SPECIAL REPORT: Master of All Trades Strategy Leads to Success

Managing Partner, SRG LLC, Encino Years at firm: 28 Residence: Pacific Palisades Andrew “Drew” Grey has worked as chief financial officer at a commercial lighting company, chief executive of a dietary supplement manufacturer and as top accountant at a real estate brokerage – all while partner at SRG LLC. How is that? It goes back to what Grey – the “G” in SRG – calls the Encino firm’s controlled growth strategy. It has never made an acquisition and all partners joined as lower-level staffers and worked for the title. Instead, during his tenure at the firm, Grey has served in various operational capacities at client companies that need assistance – a practice that has spread among the eight partners and 42 employees at the firm. “The other partners and professional staff have been controllers and CFOs at companies and understand business,” he said. “When we consult with companies, we do it in a way unparalleled in the CPA industry.” In the future, the firm even plans to take equity stakes in companies, which, ironically, will require it to hire an independent CPA firm to handle the books. Gray began at Ernst & Whinney, a predecessor to Ernst & Young Global Ltd., in 1978. Six years later he left public accounting to work for Baldwin Co., a real estate development firm that went from $2 million in revenue to $250 million in a year. But Grey was fired when the founding family disagreed about his high salary. Still, he credits the experience with setting his career course. “I was responsible for establishing the accounting systems, opening an escrow company, building a finance department and selling bonds on Wall Street,” Grey recalled. “And when I was fired, it was the best thing that ever happened to me. It allowed me to become a partner and owner of a successful CPA firm.” SRG is a full-service firm, but Grey believes its competitive advantage lies in a tax minimization method he calls “the emancipation of financial statements from tax planning.” Most private companies organize their books to shrink their profits and save on taxes. But the strategy proves counterproductive when it’s time for a loan and the banker sees tiny profit margins. “If bankers had a dollar for every time a customer told them, ‘I’m actually more profitable than I showed,’ they would be able to retire,” Grey said. “Most companies don’t understand that you have different methods of accounting that fairly state your financial condition to help lenders and others, but also minimize your taxes.” With the emancipation method, SRG tries to accurately portray profits and use other means to lower taxes. Examples include cost segregation, in which real estate owners depreciate the value of certain portions of the property faster to gain tax benefits. One of the firm’s clients, an apartment landlord with $4 million in income, found $4 million in cost segregated deductions to eliminate his tax liability. Few companies employ the emancipation strategy because it entails a lot of work, Grey maintains. Jim Dunn, chief executive of the Air-Tel Plaza Hotel in Van Nuys, has worked with Grey for 30 years on real estate, tax and estate planning projects. He praised the accountant’s skill at reducing taxes. “Drew has creative solutions to problems when you try to blend real estate with partnerships,” Dunn said. “He’s very covetous about taking care of my assets.” Grey joked that he sleeps in Pacific Palisades but lives in the Valley because he spends nearly all his waking hours here. “I only do three things: I work a lot, I play golf a lot, and I like to eat,” he said. “I enjoy what I do at the office, so I’m never really working.”