The chief executive of Ross Smith Energy Group is a dapper gentleman who seems to relish the comforts of life.
The stylish Allan Ross entertains a visitor to his company’s downtown Calgary office in a spacious, posh lounge, featuring leather sofas and a giant-screen entertainment system.
But don’t be fooled by the CEO’s cufflinks and fancy digs.
Closer inspection reveals dirt under the fingernails of the CEO, a former partner with Peters & Co. oil and gas brokerage firm who founded the independent oil and gas research firm five years ago with another Peters & Co. partner, Michael Smith.
At a time when investors are particularly jittery over traditional investment research provided by brokerages, Ross Smith Energy Group has taken the oilpatch by storm by digging deep and sleuthing for intelligence that is often overlooked in the oilpatch, and providing in-depth independent research to institutional investors.
|Dave Olecko, Business Edge|
|Ross Smith Energy Group CEO Allan Ross likes to sleuth out industry.|
The company has cultivated quite a reputation for digging up dirt in the oilpatch, boasting scoops on a number of oilpatch stories.
And Ross leaves the impression he’s loving every minute of it.
1. What was your boyhood dream?
“To be a member of a nice golf course. I got very lucky and joined the Glencoe Club course in its first year. As a kid growing up in a small town, we had a nine-hole course and I did laps on the course.”
2. What initially sparked your interest in finance?
“I wasn’t interested in finance going through most of my schooling. I always thought that being a mid-level general manager of a big company like General Electric would be a good path for me. After graduating (with an MBA from the University of Western Ontario), I started working with Northern Telecom (now Nortel Networks) and I started meeting a lot of people who were involved in the financial business. The more I spoke to them, the more intrigued I became. After moving to Calgary, I started asking people in the investment industry out to lunch. Ultimately, I saw an opportunity and accepted a job with Burns Fry in corporate finance. I saw the priority in that business being work, then family, and I switched to retail sales. I saw people there doing very well and having more fun. Then, I went to Peters & Co. (oil and gas investment firm), where I worked in retail sales and then in institutional sales.”
3. Why did you leave Peters & Co. after 12 years with that brokerage firm?
“I didn’t leave because there was any problem, but I saw that the whole brokerage model was starting to break up. My partner, Mike Smith, and I chatted about this at length and we felt that the quality of research, as it was being delivered to investors, was becoming more sanitized. Our business model (in forming Ross Smith) was to create our research organically, doing it well by well with engineers and petrophysicists, etc., and we were eventually back to a point where we were starting to add value.”
4. Do you view Peters & Co. as a competitor?
“I don’t view them as a competitor, but they view us as a competitor.”
5. What would it take for you to return to the brokerage industry?
“(Laughter) Jupiter aligning with Mars. That’s not in the cards. What we’re doing now has real traction to it and we feel there’s a tremendous opportunity in doing independent research.”
6. Has the demand for your investment research exceeded the expectations you had when you launched the business five years ago?
“The demand for our product is high. Yet, the biggest frustration we have is the fact that people in corporate environments are so discouraged from stepping out of the mould and doing something a little different. And our product did not exist when we started it. Every single person loved the research we were doing, but we really had to work hard to get people to try us. We’ve had to prove our product works, which we’ve done. We saved one client in particular almost $200 million. We have approximately 50 clients and we’re the largest independent energy firm in North America.”
7. How has the issue of the Kyoto Protocol affected your business?
“Our sources gave us the agreement that had been negotiated between Ottawa and the province and the producers before it hit the press. So we had a chance to evaluate it and let our clients know about it. We think the Kyoto issue is a little over-baked. I don’t really think it’s as big a deal as it has been made out to be.” 8. What’s your vision for Ross Smith Energy Group?
“We have tools that we use internally called the “10 times mind expander.” This is what challenges us to keep thinking aggressively. That challenge is to build the business 10 times, or essentially to add a zero to the business. For us to do that, we’ve had to become not only an expert in Canada, but also become an expert in the United States. We have launched in Europe and will be dedicating more resources there this year.”
9. How many zeroes do you have now in terms of revenue?
“I really can’t say. I can only say that we’re always looking for that extra zero.”
10. Is it difficult finding good spies to investigate companies?
“No. We pay cash. We never have trouble finding people to respond to requests for information. We have a large network of people. Some are ex-diplomats. Some are private detectives.”
11. What’s your view of the rash of corporate scandals over the past couple of years?
“It’s shameful. I guess what upsets me most about what’s going on is the charade that these people lived. They take money under a false pretense and a lot of them will then, through great fanfare, give money to a charity. That’s the lowest you can go. Several of these (CEOs) were held up as being the reason a certain town existed and given a degree of respect that was way above what they deserved. With respect to accounting irregularities, that’s real simple. People always behave as they are compensated. If you give them options and bonuses, they will figure out how to beat the program. Their behaviour is disappointing, but not surprising.”
12. Who are the people who have had the greatest influence on your life and career?
“There are two people. Rob Peters (founder of Peters & Co.) taught me an awful lot about entrepreneurship. He taught me about the ability to go out and make things happen on your own and not sit back and wait for people to give you things. The second person is a gentleman named Dan Sullivan (a renowned coach of entrepreneurs), who was my mentor. If it wasn’t for the tools of business that I learned from him, I would not be doing what I’m doing today. I meet with him every year.”
13. What specifically did Dan Sullivan teach you?
“The business model we’ve always been taught is that time equals money. Dan Sullivan taught us that that is not the appropriate model for this day and age.
“Relationships equal money. So as we started to come to grips with how the future was unfolding and how we wanted to be positioned in the future, we felt the only way to really exploit the concepts we worked so closely on was to start our own business. So our whole structure, our compensation system and everything is based on a unique set of business principles. We call it ‘uniqueability.’ We have found that if you put somebody in a position where they’re doing what they’re uniquely qualified to do and what they enjoy doing, and you give them the resources to do that 80 per cent of the day, they’ll hit a home run. We have a concept called focus time and free time. We give all our employees six weeks a year off. We believe free time is not a reward for hard work, but a necessary component for hard work. We find that very few people get sick here and they’re fairly well energized.”
14. Describe your management style?
“We like to empower employees and give them the tools to work with. As a manager, I’m more of a facilitator. I generate ideas and we want people to run with those ideas. My own personal testing shows me as a quick starter. The management style is not to have really well-defined roles for people, but having everyone pitch in where they can.”
15. What’s the best advice you’d offer a young entrepreneur?
“To be successful, you have to have two things – relationships and skill. You have to have the ability to establish a relationship with someone and you have to show you have value in that relationship. If any young person is looking to get into any business at all and doesn’t have those two key things, forget it.”
16. Who’s the entrepreneur you most admire?
“A gentleman named Bob Buford. He built up a cable company from nothing to something very substantial, sold it and he used the proceeds from the sale to start a new business bringing entrepreneurism to the not-for-profit sector. He’s one of the most influential and impressive individuals I’ve met. And his books are must-reads.”
17. Is there a celebrity you’d walk over hot coals in bare feet to have beers with?
“Tiger Woods. I respect him immensely for being able to perform so well under pressure and to be able to speak so eloquently for someone his age. I admire dominance and he dominates a sport that is very difficult to dominate. I’m very impressed with the way he has kept his private life private.”
18. You have mandatory conflicting lunch dates tomorrow with (controversial former Wall Street analysts) Jack Grubman and Henry Blodgett. Which do you stand up?
“I would love to talk to both of them. I think they’ve been made scapegoats. The press has totally destroyed the reputations of people that did exactly what they were supposed to do. I find it hypocritical for the press to do this because most investors got tremendous information from both these individuals. Granted, they were effectively corporate banking salesmen. But everyone knows that. I find it tough to swallow when people destroy these individuals for their own gain, such as class-action lawsuits.”
19. What are you personally investing in these days?
“Cash. I think that when everyone is enamored about a sector like oil and gas . . . when stocks are reflecting a reasonably buoyant commodity price, that’s the time to sell. I believe that the economy, especially the U.S. economy, is fundamentally flawed right now and I believe cash can give me a better rate of return than many stocks right now.”
20. What do you see in your life’s crystal ball?
“Every year, I do a 25-year plan. When you have the opportunity to dedicate 25 years to a goal, it’s hard not to become very good at something. To do a 25-year plan, you have to prepare yourself to live longer. I believe I’ll have another two to three businesses in the next 25 years. The two sectors that intrigue me the most are health and financial services, both of which are a commentary on the population.”
IN PROFILE: Allan Ross
* Born/raised/age: Antigonish, N.S., 48.
* Title: President/CEO, Ross Smith Energy Group.
* Education: University of Western Ontario, MBA; Certified Management Accountant, 1981.
* Family: Wife Denise, daughter Kathleen, son John.
* Career: Ross co-founded Ross Smith Energy Group five years ago after a 12-year career in retail and institutional sales with Peters & Co. brokerage where he was also a partner. Prior to joining Peters & Co., he worked in corporate finance and retail sales with Burns Fry and in economics and planning with Gulf Canada.
* Mentor: Dan Sullivan.
* Passions: Golf, working out.
THE COMPANY: Ross Smith Energy Group
* Brass: Allan Ross, president/CEO; Michael Smith, chairman.
* Profile: Ross Smith is a privately owned independent equity research boutique that employs the collaborative effort of more than 100 of the top specialists in the oil and gas industry to help institutional investors make informed decisions. The company bills itself as the top independent oil and gas research firm in North America and is also making inroads in Europe.
* Website: www.rseg.com
* Address: #400, 407 8th Ave. S.W., Calgary, T2P 1E5.
* Phone/Fax: 403-294-9111, 403-294-9112.