3 Wealth Lessons From A BE 100s Legend: James Reynolds Jr. of Loop Capital

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James Reynolds Jr. (Image: Loop Capital CEO James Reynolds)

In selecting BLACK ENTERPRISE’s 2016 Financial Services Company of the Year, we identified a firm with a rep best summed up in a word: Solid. And there’s no characteristic that better defines Chicago-based Loop Capital or its CEO, James Reynolds Jr.

I spent a few days interviewing the visionary Reynolds and members of his team to discover the secret sauce of this sprawling firm that extends to the commercial centers of both coasts: Wall Street and Silicon Valley.

Roughly two decades ago, Reynolds co-founded the firm with another industry vet Albert R. Grace Jr., launching a six-person shop united by a simple guiding principle: “To provide client service beyond expectations.”  Due to that focus, Loop has grown into a full-service investment bank, brokerage, and advisory firm that helps municipal and state governments borrow money to finance everything from schools to public transportation systems; positions companies like Apple to engage the debt market for stock repurchases, dividend payouts and the like; and enable corporations like Facebook to gain equity financing by selling shares to the public.

Loop Capital is now one of the largest privately-held investment banks in the U.S. and has participated in transactions with more than 2,500 state and local governments, college and universities, transportation, and housing agencies and public utilities across 49 states.

In my conversations with Reynolds, I found his entrepreneurial journey offered lessons that can be applied to your personal wealth-building efforts. Here are three that may prove most valuable in refining your money management and investment approaches:

1. Learn how money really works. One of the tenets that BLACK ENTERPRISE continually shares with our audience: Understand and apply the power of compounding to make your dollars grow exponentially. When Reynolds took his first banking gig after graduating from the University of Wisconsin La Crosse and enrolling at Northwestern University for his M.B.A., he set out to fully embrace “the velocity of money.”

I became very fascinated with how money grew, how one would invest let’s say $10 million overnight and then the next day that $10 million might be $10,002,000. While I was out doing all sorts of things, money worked from the time I invested it to the time it matured the next day. It really started being almost an obsession with me to find out how to make it work better, how to be more efficient with it, how to be more thoughtful around it and what sorts of investments to do.
Although you may not become a bond trader like Reynolds, his focus and philosophy can help expand your understanding of personal money management.
2.     Reinvest in yourself.  As Reynolds was building Loop Capital, he kept his eyes on the dollars and plowed profits back into the business. He credits that approach, in part, with his firm’s expansion. Moreover, while some of the industry’s most iconic institutions were stomped, beat up, and whooped during the financial crisis several years ago, Loop was well-positioned to pounce on opportunities.

 The ability to generate revenue quickly so that we can reinvest and get additional talented people was very important. I didn’t pay myself for the first two years because every dollar we made I reinvested that in the firm, which is why we were able to grow so quickly. We were profitable after our first month in the business and we stayed profitable.

In similar fashion, reinvest dividends among your investments to build assets and increase liquidity.  Simply put: Avoid instant gratification.

3.     Diversification and discipline equals growth. Reynolds wasn’t content with his firm being a one-trick pony.  That’s why he earned the designation of chartered financial analyst (CFA)—the highest for such a professional—to deepen his knowledge of investment processes and products as well as further hone his discipline. In fact, Reynolds says the CFA enabled him to successfully structure the firm to handle different areas in the financial arena.  

When you look out at Goldman Sachs and Morgan Stanley you see firms that are highly diversified. They are in everything because they understand the cyclical nature of those businesses. When you are seeing poor performance on the sales and trading of all those businesses then you see the wealth management side doing well or you see the M&A side doing well. Diversification is major.

Just as critical, he says, is discipline: Develop a clear strategy, employ the right people to execute and monitor for desired outcomes.

You should do no less in building your finances.