David King, President, Managing Partner & Co-Founder, U.S. Capital Wealth

In an interview with Invest:, David King, president, managing partner, and co-founder of U.S. Capital Wealth, discussed the firm’s growth, the advantages of the independent advisory model, and how Houston’s economy continues to generate wealth across sectors. “Houston has an entrepreneurial culture. It is a welcoming city if you want to start a business, and that is also true across Texas,” King said.

How would you describe U.S. Capital Wealth’s role in Houston’s business and wealth management landscape?

Houston is an incredibly dynamic city. It has historically been fueled by oil and gas, but the economy today is much more diverse. It has the largest manufacturing base in the United States, and a significant amount of that is driven by the petrochemical industry because of the feedstocks here, including natural gas and natural gas liquids.

Houston also has world-class healthcare and technology resources. The Texas Medical Center is the largest in the United States. MD Anderson is one of the top cancer hospitals in the country, and Texas Children’s Hospital is one of the top pediatric hospitals and research centers. That ecosystem brings healthcare services, biotechnology, innovation, and startups to the city. Houston is also well known for aerospace, particularly NASA.

U.S. Capital Wealth was founded in Houston in 2010. Today, we have 155 employees and are largely Texas-based, with offices in New York, Boston, and Coral Gables, Florida. Our focus is on high-net-worth and ultra-high-net-worth clients. We tend to bring financial advisors in from large wirehouse firms and private banks, where they have built significant businesses and experience. Our average advisor has been in the business for over 15 years.

We are the largest independent wealth firm headquartered in Texas today, with over $11 billion of client assets under management. Competing in a hypercompetitive environment against firms with significantly more financial resources, capital, and geographic breadth, it all comes down to bespoke solutions and exceptional service. That is where our boutique model often wins against the larger firms.

How has the wealth management environment changed over the past year, and what has had the biggest impact on your business?

Global markets were strong last year but have not been as strong this year. This year’s volatility is being driven by two primary factors. One is questions around the amount of capital being invested in AI by many of the largest technology companies in the United States, including Microsoft, Amazon, Meta, and Google, and what and when the return on that capital will be.

The second factor is global uncertainty and the impact it has had on crude prices. Elevated fuel prices are bad for many industries, including air transport, freight, rail, and consumers who drive to work every day. That can affect GDP growth if high prices remain.

We also continue to see elevated inflation across the board, not just in energy. That makes it difficult for the Federal Reserve to continue reducing rates, which was a significant factor driving markets last year.

In the wealth management industry, we continue to see tremendous consolidation nationally. Private equity is investing in wealth management firms because they are attracted to the recurring quarterly revenue and the relatively high margins that can exist at scale. The industry also remains incredibly fragmented. There are still thousands of independent registered investment advisors nationally, many of which are managing relatively modest amounts of client assets with small teams.

How are you adjusting your investment approach amid volatility, interest rates, and uncertainty?

U.S. Capital Wealth is set up much like the larger firms in that we hire experienced financial advisors with proven track records, and they manage their client assets. That said, we provide a wide range of investment resources, information, and technology to help our advisors deliver the best possible client experience.

Broadly across the firm, we are running with higher levels of cash than we typically do. We are active in alternative investments and always have been, ranging from hedge funds to private equity to venture capital. On the venture capital side, we invest in early-stage and late-stage companies. For example, we have been investors in a number of private companies that have gone public and performed well in the public markets. 

Private market investing can generate alpha for wealthy clients because many companies are staying private for much longer, supported by the large and growing private investor universe. Many management teams would prefer to remain private rather than public because running a public company can be a distraction from generating returns for shareholders.

We are also always focused on tax efficiency. We use strategies that help increase the net return after taxes for clients, which is what matters at the end of the day.

How important are Houston and Texas to your growth?

They are extremely important. A number of our advisor teams are laser-focused on certain industries. We have teams that specialize in working with retirees from large oil and gas companies. They have developed expertise on those 401(k) plans and defined benefit plans, and how someone can retire from these companies while maximizing their wealth in retirement.

We also have teams focused on medical practices. We are the only independent wealth firm in Houston that has an office in the Texas Medical Center.

More broadly, Houston has an entrepreneurial culture. It is a welcoming city if you want to start a business, and that is also true across Texas. There is a tremendous amount of capital here, whether for venture capital-backed companies or private equity-backed businesses.

Many private businesses, including family-owned businesses, have grown significantly and achieved remarkable success. We see exits in those businesses from clients and families we work with all the time. We have an internal investment banking team that helps clients who own private companies value their businesses and navigate the exit process.  This is an important differentiator for us.

What advantages does the independent advisory model offer?

My partner, Pat Mendenhall, and I left one of the global wealth management firms to start U.S. Capital 15 years ago. The primary driver behind this decision was that we felt large firms often have a box, and financial advisors can reach into that box to get solutions for their clients. But that box is standardized and tends to provide a one-size-fits-all approach.

We believed that was not enough for high-net-worth and ultra-high-net-worth clients, as well as their financial advisors. We were running into issues where we could not solve specific client needs.

We wanted to build a firm where, rather than creating a box and asking advisors to pull solutions out of it, we would be responsive to what clients and advisors need and then build those solutions on a bespoke basis. That has helped us attract exceptional financial advisors, retain those advisors, and win excellent clients. We can listen and solve specific needs rather than simply applying off-the-shelf solutions.

What role is technology, including AI and data, playing in how you serve clients and run the business?

We are focused on technology and AI. Key areas include CRM and portfolio management systems. Portfolio management systems are critical because they allow us to report on returns and asset allocation, conduct quarterly fee billing, execute trades, and complete quarterly rebalancing.

On the AI side, we are fortunate that our private equity partner has a robust internal AI team and capability, which we intend to leverage. We are also reviewing interesting AI platforms for compliance and supervision. We are a highly regulated business, and those tools can help us become more efficient in daily supervisory and compliance processes.

AI is not putting jobs at risk in our industry right now. When markets are volatile, or clients have needs in financial planning, estate and trust planning, or risk reduction, they want to speak with a trusted professional. I do not think our business has much risk from AI. That said, we expect that we will be active users of AI-enabled tools to help drive efficiencies.

What are your top priorities for the next few years?

We need to continue increasing the breadth of our service offering, and we need to do that responsibly. It is about being responsive to client demand.

We are looking at bringing in more financial planning resources. Most of our new client relationships start with financial planning. That gives the client a roadmap and ensures that our financial advisors and their teams become intimately familiar with the client’s financial situation, objectives, tax situation, and estate and trust planning needs.

We are also going to be building out internal tax advisory resources in order to broaden the ways in which we can help our clients. 

In addition, we also have significant capabilities in structuring and advising family offices, an area we are likely to continue to expand where and when we see the opportunity.