Founded in 1854, H.M. Payson is one of the longest-standing independent investment firms in the United States. No small feat – especially in an industry characterized by myriad booms and busts.
To what do we owe our longevity? Being far removed from the dramas of Wall Street? Perhaps. We’ve long-prided ourselves on our rational perspective and prudent approach. But our staying power is about more than history; it demonstrates our ability to remain relevant and responsive to a dynamic marketplace.
What sets us apart
H.M. Payson is employee owned; these individuals are solely responsible for the strategic direction and management of the firm. There is no remote corporate office to answer to. We do not make loans, take deposits, offer mortgages, sell insurance or engage in investment banking activities. Our focus is investment research, portfolio management, trust and fiduciary services related to the financial well-being and prosperity of our clients.
Over the years, we have responded to market shifts and client needs thoughtfully and with purpose. We evolved and expanded our trust business, transitioned to a fee-based portfolio model, moved from a partnership to incorporation, enlisted our own independent research team and employed cutting-edge metrics and analytics.
But to our minds, it’s not just what we do that has kept our company robust. It’s who we are. We remain steadfast to Henry Martyn Payson’s core vision: Serve the client first.
And that’s something that never goes out of style.
H.M. Payson: an illustrative early history
One could argue our company was founded on failure. Like so many success stories, Henry Martyn Payson’s business career got off to a shaky start. But when the fates turned against him, our founder squared his shoulders, forged ahead and met the future head-on. And it was ready for him.
A businessman is born
Henry Martyn Payson was born in 1821. His father, Edward, was a minister at the Second Parish church in Portland. Edward was known for his fiery conservative doctrine, and he sermonized vigorously against the new liberalism of the day. It is said that he preached himself into an early grave at the age of 49. Henry was only 6 when his father died, and although two of his older brothers attended Bowdoin College, Henry went to work right out of school. In 1846, at the age of 25, he went into partnership and opened a hardware store on Exchange Street in Portland. Three years later, the store failed. Henry was married and had a son, but the baby was never well and died in 1849 at the age of six months. Henry’s wife, Charlotte, who never fully regained her health after her son’s birth, died shortly thereafter. Henry was bankrupt and bereft with his beloved wife and son gone. The California Gold Rush was in high gear. Shipping companies advertised for passengers. He had little left to lose, so he signed on. But he would not forget what he still owed his creditors.
Go west, young man
Henry arrived in San Francisco in January of 1850, after a rugged passage. In letters to his sister, he described being stuffed with 290 men in a ship’s cabin large enough to hold only 50. The air was foul, the cabin filthy and many of the men became sick. Henry said he missed home, but he was unable to contemplate coming back to Portland without Charlotte being there. Upon arrival, things improved little. He wrote of working sunup to sundown, wheeling dirt to a sluice in the river where he washed and panned it for gold. His spoils were meager. He earned barely enough to keep himself fed and clothed. This was not the get-rich-quick scheme promoted and promised. It was a lesson that would stay with him. Henry did return to Portland, and in 1854 he opened a small office at 32 Exchange Street, only steps from H.M. Payson’s current location. He advertised himself as a stock and bond broker and a dealer in “uncurrent money”— issuances of paper money by state banks to augment the short supply of specie (hard currency) – in the form of coins whose supply was not growing as fast as the economy. It appears that while in California, Henry gained an appreciation for the importance of reliable financial agents in the workings of long-distance commerce. Burgeoning trade with Canada through Portland provided him an opportunity to deal in foreign exchange, as well. The future started to look bright, and he was poised to act.
Henry’s impeccable reputation was critical to attracting and retaining brokerage business. In those days, there was a great appetite for an independent exchange broker, since the banking system was often unstable. Although all Henry’s record books were lost in the great fire of 1866 that subsumed over 200 acres in the heart of Portland, his records dating from 1867 indicate he owned for his clients only high-quality securities from the well-established companies of the times. He also felt honoring his debt was critical to his name. Remember, this was a time when there were not all the consumer protections we now have in place. The only guarantee was a man and his word. Although he was never legally bound to do so, in 1863 Henry finally finished repaying the last of his bankruptcy creditors, much to their delight and surprise. One former creditor wrote: We cannot let this opportunity pass without telling you the agreeable surprise your letter has given us. Not entirely in a pecuniary point of view, for that, of course, would be agreeable, but that it pleases us beyond expression to find in our long mercantile experience of over half a century, that honor unassisted by law, still has a resting place on earth, and we congratulate you on being the first and only party to demonstrate it to us directly. Another responded: I enclose receipt for your draft received today. I need not add how much I appreciate the sentiment in your action. It is but few that do as you have done, and your reward is in your own conscience, for you cannot but feel contented in the retrospect. What is money worth? Only to do our duty as men; and what is life if we don’t well acquit ourselves.
A cool head and a clear eye
Before Henry ever managed one penny of a client’s money, he had gained several hard-won insights. He had a firsthand understanding of business risk from his own painful bankruptcy. After his Gold Rush boondoggle, Henry developed a healthy skepticism for investment ideas based on a rosy promise. H.M. Payson maintained no margin accounts. Instead, it was primarily invested in high-quality utility bonds with ample interest coverage. These principles guided Henry and his clients past the disastrous panic of 1873, which precipitated a depression lasting five years during which many banks went under and most major railroads failed. This boom and subsequent bust was caused by the extreme overbuilding of the nation’s railroad system, which spawned widespread speculation in the stock market. (Sound familiar?)
An heir apparent
Around this time, Henry employed his young nephew Charles Payson right out of high school, despite the fact Charles’ greatest dream was to go to college. But, as the eldest in the family, there was not money for his tuition. Perhaps Henry sensed a kindred spirit in his new hire. Early on in his employment, Charles took a great interest in the company’s investment in the water business. As Portland flourished as a commercial and financial center, it outgrew its infrastructure. In particular, there was a great need for a more reliable water supply. The Portland Water Company was barely profitable in 1884 and was in need of more capital for ongoing improvements and to shore up its balance sheet. This opportunity set the stage for the next great chapter in H.M. Payson’s history.
In 1888, Charles Payson shipped out on a legendary trip to London hoping to sell $1 million worth of the Portland Water Company’s 40-year mortgage bonds. Local banks were in no position to make that kind of investment, and most likely investment firms in New York and Boston would have little appetite for the offering. It turned out Charles was very successful in placing the bonds, and the capital infusion to Portland Water went a long way toward solidifying its financial position. In 1879, Henry made Charles a partner. Seven years later, upon Henry’s retirement from the firm, Charles ascended to the role of president. Through his experience with the Portland Water Company, Charles saw the opportunity to finance, develop, acquire and operate other utilities that needed capital and plant improvements. By the early 1900s, H.M. Payson & Co. had underwriting relationships with over 100 water companies from Maine to California and had become widely known as “The Water Bond House.”
Prudence over panic
There were always political and business risks to contend with, but H.M. Payson & Co. would not invest customer assets in marginal companies or where the political climate was not favorable.This conservative approach was in sharp contrast to the practices of some other underwriters of the day. The panic of 1893 caused 15,000 companies to fail, 500 banks to go into receivership and rendered nearly 30 percent of the country’s rail system financially insolvent. Customers approached H.M. Payson to hold funds for them in what were essentially checking accounts. This panic cast the U.S. and Europe into a deep depression lasting three years — but customer portfolios at H.M. Payson proved as resilient as they had during the panic of 1873. Many viewed H.M. Payson as the only real safe haven for their money, having weathered two major banking crises in 20 years. During the rapid infrastructure development through the first quarter of the 20th century, it was common to finance utility companies through the public sale of stock and bonds — and many of these failed. While the Payson partners were prepared to risk their own capital in direct or mezzanine investments, they would recommend only high-grade securities for their clients, who had come to Payson seeking a trusted fiduciary. The next true test of H.M. Payson & Co. would be the crash of 1929 and the ensuing depression. While the firm’s investments might have appeared overly conservative throughout the Roaring Twenties, the absence of margin accounts helped clients once again sidestep catastrophe. H.M. Payson’s brokerage business declined 50 percent in 1928 from its year-earlier highs and declined an additional 50 percent in 1929. The company reported an operating loss that year of $100,000, and several partners made contributions to shore up the firm’s capital. Trading volume increased dramatically in 1930 and 1931, and when it was all over, the firm was still standing and in solid shape. Although H.M. Payson remained active in the underwriting business through the mid 1900s, asset management and trust services grew to become our most important businesses.
History repeats itself
The cycle of booms and busts would continue throughout the rest of the 20th century and into this one. But thanks to the prudent approach set in place by Henry Martyn Payson, we have never been swept away by market manias or the Next Big Thing, proving there will always be a place for well-reasoned, independent judgment. Life, as they say, turns on a dime. What if Henry’s first business venture had succeeded? (Other than the fact you might today be buying your stepladders and birdseed from Payson Hardware.) What if he had struck it rich out west? Would he have come home sold on speculation and risk? What if he had followed the letter of the law rather than the compass of his conscience regarding his bankruptcy debt? Would he have still earned such a sterling reputation? Who can say? But we like to think our adherence to Henry Martyn Payson’s core values of integrity, independence and intelligent investing would make him proud today.
And like our founder, we’re poised and ready to greet the future, head-on.