There's no question that right now is a difficult time to be in the wealth-management business, says longtime Spokane investment adviser John Peterson.

"We are reliant on new business, and we're not seeing that," says Peterson, who launched Peterson Investment Management Inc. here in 1977 and now runs the firm with his son, Robb. "Whatever you want to make of this (economy), it's not a tasty pie."

Still, Peterson says he's confident in the firm's prospects, saying its 32-year focus on practicing conservative money-management strategies tends to calm its well-heeled clients.

"Our clients are already wealthy, and they know stocks provide the best results, but rule No. 1 is, 'Don't lose the money,'" he says. "We aren't worried about our clients bailing out."

Peterson launched the firm, which currently has about 48 clients and manages about $51 million in assets, after stints at Kidder Peabody & Co. in New York and San Francisco and W.M. Hutchinson & Co. in San Francisco. Robb Peterson joined him in 1993, after working for Dun & Bradstreet Corp. and Kidder Peabody in the San Francisco area, and now serves as vice president.

The fee-only investment management company offers personalized money-management services to individuals, corporations, charities, and foundations, though its focus currently is on individuals, says Robb Peterson.

Despite last year's market meltdown and the ongoing recession, the two are confident that they've managed their clients' portfolios conservatively to protect assets, which they say is the business's prime directive.

Though both its client list and current portfolio value are down a bit from last year, John Peterson says the company has helped its clients weather the storm better so far than the market as a whole.

"We're keeping our clients above water," he says.

Over the past year, Peterson Investment's overall portfolio has dipped in value by almost 22 percent, but the Petersons point out that the weighted target they use for comparison—a mix of the Standard & Poors 500 Index with dividends and Lehman Bros. Intermediate Government Bond Index—fell by more than 26 percent, and the S&P alone dropped 37 percent over the same period of time.

The firm targets higher-income investors and keeps its client list relatively small to ensure individualized attention, the Petersons say.

For instance, says Robb Peterson, for a typical financial adviser, the average account size is about $250,000, and the adviser might at any given time be handling the portfolios of thousands of clients. Peterson Investment's 48 clients, on the other hand, are primarily individuals who have more than $1 million invested through the company, and its prospective clients have on average at least $500,000 to invest, he says.

"We have a small approach for high net worth individuals," he says.

Many of its customers are business owners or retired business owners, who have earned or inherited wealth that they expect to live on, Peterson says. Most have been through a series of other advisers or brokers and were disappointed with previous results, he says. Its clients have on average been using Peterson Investment's services for 14 years, and they are located primarily in Washington and California.

Because of their relatively small client list, the Petersons get to know their clients personally and understand their goals, he says.

Adds his father, "This business is based on personal contacts," and how they view what Peterson Investment has done over time.

Robb Peterson says that although the firm would like to add more clients, and, with current technology can handle up to twice as many accounts as it has now, its focus is on serving the clients it already has, rather than growth.

"We try to do the best job we can for our existing clients," John Peterson says.

The Petersons say it's difficult to gauge the company's growth by comparing year-over-year results. Because it has so few clients, the addition or loss of a client or two can skew annual results significantly. In the last two years, it has seen its overall portfolio reduced some due both to the recession and to the loss of a handful of clients, for various reasons.

In other years, the addition of a major client or two similarly has skewed results upward, they say.

Peterson Investments doesn't do much advertising, and the Petersons say most of their new business comes to them through referrals and personal contacts. It's a difficult business to start, Robb Peterson says, because having a proven track record is so important, especially in today's marketplace.

John Peterson says that once such a firm is established, it's a good business to be in. "We have no inventory, and don't have to borrow any money from a bank. We have stable costs."

The Petersons currently are the only employees of the company. They had a secretary, but when she left some time ago for medical reasons, they outsourced those duties to their accountant's office.

A measured approach

The Petersons personally research the companies in which Peterson Investment buys stock for its clients.

"We do all our own equity research," Robb Peterson says.

Adds his father, "We try to make choices based on what companies make sense. If they have a viable plan, and if we can understand it," then they consider investing in it. If a company's business plan is too convoluted or its documentation isn't transparent enough to be understood, Peterson Investment doesn't consider the company a good risk, he says.

Peterson says the company seeks to select high-value stocks for its clients, primarily those considered "blue-chip" stocks.

Though each client's portfolio is tailored to the client's investment goals, all the various stocks included in them have been researched and hand-selected by the Petersons, they say.

Peterson Investment seeks to make its own processes clear and understandable. To do that, the firm has a straight, graduated fee schedule that tops out at 1 percent of the invested amount per year. It's a sliding scale, so the more a person has invested, the smaller the fee. Additionally, it doesn't charge performance fees as some other advisers do.

"We deal with a discount broker (Schwab Institutional) that gives our clients the lowest possible commission," John Peterson says, adding that the firm doesn't receive any "feedback" payments, such as some advisers collect for selling certain mutual funds.

The Petersons say they don't generally believe such products are in their clients' best interest because they result in unnecessary fees and put decisions into the hands of a third party. The company doesn't sell mutual funds or annuities at all. The approach also helps the Petersons ensure for their clients that they have no conflicts of interest, they say.

Despite the challenges in the economy today, the Petersons say they haven't altered course much, but they monitor conditions carefully and make adjustments as needed.

John Peterson says that the stock market currently is at a pivotal point where it's seeking to firm up a bottom, and to determine whether it's going to launch into a bull market. Peterson Investment is carefully monitoring transports and industrials, which Peterson says are two important indicators. With current low share prices, the Petersons say that although a conservative approach is best, this is no time for timidity.

"This is a great time to be saving," by investing in low-priced stocks, Robb Peterson says.