Freestone Capital Management: Impressive facade & dubious impact (Exclusive Report, year 23)
Freestone Capital Management is an investment advisory firm based in Washington state. Their office is located in Seattle.
At a glance, Freestone Capital looks like an impressive finance company. However, they have a ton of issues that suggest it would be best to avoid working with them.
From numerous negative Freestone Capital Management reviews to conflicts of interest, this firm has too many problems to count. That’s why I have assorted them in the following points.
They will help you figure out if this firm is worth your time.
Freestone Capital Management charges excessive fees, has too many negative employee reviews, and puts its clients at excessive risk. It might not be suitable to work with them.
Freestone Capital Management: People Behind the Firm
Freestone Capital Management LLC is a financial advisory firm based in Seattle, WA. Apart from Seattle, they have offices in San Francisco, CA and Santa Barbara, CA. Their HQ is located at 701 Fifth Avenue, 74th Floor, Seattle, Washington 98104.
The firm has been operating since 1999 and has earned a strong reputation in the industry. They have a staff of 35 professionals that serves ~4,000 clients.
Freestone operates in 31 states in the US.
Over the years, this advisory firm has established a solid brand in the nation. But their regulatory records reflect that they might be taking advantage of their clients.
The main people behind Freestone Capital Management are:
Freestone Capital Management recently appointed Larry Miles as their CEO and President. Larry was a Principal at AdvicePeriod, before joining Freestone. He works from the Seattle office of the firm.
Gary Furukawa is the founder of Freestone Capital Management. He is a senior partner and client advisor at the firm and handles firm management and investment management. Gary operates from the Seattle office of Freestone Capital Management. Before founding Freestone Capital Management, he worked at EF Hutton and Salomon Smith Barney.
Andrew Erisman is a partner at Freestone. He is a client advisor and handles firm management. Andrew has the CIMA certification. Before Freestone, Andrew worked at Oppenheimer & Co. While he’s highly experienced, Andrew also has a multi-million dollar customer dispute in his FINRA BrokerCheck profile.
CIMA certification: A certification on Chartered Institute of Management Accounts is the accounting body based in UK, which works globally and offers training and qualification in management accounting to students and professionals.
Erik Morgan is a senior partner at Freestone Capital Management. He is a client advisor and handles investment management and firm management. Erik Morgan Freestone Capital Management have been together for several years. Before this, he worked at Arthur Andersen. Barron’s has named him in their top Financial Advisor in Washington state list multiple times.
Michael Allard is a managing director at Freestone Capital Management. He works from the San Francisco branch of the firm. Prior to working with Freestone, Michael worked at Charles Schwab.
There are many others in Freestone Capital Management. With such an acclaimed staff, Freestone should have no problem in serving its clients properly.
However, their disclosures paint a different picture.
Freestone Capital Management has some of the most selfish and biased conflicts of interest present in its services. However, most clients wouldn’t notice them because of the acclaim its staff has garnered.
Before we discuss Freestone’s ethical conflicts, we should look at the Freestone Capital Management AUM (Assets Under Management):
Freestone Capital Management AUM
The total Freestone Capital Management AUM is $7.2 billion. This means they are managing assets worth more than $7 billion. However, they manage so many assets with a small team of 35 members only.
Gary Furukawa and his wife Della own around 50% of the firm through Freestone Capital Holdings.
If you’d look up Freestone Capital’s name, you wouldn’t find any negative information about the firm. This can give you the impression that they have been providing flawless services since 1999.
However, that’s not true at all.
In fact, many of Freestone Capital’s team members have disclosures in their FINRA BrokerCheck profiles.
Freestone Capital and its Multi-million disputes
Freestone Capital Management’s ADV filing shows no disputes. But that doesn’t mean the company is free from any specks.
In fact, their several advisors show disputes in their FINRA BrokerCheck profiles. Most notably, they are Andrew Erisman and Robert Philip Carter.
Both of them are client advisors at this firm. Andrew holds a much senior position in the firm as he’s also a partner and oversees firm management.
I found the following disclosure common in both of their FINRA BrokerCheck profiles:
This dispute is dated 3/15/2010. The claimant here was a public company that claimed breach of fiduciary duty, negligence, unsuitability, and failure to supervise regarding auction rate securities bought in 2007.
They had requested $14,450,000 in damages. And they settled it for $3,000,000.
Both Andrew and Robert have given the same reply to the dispute. They deny any admission of wrongdoing or liability. Moreover, they point out that they didn’t pay the settlement amount, their past employer did.
Andrew and Robert deny any involvement in the case, but that’s highly unlikely. If they were really not involved, the case wouldn’t appear on their BrokerCheck profile.
Still, no one would want to admit to a $14 million mistake, would they?
So, even though Freestone Capital Management has no disclosures in its ADV filing. It’s staff members have significant disclosures and that says a lot about its services.
Even a small customer dispute shows a lot about an advisor’s competence and ethics. The dispute on these Freestone Capital advisors are in millions. Certainly, they made grave mistakes in the past.
Freestone Capital Tries to Mislead You:
Freestone Capital’s website tries to mislead its clients about its disclosures. On their website, they have a dedicated page titled “Important Disclosures”.
The first thing you’d see on this page is not their ADV filing but their different awards. To clarify, on FINRA BrokerCheck, a disclosure could be a customer complaint, arbitration, employment termination, bankruptcy filing or particular civil or criminal proceedings they were a part of.
So, by naming the “Important Disclosures”, Freestone Capital implies you’ll find information regarding these aspects of their business.
And for the sake of it, they have mentioned that they don’t have any disclosures in a single sentence on that page.
However, “Important Disclosures” doesn’t mean “Our Accolades and Achievements”. It’s a sleazy way of misleading clients.
Funnily enough, they start the page by pointing out that historical performance isn’t indicative of future performance. It’s their way of saying, “Just because we won awards, doesn’t mean you should expect an award-winning performance.”
You can see why it bothered me.
They are using misleading terms. And it’s a very shady practice by any standards.
Freestone Capital Management Reviews: Evidence of Poor Leadership
Freestone Capital Management claims to be a 100% employee-owned company. But that’s easy to say when the firm’s founder is also an employee at the firm.
While I was researching for this article, I found many Freestone Capital Management reviews that illustrated the reality of work conditions at this company. It seems the leadership at Freestone Capital doesn’t care about its employees.
Following are the Freestone Capital Management reviews you should read if you’re interested in Freestone Capital careers:
“Lays off for No Reason”
According to this review, Freestone Capital’s leadership tends to fire people for no apparent reasons. They also add that the company expects its employees to work 12 hours a day for 8 hours a day worth of pay.
This is pure exploitation and no company should force its employees to work like this.
In the “Advice to Management” section, the reviewer adds that the company should clarify how much they expect a staff member to work.
“Dysfunction and Unclear Roles”
This reviewer points out the different flaws present in Freestone Capital’s management. They have mentioned that Furakawa, the founder of Freestone Capital Management, isn’t the CEO. And that’s no longer the case now too.
According to the review, the company gives sales bonuses on the basis of feelings instead of data. The reviewer has also pointed out the overall morale at this company is extremely low.
This review highlights multiple drawbacks of working at this firm. They point out the lack of proper HR at the company and the poor communicating skills of the management.
Another drawback they pointed out is that Freestone Capital Management offers poor work/life balance to its staff.
Studies show that poor work/life balance has many adverse effects on a person’s mental and cardiovascular health. These damages include anxiety, depression and other mental disorders and higher risk of heart disease and stroke.
Also, it seems the leadership doesn’t listen to its staff.
Because in the “Advice to Management” section, the reviewer says they wouldn’t consider it so it’s pointless to give any advice. Ouch.
Poor management is the recurring theme in these Freestone Capital Management reviews. This reviewer points out issues about the firm’s leadership. They say the managers don’t know anything about management and don’t deserve their positions.
No matter how attractive the average Freestone Capital Management salary may be, it doesn’t seem worth it.
Another issue they have pointed out here is that the employees look down upon collaboration between departments. Communication is quite restricted here.
The review says Freestone Capital is “Anti-employee”. Moreover, they also say the leadership here doesn’t provide proper reasoning for their directives. Certainly, there are many issues with the management at this company.
According to this review, the company’s leadership supports dishonesty. Apparently, during this person’s interview, they told them they were an asset to the firm.
But right after, they reduced their pay.
If a company’s leadership can lie to its employees, it can certainly lie to its clients. And that’s a huge concern.
It puts the reliability of Freestone Capital under question.
Freestone Capital Careers: Are They Worth It?
Whether you’re interested in Freestone Capital careers or earning a Freestone Capital Management salary, I don’t think it would be okay to work here.
Judging by these reviews, it seems the workplace environment here isn’t healthy. There are a ton of other financial advisory firms that you can go to instead of Freestone Capital Management.
You should pick a workplace that offers a comfortable environment to its employees. Moreover, this company has many leadership issues.
If there weren’t any leadership conflicts, they wouldn’t have needed to get a new CEO. Larry Miles has just recently become the CEO of this company, so it’s too early to see if he would lead the firm properly.
According to the Freestone Capital Management Reviews I found, it would be best to avoid this firm.
This is why it’s best to look up an employer before starting working with them. Even though the Freestone Capital Management assets under management are in billions, their work culture is too toxic. It might be harmful to your mental health to work there.
Why Freestone Capital Management Might be Unsuitable for You
Apart from having poor leadership, Freestone Capital Management also has a ton of additional issues.
It’s important to be aware of these issues while selecting a financial advisor to work with. That’s because many clients overlook these matters. Firms also don’t want their clients to know about some of these aspects of their operations.
Freestone Capital’s disclosures have many conflicts of interest. They suggest this company might be giving subpar advice to its clients. It’s highly probable for their clients to not know about these conflicts of interest.
The following points will help you understand why Freestone Capital Management might not be a suitable firm for you:
Charge High Fees
Freestone Capital Management has a max rate of 1.50% for its investment advisory services. This is significantly higher than the industry average of 1.02% for accounts with $1 million in assets.
The fees could be lowered, but advisors rarely lower their income for their clients. Such high fees means you’d be paying substantially more than your peers.
Freestone Capital charges three kinds of fees: Asset-based fees, performance-based fees, and private fund fees.
Their excessive fees would put a lot of burden on your pockets. In comparison to the industry average, their fees are nearly 1.5 times higher. Certainly, it would be more expensive to work with these guys.
When you consider the additional conflicts of interest present with this firm, their expensive fees don’t seem much attractive.
Earn from Commissions
Freestone Capital Management’s disclosures reveal that they accept commissions. They earn these commissions from the companies whose investments they sell.
While it enables them to offer various investment options and follow different management styles, it can also influence their recommendations. Their advisors might recommend investments that offer them higher commissions, while ignoring your financial requirements.
Some might say compensation-based compensation turns financial advisors into sales professionals. And this can cause them to give you unsuitable advice.
For example, Christopher Aitken, a UBS financial advisor, is facing a lawsuit for recommending an unsuitable investment to an elderly couple. This is more common than you think, which is why it’s a huge red flag when an advisory firm earns from commissions.
It incentives them for putting their finances ahead of yours. Would the company prioritize you or its wallet?
Offer Mutual Funds with 12b-1 Fees
Freestone Capital Management offers mutual funds with 12b-1 fees. The cost of owning such mutual funds is considerably more than those without such fees. But mutual funds with 12b-1 fees don’t offer higher returns (or other benefits) even though their cost is higher.
The 12b-1 fee is the marketing and distribution fee. In most cases, it goes in the advisor’s pocket.
Investing in mutual funds with this fee only increases your costs, resulting in poorer results. SEC had done a research to compare the returns of mutual funds with 12b-1 fees and without such fees. They found no difference.
It’s a huge downside of working with Freestone Capital. You’ll be paying extra for no benefits whatsoever.
They are Insurance Brokers
The advisors at Freestone Capital Management are insurance brokers. This means they earn commissions from selling insurance products.
You might think your advisor is insuring you because they care about your security, while in reality, they are only focused on their commissions.
Being an insurance broker, they might suggest insurance products needlessly. It increases the chances of the advisor suggesting you unsuitable insurance products.
Sells Proprietary Investments
Freestone Capital Management is a national firm. They have multiple proprietary investments.
Their advisors have incentive for promoting and “selling” Freestone Capital’s proprietary investments and products. They might even ignore your welfare while doing so.
When advisors sell proprietary investments, they ignore investments that offer them lower commissions. So, you might miss out on a ton of attractive investment opportunities simply because your advisor wouldn’t get commissions from them.
Charge Performance-based Fees
A huge red flag in Freestone Capital’s services is it charges performance-based fees. There are many drawbacks to this compensation structure.
When your advisor follows a performance-based compensation structure, they get paid to outperform a benchmark (like an index). It makes a lot of sense on paper. But financial advisors tend to pursue high-risk strategies for beating the benchmark, putting you at unnecessary risk.
Excessive risk can be detrimental to your financial well-being, especially in down markets. In down markets, you can lose a substantial percentage of your invested capital very quickly.
Due to its risky nature, Congress had banned RIAs from charging performance-based fees in the 40s. It came back in 1985 only when the SEC allowed RIAs to charge this fee for qualified clients.
Freestone Capital Management’s advisors charge performance-based fees. So, there’s a high chance that they are putting their clients at excessive and unnecessary risk.
It wouldn’t be safe to work with these guys.
Freestone Capital Management performs side-by-side management. This means they work with large hedge funds and mutual funds as well as smaller retail accounts.
Side-by-side management can lead to biased services and can cause smaller accounts to get less attention. It’s a prominent issue with large advisory firms.
Read also about: Brandywine Oak Private Wealth
Firms that perform side-by-side management tend to favor their larger clients. This leads to unfair trading costs and poor service quality for the smaller accounts.
Recommend Affiliated Securities
When a firm recommends affiliated securities it means they suggest securities they have stakes in. Certainly, it influences their recommendations.
Freestone Capital’s advisors would prefer suggesting securities which their company has recently taken over.
It’s similar to the commission-related conflict we covered earlier. Affiliated securities provide the advisors with more commissions, giving them incentive to ignore their client’s requirements.
Accept Soft-dollar Benefits
According to Freestone Capital Management’s disclosures, they accept soft-dollar benefits.
Soft-dollar benefits are highly notorious in the finance industry. Because they make it much easier for an advisor to exploit their client.
It suggests that the advisors might push trades through brokers that offer advantages to their company, instead of the client.
Similar to the previous conflicts, it introduces bias in an advisor’s recommendations and makes it challenging to trust them.
Trade Recommended Securities
Freestone capital Management’s advisors trade the securities they recommend to their clients. This is a huge red flag because it leads to multiple conflicts of interest.
The advisor can use their client’s funds to manipulate returns for themselves. And in most cases, clients aren’t even aware of this.
A popular example is front running where the advisor trades certain securities and then recommends them to the investor.
Trading recommended securities influences the advisor’s recommendations significantly.
They might ignore their clients’ requirements and focus on their own returns while suggesting investments. And that wouldn’t be good for your financial well-being at all.
Terrible Advisor / Client Ratio
At the time of writing this review, Freestone Capital Management claims to have 3,988 clients and a team of 35 advisors.
This means their advisor / client ratio is 1:113. In other words, for every advisor, they have 113 clients. It’s a terrible ratio because it makes it highly difficult for an advisor to provide their clients with proper attention.
Managing 100+ clients alone can be highly detrimental for an advisor’s performance. It seems the people at Freestone Capital Management have become greedy.
Imagine yourself at the advisor’s position. Would you be able to listen to 113 people individually and give them undivided attention at once? Probably not.
When a company has such a poor advisor / client ratio, they resort to giving cookie-cutter advice to their clients, which is among the worst practices in the finance sector.
You must have specific goals and financial requirements. And it’s 100% certain that your financial requirements are different from mine. Then, would it be okay for an advisor to give you and me the same investment recommendations?
When advisors give cookie-cutter advice to their clients, they ignore their unique requirements. They follow a template and suggest investments accordingly, without paying any attention to their clients’ welfare.
Granted, you can get some positive returns from following cookie-cutter advice. But they are no match for the returns you could have gotten if you followed a personalized investment plan.
Freestone Capital Management isn’t the gem it seems to be. It’s a corporation that exploits its staff and has provisions that help it exploit its clients.
As a consumer, you should be aware of these details. However, financial advisory firms don’t want their clients to know all this. This firm even tries to mislead people by using the term “disclosures” for highlighting its accomplishments even though it stands for “disputes” in the finance sector.
Clearly, this firm doesn’t have good intentions and hence, I recommend avoiding them.
If you know someone who’s interested in working with Freestone Capital Management, do share this article with them. The more people know this side of them, the better.
Thanks for reading.
Freestone Capital is a firm that tries to mislead its investors and has a ton of ethical issues. Their fees is higher than the industry and have numerous complaints from their employees.
- Experienced leadership
- Excessive fees
- Advisors were involved in multi-million disputes
- Numerous employee complaints
- Various conflicts of interest in disclosures