For most successful entrepreneurs, there are character-building potholes on the road to riches.

Brent McLean is living testament to that fact.

A millionaire stock broker by age 27, McLean lost his fortune in 1982, but he is quick to attribute those hard lessons to his current success as an entrepreneur and wealth manager.

David Lazarowych, Business Edge
Brent McLean was a millionaire by 27, but lost his fortune and had learned plenty from the experience.

Today, the 48-year-old graduate of the school of hard knocks is chief executive officer of Calgary-based McLean & Partners Wealth Management Inc., an independent financial firm that manages $510 million in assets.

Not bad for a kid from Lethbridge whose entrepreneurial career was launched with a backyard fair and lemonade stand that netted a $20 bill.

1. What was your boyhood dream?

“To be a pro golfer. I won the southern Alberta junior championship when I was 15. After that, it became apparent to me that the probability of making that work was relatively low, and I moved on. I don’t play that much golf anymore. When you play at that level and then don’t play for a number of years, you sort of remember what you could do and it’s a little frustrating when you can’t do it.”

2. What was your first job?

“When I was nine or 10, I created a fair in my parent’s backyard. I had a lemonade stand, I had my mother bake some cookies, I made a couple of little rides, all the kids came, I made $20 and I thought I was on top of the world.”

3. What initially attracted you to the investment world?

“When I finished university (University of Calgary), I knew I wanted to work for myself, because I thought I’d have difficulty working for someone else. To do that, I knew I’d have to either get into a sales job or start my own business. Starting my own business without any experience or any capital was pretty unrealistic. I applied for a number of sales jobs and the one that looked the most interesting was Wood Gundy (investment firm) and, quite honestly, I didn’t know the difference then between a bond and a stock.”

4. How did your early years in the financial world prepare you for your current business?

“I always had this ambition where, if I was going to do something, I had to be the very best. So, at Wood Gundy (as a stock broker), I worked 12, 13, 14 hours a day for five or six days a week for years. When I got off the training program in 1978, the oilpatch was going nutty with oil prices going straight up because of embargoes from the Arab nations. Money was easy from 1978 to the fall of 1981. I made more money than I ever should have, but then I also lost it and basically had to start from scratch again (in 1982).”

5. What did you learn from the experience of losing your fortune?

“It taught me that it’s one thing to make money, another thing to lose money. It was about inexperience and greed. My net worth was over a million (in 1981), but losing it all made me realize that I couldn’t make the same mistake. So that’s why I started in the portfolio-management business that I’m in today.”

6. So what was it like to be a broker who is broke?

“I’ll tell ya, it focuses your brain (laughter). I did everything, like taking a Dale Carnegie course, so I could think differently, refocus and re-energize myself. It was a very difficult time, but looking back, it was probably one of the best things to happen to me. My advice to anyone in that situation is to never give up, always believe in yourself and have faith in the future. The only way you’re going to grow into a person that is more significant than you are today is by making some mistakes and learning from them. It’s those people who have the most positive mental attitude, that are not afraid to make mistakes, that are willing to work hard and have a great amount of persistence who are successful. But if you’re so narrowly focused just on your business and forget about the other areas of your life, you’ll never reach the next level.”

7. What inspired you to start McLean & Partners in 1999?

“We wanted to build a company from the client up. In other words, we wanted a very client-focused company built from the most independent, unbiased platform in the industry today. At most brokerage firms, the real profitability is in the underwriting deals and the corporate finance work that revolves around that. As a result, there’s a bias in almost anything they do, from their research to their trading.”

8. So do you anticipate more demand for an independent business as a result of recent scandals involving analysts and major brokerages on Wall Street?

“We didn’t foresee all these scandals coming, but we did foresee that the independent solutions for clients without any corporate underwriting bias was absolutely essential to our business model. It was the crux of our business model.”

9. What advice are you offering clients today in light of the uncertainty in the stock market?

“Earnings and earnings visibility are what drives stock prices, and we want good, solid earnings year and after. In other words, we don’t want the earnings to be there one year and gone the next. In terms of visibility, we want to be 80 per cent comfortable with the (earnings estimate), 12 to 18 months out. Also, we don’t want to pay too much for that because, right now, the market is still trading at about 23 times earnings. We want to buy businesses that are trading well under the market (price-to-earnings) multiple, growing faster than the rest of the market, are well financed and well managed and, finally, a company that pays ever-increasing dividends. On a relative basis over the past two years (in a bear market), we’ve significantly outperformed the averages.”

10. Have you joined the flight to investing in gold and gold stocks?

“We were actually invested in gold and made lots of money when nobody else wanted it. We were in gold until after 9/11 (Sept. 11 terrorist attacks) and then moved on after making 30 to 40 per cent. We moved out a little bit too early. But everybody likes gold now and we don’t do that. We tend to buy when nobody likes it and we tend to sell when everyone likes it.”

11. What’s your outlook for the stock market?

“We believe the overall market averages over the next five years will probably do nothing of significance. We believe the broad markets, like the S&P 500, the TSE 300, the European indexes, will have subpar returns and, in fact, they may be zero. The reason for that is that the price/earnings multiples are as high as they’ve ever been and we believe they have to come down. Therefore, it’s very important to buy companies, as I’ve said, that are under the market multiple.”

12. What’s your view of the mutual fund industry and the dismal performance of many funds in the bear market?

“I think it’s suffering from over-supply. All those mutual fund managers are all trying to buy the same thing and it’s very difficult to bring any value added to the investment equation when that situation exists. We also believe the mutual fund industry’s management expense ratios are too high, especially given the current environment, and it can be very difficult for them to outperform (the market average) as they’ve seen over the past two or three years where most of them have significantly underperformed on average. We do a significant amount of indexing, but we don’t buy the broad indexes. We buy the sectors within the market that we believe are going to outperform the market.”

13. What sectors do you like?

“The sector we think will continue to outperform (the market) over the next year or two are the basic industries such as the metals, forest products and chemical companies that are economically sensitive. We think they will continue to outperform because their (price/earnings) multiples are still relatively low versus historical averages. We believe their earnings growth will be two to three times the market over the next year or two. From a longer-term perspective, we’re getting more and more interested in health care because the health-care stocks have done poorly. Typically, because of the built-in demographic growth of an aging population, they’ve always traded at a 35- to 40-per-cent premium to the market. Right now, they’re trading at the market multiple.”

14. Do you trust those analysts and brokerage firms that operate with conflicts of interest?

“No. Having said that, it’s like any other business. There are some fantastic analysts out there who are very good at what they do. The problem is that there are so many others who are influenced by what is going on to make money today rather than make money for the clients. We understand all of that. We are covered by a number of large firms, but what we don’t do is read their conclusions (i.e. recommendations, target prices). But a lot of their statistical work is very good and they spend hundreds of millions of dollars on that.”

15. Who’s the investor you most admire?

“I’d say the investor who stuck to his guns all the way through and bought companies with the most visible earnings and can look out the furthest has got to be the old favourite, Warren Buffett (chairman of Berkshire Hathaway). In 1999, he was down 28 per cent and everybody thought that he’d lost it with the tech stocks going up. We didn’t know any tech stocks then either. And at that time, we took more flak than we ever have on a relative basis, but we stuck to our guns and it has paid off in spades.”

16. What’s your favourite stock today?

“We don’t have one. We have a basket of 10. We love Loblaws (L-TSX) in the grocery business. We think that’s one of the best-managed companies in Canada. The earnings visibility is one of the best out there. We love Power Financial (POW-TSX). They are the Cadillac of their industry (financial services) and they’re paying ever-increasing dividends and they’re well managed. From a long-term perspective, we also like Astral Communications (ASM.A-TSX), which owns radio stations and other communications assets. We believe advertising spending will increase significantly over the next 12 to 24 months as cash flows increase. They generate a huge amount of free cash flow and free cash flow is what we always look for. We love businesses that produce cash and we hate businesses that don’t produce cash.”

17. How important is money to you?

“It used to be more important than it is now. It’s important for me to build this company to where we want to build it to, and to not jeopardize our integrity one iota in doing so.”

18. What’s your vision for McLean & Partners?

“We believe that in five years we will manage about $3 billion. Our vision is also to provide a fully integrated wealth-management solution to the affluent clients (the minimum investment is $1 million) in Western Canada and mostly in this city.

What I mean by that is that we’re also in the midst of creating a tax, estate and succession planning division along with our investment management. We believe it’s integral to provide a totally integrated solution to the high net-worth individual so that the left arm basically knows what the right arm is doing.”

19. Any regrets when you reflect on your career?

“No. I’ve been fortunate. I have some great people working with me who have been with me for a long time. I truly believe in sharing the wealth with those people, which I’ve done. Let’s face it. The only way you can build a significant business is by having people who are smarter than you. My job is to get them moving down the track in the same direction.”

20. What’s your goal beyond business?

“My goal is to have a better relationship with my (four) kids and my family and continually give back to the community. This community has been very good to me and my family. I also love to participate in sports that are a great escape from work, like (downhill) skiing, mountain biking and water skiing. Unfortunately, I love all the young men’s sports and I’m not that young anymore. In my mind, at 48, I’m still young, but my body isn’t acting like it’s 21 anymore.”

IN PROFILE: Brent McLean

* Born/raised/age: Lethbridge, 48

* Title: President/CEO, McLean & Partners Wealth Management.

* Education: Bachelor of Commerce, University of Calgary (1978).

* Family: Wife Sheila, children Laura, Michael, Kyla and Jared.

* Career: Upon graduation, McLean completed the Canadian Securities Course and joined Wood Gundy as a broker. He later worked in money management with Prubache Securities (later known as Burns Fry) and Nesbitt Burns. In 1996, McLean and his investment team created the Calgary office of Gordon Private Clients, which subsequently merged with HSBC Securities in 1999. That year, he and his partners founded McLean & Partners.

* Favourite investor: Warren Buffett.

* Passions: Downhill skiing, water skiing, mountain biking.

IN PROFILE: McLean & Partners Wealth Management

* Brass: Brent McLean, president/CEO; Sharon Watkins, chief financial officer (other founding partners are Kevin Dehod, Anil Tahiliani and Russ MacKay).

* Profile: McLean & Partners is an independent and integrated financial services firm that builds investment portfolios for high net-worth individuals and manages $510 million in assets. The company is controlled by five partners, and all of its advisers are shareholders.

* Web site: www.mcleanpartners.com

* Address: 810 10th Ave. S.W., Calgary, AB T2R-0B4.

* Phone/Fax: 403-234-0005, 888-665-0005; 403-234-0606.