books, we maintain full control over our assets and direction.

For example, a well-known third-generation firm we had considered merging with had no succession plan and allowed advisers to control their own books. When a team left, they had no recourse. We avoided that pitfall because our team is fully aligned. Our advisers are part of the strategic discussions, fostering transparency and inclusion. The executive team made final decisions, but everyone felt heard, enabling smooth execution.

What types of financial planning services have seen the most growth among your clients, and what factors do you attribute that to?

Simplicity is one of the 10 core strategies that we use in our work, and financial planning is no exception to that. The moment things become too complicated, we know we are off track. In the past, we attempted to create a guideline for our client experience, and the person in charge developed what someone referred to as the NASA space shuttle manual, as it was full of excessive details. As soon as a plan becomes overly complicated, it becomes a recipe for disaster. Keep it simple. First, focus on the objective, then outline the major steps to achieve it. Smart individuals will take it from there.

Coming back to financial planning, we have always provided financial planning services. I began pursuing my CFP designation through part-time study, which took three years. I earned my CFP in 1982. Back then, I drafted financial plans on yellow legal pads. When we transitioned to digital systems, my team often retrieved those old plans from the files for amusement. However, those early plans followed the same structure as modern financial plans.

The difference now is that we are elevating every component to a higher level. For example, estate planning has always been a focus, but we now approach it with greater sophistication, particularly for high-net-worth and ultra-high-net-worth clients. Business succession planning, divorce, and widowhood support have also become specialized areas within our practice. While we previously addressed these issues broadly, we now provide highly refined solutions tailored to our clientele. Pittsburgh may not be New York or Chicago, but it has a significant concentration of wealth, particularly among business owners and professionals who require this level of service.

Our enhanced financial planning capabilities have been supported by improved IT tools. Most importantly, we have streamlined these tools to ensure a single point of entry rather than multiple access points. This efficiency reduces labor and enhances coordination. For instance, when opening a new account, all relevant team members receive simultaneous instructions, eliminating the need for manual follow-ups. This is especially valuable in our hybrid work environment.

With the rise of AI-driven financial tools and robo-advisers, how do you balance technology with the personal touch that clients expect?

Technology like AI is an opportunity, not a challenge. We made a strategic decision in 2019 to enhance our IT capabilities. When the pandemic struck, we were well-prepared due to these prior investments. We continue to refine our systems because we do not fear technological advancements. Clients will not replace professional financial planning with DIY software. What they need is a professional with expertise, education, and objective judgment, especially in volatile markets.

Advanced tools are analogous to the shift from agricultural to industrial society. Power plows replaced manual labor, allowing workers to focus on higher-value tasks. Similarly, automation frees our team from repetitive tasks, enabling them to specialize in areas like financial planning for divorce or business succession. Our role as management is to provide the tools that facilitate this transition.

What are your top priorities for the next two to three years in terms of growth, student success, and institutional impact?

Growth must be strategic. Acquiring practices, such as our acquisition in Beaver, presents challenges such as inheriting undesirable accounts. While acquisitions boost revenue, they can harm profitability if smaller clients dilute resources. Instead, we focus on organic growth in the high-net-worth and ultra-high-net-worth segments, which is why clients with under $1 million in assets are directed to our independent associated advisers.

We have also established a framework for independent advisers to use our portfolio management services, ensuring consistency and compliance. This model benefits both our firm and the advisers by reducing costs and maintaining oversight.

Succession planning is another priority. Our ESOP, outside board of directors, and structured governance ensure continuity. Strengthening our executive team and fostering collaboration are essential as we prepare for future leadership transitions.