Published on Jan 27, 2010 – FUNDfire – An Information Service of Money-Media, a Financial Times Company
By Gregory Shulas

A new wealth firm with offices in Florida and Ohio launched last month catering to high-net worth clients with investment and family office services, as well as an affiliated law practice. The three partners – former private bankers and directors with National City Bank and its Sterling multi-family office division – opened shop on Dec. 18 aiming to serve clients with more than $5 million.

Asset management firms are making sales professionals their top recruitment priority this year amid growing signs that the once-frozen job market is thawing.

That’s according to a FundFire reader poll where roughly 37% of respondents said money managers want to add to their sales and marketing workforces in 2010, making that the most popular job category in the survey.

That vote total included 25% who said institutional sales and marketing positions are the top hiring focus at their firm, and 12% who indicated that bringing on retail wholesalers is the most important recruitment goal.

Investment professionals, including portfolio managers and analysts, received the second highest number of votes, with 16 overall. Technology and operations garnered 11%, while product development and compliance received 6% each.

About 25% of respondents said their firm is either not hiring or plans further layoffs. In spite of that, the survey offers some evidence that the long dormant job market is beginning to wake up.

A FundFire poll early last year found 64% of respondents saying their money management firms were not increasing staffing levels in any areas for the upcoming year. A nearly identical percentage, about 63%, maintained that view in an August FundFire survey on whether companies were expanding payroll again or were keeping the status quo.

Goldman Sachs, General Electric Asset Management and T. Rowe Price are just some of the managers that in recent months have revealed plans to increase staffing in the near term. Goldman CEO Lloyd Blankfein said in November that expanding institutional and private wealth sales coverage is a priority. GE Asset Management announced this month that it will hire its first U.K.-based consultant relations specialist as part of a broader institutional consultant channel push.

FundFire has also reported that recruiters are actively recruiting for fixed income investment professionals. Of specific interest are investments specialists from the Treasury, high-grade, mortgage and distressed credit spaces.

Jacob Navon, partner at recruitment firm Westwood Partners, has seen encouraging signs of life in the industry’s job market, with sales and investments standing out as strong points.

“We are seeing a more balanced mix between demand for investment professionals and demand for sales, marketing and client service personnel across the major distribution channels,” he says. “The major point, however, is that there is a strong and widespread race for talent in these two segments of the business.”

Andy Klausner, founder of strategic consultancy AK Advisory Partners, says firms are focusing on sales professionals before they beef up their investment staffs.

“By adding sales professionals who are presumably paid to a large degree on commission,they can hedge their bets while still trying to grow their business. In addition, the emphasis on institutional versus retail reflects the reality that the institutional marketplace is less affected by current economic conditions than retail,” Klausner says.

As of 3 p.m. Tuesday, 101 FundFire subscribers had participated in the poll. Participants were self-selected and were only able to vote once. FundFire’s primary audience consists of asset managers, institutional investors, consultants, financial advisors and service providers.

Published inFUNDfire – An Information Service of Money-Media, a Financial Times Company
By Tom Stabile

Two former UBS Financial advisors recently joined the ranks at HighTower, a Chicago-based boutique brokerage start-up that is aiming to “double or triple” its roster in the next two years by poaching from the wirehouses. Christopher Davis of Virginia and Matthias Kuhlmey in New Yorkjoined separately from UBS, bringing the firm’s tally, in a little over a year of operation, to 17 advisors with about $15 billion in assets – including 10 teams from the wirehouses or other big-name brokerages.

“We’ll have new people coming aboard in December or just after the New Year,” says Elliot Weissbluth, HighTower’s CEO. “We expect to be at between $50 billion to $100 billion in assets in the next two to four years.”

The goal sounds ambitious, even though the firm has said it is focusing on advisors with $300 million or more in client assets. It added a big chunk of its assets this year with a single advisor team led by Richard Saperstein that had run about $10 billion in client accounts at Bear Stearns.

But Weissbluth says HighTower expects to grab its fair share of the increasing number of large-book wirehouse advisors who are leaving the brokerage environment. The absolute number of advisors leaving remains small – in the hundreds – out of the universe of more than 50,000 wirehouse advisors, but it has nevertheless been growing rapidly.

“The wirehouses are our core target,” he adds. “We look for the elite brokers inside the wirehouses who have made the decision they would like to leave. We want to be on their short list.”

The idea that wirehouse advisors are willing to move is fueling business initiatives at dozens of custodians, managers, advisory firms, and service providers this year. And on Friday, Charles Schwab & Co. released the results of its survey of 200 wirehouse advisors about their attitudes on leaving the brokerage world for an independent firm, and it found that nearly half would “consider” such a move. Schwab is a large custodian that aims to attract brokerage advisors who decide to go independent to its platform. HighTower uses the platforms at Schwab and another large custodian, Fidelity Investments, for investments, custody and other services.

HighTower’s own traction was rapid in its first six months as it added 15 advisors through May. It had a dormant recruiting stretch until adding the two UBS advisors, but Weissbluth says the pause was planned because HighTower undertook a time-consuming effort to set up a clearing infrastructure through JPMorgan, particularly to benefit Saperstein’s large practice.

“That was a big operation,” Weissbluth says. “We decided to allow for JPMorgan and HighTower to have a sufficient amount of time to make sure the infrastructure was working well between the firms. We decided to build instead of trying to build and grow at the same time over the summer.”

The HighTower model appears to promise good results, particulary because it offers an equity stake and share in the firm’s growth, says Andrew Klausner, principal at AK Advisory Partners, a Boston-based consultant. He refers to HighTower’s structure that assigns 25% of the firm’s equity to advisors who come in as partners, with shares allotted by the size of the incoming recruit’s book of business.

“I think the concept has legs,” Klausner says. “The equity option appeals to people.

HighTower’s model also calls for providing the advisors with infrastructure, platforms, and product access similar to what they had at the wirehouses, which is different than the effort required for advisors who go fully independent and start up from scratch. Klausner says having a business infrastructure in place is likely appealing to a wirehouse advisor who is eager to leave but doesn’t want to mind the details of running an office.

Klausner says he has seen other start-ups using this model, including the “equity kicker,” but none have yet matched HighTower in recruiting results. The firm now has eight locations, including “corporate offices” in New York and San Francisco that are equipped to bring in additional advisors, as well as five other offices based around regional teams in other cities.

One of the recent UBS recruits highlights another focus of the HighTower model – bringing in advisors with specialties that can in turn be offered to the clients of other partners at the firm. Kuhlmey brings over a specialty in global asset allocation and international banking, having worked as well at Julius Baer and Deutsche Bank’s private banking operations. His experience includes extensive buying and selling of foreign ordinary securities in native country currencies, an arduous process that many U.S.-based advisors don’t follow but which can offer significant benefits to certain clients.

That example adds to Saperstein’s cash management specialty and to others at the firm who focus on fixed income, Weissbluth says. “The HighTower strategy is to find really high-quality advisors, and many have developed differentiated practices,” he adds.

He says “information arbitrage” stemming from the partnership structure allows advisors to share their expertise with clients of their colleagues. Such occurrences call for the advisors to coordinate both with HighTower’s CFO to establish a revenue-sharing model as well as with the firm’s compliance team to ensure clients are well-informed about the arrangement.

AK Advisory’s Klausner says a specialist model should succeed at a firm where advisors shareequity. “In the brokerages, you’re typically relying on the home office resources,” he adds. “Here, you are relying on other producers who are experts. And, typically, in a wirehouse you’re not compensated to help anybody else. But when you have an equity stake, you have a direct incentive to grow the base of the business.”

HighTower’s recruiting haul so far also includes advisors from Morgan Stanley, Merrill Lynch, and Goldman Sachs. Weissbluth says the advisors get most external investment products, including separately managed accounts, from Schwab and Fidelity platforms or dual contract relationships with managers.

Published inFUNDfire – An Information Service of Money-Media, a Financial Times Company
By Gregory Shulas

Institutional investors’ increased appetite for passive products will only grow stronger in thecoming months as interest in active management continues to wane. That’s according to FundFire poll respondents.

Roughly 57%, or 212 voters, said passive strategies will have the most momentum in the near future. That made it the most popular sentiment in a FundFire poll querying readers on whether active managers will continue to lose business to their passive counterparts in the coming quarters.

The majority tally includes 14%, or 52 voters, who said passive will have a “significant” advantage in the near future. It also includes 43%, or 160 voters, who said a “moderate” amount of investors will make the active-to-passive switch. That latter choice was the survey’s most popular individual option.

In contrast, 43%, or 162 voters, indicated that investors will remain loyal, if not increasingly committed, to active management in the months ahead.

The minority tally includes 21%, or 80 voters, who see no change from before, as well as 22%, or 82 voters, who expect investors will actually emphasize active management over passive management in the near future.

FundFire has reported on how institutional investors have displayed an increased interest in passive products in the past several months. For example, the San Jose (Calif.) Police and Fire Department Retirement Plan recently decided to move more than $250 million worth of largecap  equities into passive products as part of a larger asset allocation shift. Meanwhile, a recent survey from Greenwich Associates found that one in five investors have relocated money away from active managers, up from 4% last year. Further, the California State Teachers’ Retirement System has been debating the merits of active versus passive management.

Andy Klausner, founder of AK Advisory Partners, a strategic consultancy serving asset managers and advisors, says he’s not surprised by the poll’s results due to how many industry professionals are still “shell-shocked” from the past year’s events.

“One popular theme has been that active no longer works and that passive makes more sense. However, I think that this is more of a reactive mentality,” he says. “Especially since the markets have come back, I would have expected a little more support for the active side. What is probably clouding the issue is the fact that even though markets have rebounded, the general economy is not doing that well so people are still nervous.”

As of 3 p.m. Tuesday, 374 voters had taken part in the FundFire survey.

Participants were self-selected and only able to vote once. The survey is an unscientific sampling of FundFire’s audience, which consists of asset managers, institutional investors, consultants, financial advisors and service providers.

Published in Ignites – An Information Service of Money-Media, a Financial Times Company
By Gregory Shulas

The BlackRock-Barclays Global Investors combination is the merger most likely to generate the most success when compared to the other big industry deals. That’s according to a plurality of Ignites poll respondents.

Roughly 47%, or 308 voters, said BlackRock-BGI has the greatest business opportunities ahead of it. That made it the top choice in the Ignites survey, which polled readers on which industry M&A deal will collect the most new assets and retain the most existing clients over time.

Voters said the deal with the second most growth potential is Invesco-Van Kampen Investments, which received 19% of the vote, or 125 votes.

Meanwhile, the Ameriprise Financial-Columbia Management deal garnered 15% or 98 votes putting it in third place. The Wells Fargo-Evergreen Investments deal collected 14%, or 89 voters, to finish in fourth place.

Macquarie Group-Delaware Investments finished last, with roughly 5%, or 32 votes.

Andy Klausner, founder of strategic consultancy AK Advisory Partners, says the high confidence in the BlackRock-BGI deal reflects the name recognition of the New York-based acquirer as well as the respect the firm’s risk management prowess commands.

“The Ameriprise-Columbia Management deal dragged on for quite awhile and that probably left some readers with questions. The other deals are recognizable names, but overall I think the quality of the BlackRock franchise is probably what influenced people the most,” Klausner says. Further, lack of name recognition probably hurt Macquarie Group-Delaware Investments’showing in the poll, he adds.

BlackRock announced in June that it would acquire Barclays Global Investors for $13.5 billion. The transaction gives New York-based BlackRock access to iShares, an ETF market leader.

Industry observers have described BlackRock-BGI as the future model of success in asset management, noting BlackRock’s strong active management capabilities and BGI’s rich passive product mix.

The most recent major deal was Invesco’s purchase of Morgan Stanley’s retail asset management business, including the Van Kampen Investments unit. Under the $1.5 billion deal, Invesco pays $500 million in cash and gives Morgan Stanley a 9.4% stake. The end result will create a fund complex with roughly $536 billion in assets.

That deal came within weeks of Ameriprise Financial’s announcement that it will pay between $900 million and $1.2 billion for the long-only mutual fund unit of Bank of America’s Columbia Management.

Published inFUNDfire – An Information Service of Money-Media, a Financial Times Company
By Tom Stabile

Wells Fargo has finished a major step of its private banking business integration with the former Wachovia Wealth Management by appointing the last of about 30 regional heads on the East Coast who will oversee a range of services for high-net-worth investors with $5 million to $50 million. The restructuring caps one of the biggest outstanding tasks following Wells Fargo’s acquisition of Wachovia last year, bringing together private banking arms that were similar in size but had different organizational models.

A notable aspect of this integration for asset managers is that bank-based financial advisors in the newly reformatted organization will have access not only to the standard brokerage product platforms but also to the broader lineup of strategies available to Wells private bankers.

The newly integrated units had been geographic mirror images, with Wells mostly on the West Coast and Wachovia largely covering states east of the Mississippi River. The combined group now has 34 regional heads in the West region, and 29 in the East. Those managers report up to 12 regional managing directors overseeing larger zones. The 12 are split evenly between six in the Eastern half of the country, reporting to Stan Gregor, and six in the Western half reporting to Chuck Daggs.

Gregor and Daggs in turn report to Jay Welker, executive v.p. of the wealth management group. Also reporting to Welker are several senior executives overseeing sales, technology, and wealth advisory and private banking services and products.

Gregor says the end result of the integration incorporates elements of both business models, though on the Eastern U.S. side, it resulted in more appointments recently to regional manager positions. “We truly have looked at the way both companies were running the businesses and picked out the best of both, with the clients’ needs at dead center,” Gregor says.

The legacy Wells side, whose previous model resembled the current one, only saw a few new private banking regional managers named, but new appointments have been taking place throughout the year in the former Wachovia territory. The six eastern regional directors were named in the spring, and many of the 29 eastern regional managers have been named in recent months, with about 15 announced over the last week.

The regional managers oversee all wealth management functions for their markets, including private banking, credit, investment management, trust and estate planning, financial planning, insurance and bank-based brokerage services. They won’t oversee the financial advisors who are part of the stand-alone branches of Wells Fargo Advisors, which was formerly the Wachovia Securities brokerage.

The new private bank set-up is different from the legacy Wachovia structure in several ways, particularly in including the bank-based brokerage business line under the wealth management reporting chain. “That regional manager is held accountable for results, growth, and development of all the businesses within their geography,” Gregor says.

While the 3,000 bank-based brokerage advisors will remain licensed through the main WellsFargo Advisors brokerage, they will have a much different operating environment by reporting into the wealth management unit. They have broader access to the entire private banking division’s specialty consultants for matters such as trust and estate planning and banking tools, Gregor says. And most significantly, these bank-based advisors now have access to the entire private bank investment platform, an open architecture lineup that includes institutional-style managers and alternative investments.

“This creates a really compelling platform for our [bank-based] financial advisors,” Gregor says.

The wealth management division expects “enormous synergies” from tying in all of the different business lines under one leadership structure, Gregor says. He says the structure also “eliminates the silos that existed” and creates a team-based environment with specialists housed in the same offices as client-facing relationship managers.

“Our relationship managers are engaging with the same people day in and day out,” he adds.“They’re not just ‘renting’ a specialist that visits the market.”

The restructuring has also allowed a certain amount of consolidation through office closings, though Gregor declines to provide details.

The integration effort and adoption of the regional manager model for wealth management is attractive in theory, says Andrew Klausner, principal of AK Advisory Partners in Boston. He says the home office leaders of business units such as insurance and investment management don’t often coordinate, so it makes sense to centralize and combine those efforts at the regional, client-facing level.

Klausner says one of the keys to making such a set-up work is to ensure propercommunication between the specialists at a local level. But perhaps the most important facet is ensuring that compensation incentives reward individual relationship managers, advisors, and specialists for referring business to each other and sharing clients. “If the insurance guy has no incentive to build the entire business, it won’t work,” he says. “If you do it correctly from a compensation point of view, it can be a very good model.”

Gregor declines to describe the compensation set-up in the private bank unit.

In addition to previously reported appointments from recent weeksthe bank announced another 11 regional managers this week, most of whom shifted from similar roles at Wells or Wachovia:

• Jennifer Lee is senior regional manager for New York, coming from a post as managing director and regional manager for the Northeast region at Neuberger Berman.
• Joseph Giglia has been appointed regional manager for suburban New York in charge of the Westchester County and Long Island markets. He reports to Lee.
• John Garone is regional manager for Northern New Jersey and is based in Summit, N.J.
• Brian LaGrua is regional manager for Southern New Jersey, and in based in Red Bank, N.J.
• James Creamer Jr. is regional manager for the Mid-South Region covering Alabama, Mississippi, and Tennessee. He works from Birmingham, Ala.
• David Edmiston is regional manager for Greater Atlanta.
• Dagan Sharpe is regional manager for Greater Georgia, which cover the markets outside of Atlanta, and works from Augusta, Ga.
• Ken Solis is regional manager for the Tampa Bay region, working from Tampa, Fla. He also covers Hillsborough and Pinellas counties.
• Jason Williams is regional manager for the Miami and Ft. Lauderdale regions, and is based in Miami.
• Bradford Deflin is regional manager for the Gold Coast North Region in Florida, and is based in Palm Beach. He also covers Palm Beach Gardens, Stuart and Vero Beach.
• William Bourbeau is senior regional manager for Palm Beach County, and also is based in Palm Beach, Fla.

The Wells wealth management division also houses the newly renamed Wells Fargo Family Wealth Group that focuses on clients with more than $50 million. That unit combines the former Calibre multi-family office of Wachovia and a similar, smaller unit from Wells.

Published in Ignites – An Information Service of Money-Media, a Financial Times Company
By Greg Shulas

Fund industry professionals overwhelmingly believe their firms are well positioned to deliver product and services that satisfy investors’ post-financial crisis needs. That’s according to a majority of Ignites poll respondents.

Roughly 73%, or 177 voters, said their firms are well situated for the retail investing environment that’s been shaped by the economic downturn. That made it the topsentiment expressed in the Ignites survey on how well prepared fund professionals believe their firms are for a more challenging business environment.

Of the majority, 41%, or 99 voters, said their firms are well positioned for the post-crisis landscape, while 32%, or 78 voters, said their companies are very well positioned.

Meanwhile, a mere 11%, or 25 voters, said their investment companies are at acompetitive disadvantage, making that the poll’s least popular option.

Approximately 16%, or 39 voters, gave their firm mixed reviews, saying that the investment company’s preparedness is no better or worse than their peers.

The survey’s findings differ from a recent KPMG study of global investment executives in which 65% said their company’s top management lacked vision and posed a major obstacle to change during the financial recovery.

Further, 90% of U.S. respondents polled had no confidence in their firms’ upper management. The KPMG study’s respondents included investment managers and institutional investors, such as insurance companies, pension funds and sovereign wealth funds. The retail investors it surveyed included wealth managers and family offices, the latter being an advisor group which mainly serves sophisticated high-net-worth investors.

In contrast, the Ignites poll reveals a mutual fund industry that’s largely united in its postcrisis strategy.

Ignites has reported how fund companies have responded to market turmoil by developing new products and strategies that complement the needs of a more skeptical and conservative investor base.

Investment companies have explored developing retirement income funds that seek to provide steady income and relative stability through a form of guarantee, as well as funds that are less correlated to the equity and fixed-income markets.

Investment companies also have been tailoring their wholesaler and customer support services to address investors’ and end-clients’ concerns about investment losses and future financial planning

Andy Klausner, founder of AK Advisory Partners, a strategic consultancy serving the wealth management industry, says mutual fund companies are wise to distinguish themselves as providers of best-of-breed client servicing ideas to advisors.

“These ideas should not only include talking points on the performance of their particular funds, but more importantly general servicing ideas that will help them with their entire book of business, as this will help build advisor loyalty to them,” Klausner says.

Precisely 241 Ignites subscribers participated in the survey as of 3 p.m. Tuesday.

The poll is an unscientific sampling of Ignites’s audience. Readers voted only once on a voluntary basis. Ignites’s audience consists of money managers, service providers and financial advisors.

Published in FUNDfire – An Information Service of Money-Media, a Financial Times Company
By Gregory Shulas

Wealth advisors who leave for a new wealth management firm can expect to bring over the bulk of their existing clients’ assets during the transition. That’s according to a majority of FundFire poll respondents.

Roughly 62%, or 351 voters, said that half or more of an advisor’s assets move with them upon switching firms. That made it the top sentiment expressed in the FundFire poll on the percentage of assets that follow advisors who switch firms.

The majority sum included 42%, or 236 respondents, who said 50% to 75% of the advisor’s book make the jump to the new firm, as well as 20%, or 115 voters, who said 75% or more of assets come over during such transitions.

In contrast, 38% of the respondents, or 214 voters, indicated that less than 50% of assets follow an experienced advisor leaving for a new firm.

Of the minority tally, nearly one-third, or 167 voters, said 25% to 49.9% of existing assets leave the old firm with the departing advisor, while just 8%, or 47 voters, said less than 25% of client assets make the switch.

The FundFire poll’s findings contrast with a recent Wall Street Journal report that suggested only 25% of client assets are following departing advisors, compared to 50% in the past. This, the Journal said, coincides with a trend where clients are reportedly sticking with wirehouses when advisors depart, instead of moving with them.

High-net-worth investors are increasingly having second thoughts about making such transitions with their advisors, says Andy Klausner, founder of AK Advisory Partners, a strategic consultancy serving the wealth management industry. The hesitance can be attributed to how the credit crisis has decimated investor confidence levels, he says.

“Before, clients would go with advisor without thinking about it. Now they are giving a lot of thought to this,” he says. “Clients are becoming smarter. The trust factor is not what it was.” However, Klausner notes that most advisors will not leave a firm if they know at least 50% of clients won’t go with them.

As of 3 p.m. Tuesday, 565 FundFire subscribers participated in the survey.

Participants were self-selected and were only able to vote once. While wealth advisors were the poll’s main target, other FundFire readers had the ability to vote. The publication’s overall audience consists of asset managers, institutional investors, consultants, financial advisors and service providers.

Published inFUNDfire – An Information Service of Money-Media, a Financial Times Company
By Tom Stabile

Two outfits rooted on opposite sides of the country are basing future growth on acquiring uppercrust independent advisor firms, and both plan to close more deals this year.

Denver-based First Western Financial recently bought an independent registered investment advisor (RIA) firm in California, and has three more acquisitions set to close in the next three months. And Samoset Capital Group of Darien, Conn., has been ramping up to obtain majoritystakes in RIAs or to lift-out wirehouse teams, in both cases focusing on advisors with $500 million to $3 billion in assets.

Both are targeting advisors who roughly serve the $2 million to $25 million investor. Each outfit also offers an open architecture platform for most or all investment vehicles. And one firm already has private banking and trust services; the other plans to add those capabilities in-house.

First Western and Samoset are each aiming at a “sweet spot” of advisors that cater to investors who are “too big” to get tailored attention at a broad-based wealth manager but “too small” to fit into elite environments, such as multi-family offices, says Andrew Klausner, principal of AK Advisory Partners, a strategic consultant in Boston.

“The RIA marketplace has been and will continue to be a driver of growth in wealth management,” Klausner says. But he adds that while it’s a good time to have a growth model based on buying RIAs, these firms need to ensure they are presenting a unique value proposition, both to the advisors they want to acquire and to the investor end-clients.

First Western’s most recent acquisition is its seventh of an RIA, says Scott Wylie, the boutique bank’s chairman and CEO. Wylie is a former chairman and CEO of Northern Trust Bank of Colorado, and he co-founded First Western with Warren Olsen, who is vice chairman and CIO and a past president of Morgan Stanley’s mutual fund business.

First Western closed on its acquisition of GKM Advisers of Los Angeles, an RIA with $353 million in assets under management, on April 30. It now has three offices in California, one in Arizona, and five in Colorado. And it intends to continue growing in the Southwest and Western regions by acquiring more RIAs, Wylie says.

“It’s definitely an integral part of our strategy to expand into new markets,” he adds. “We’re a pretty unique strategic buyer, and that was true two years ago, it’s true today, and it will be true two years from now.”

The First Western model entails acquiring the RIA and then adding private banking and trust specialists, along with its technology infrastructure, which includes proprietary systems and a trust operations platform. Each location operates as a local boutique with its own board andofficers, but it takes on the parent name.

The firm has $2.5 billion in assets under management, focusing on the $2 million to $20 million client, Wylie says. He adds that the firm has capital in place to continue making acquisitions, with a focus on the Western U.S., in part because of a belief that the market is distinct from the East Coast version.

Wylie says while private banks on the Eastern side of the country work with a lot of intergenerational clients and families with “19th Century” wealth, the focus in the West has more of a first-generation flavor, with entrepreneurs and other “wealth creators.” And he says that begets a different culture, because clients in the East tend to want to have their wealth “taken care of,” while Western clients are more likely to want private bankers who treat them as partners.

First Western’s investment approach, overseen by in-house staff, combines proprietary strategies – largely separately managed accounts (SMAs) for domestic equities and fixed income – with similar third-party manager options, as well as outside managers for alternative investments and specialty asset classes.

Back East, Samoset’s inaugural acquisition closed last year, but it was an anomaly, says Peter Milhaupt, head of sales and new business development. The outright purchase of Baldwin & Clarke Advisory Services, an RIA with $120 million in assets under management, doesn’t fit the core model Samoset intends to employ, which will focus on obtaining stakes of 51% to 75% of advisor firms.

“We’re leaving a meaningful equity position with the partners,” Milhaupt says. “It’s built around the premise that we’re truly partnering with RIA firms.”

That original deal, self-financed by Samoset’s 15 partners, helped to jump-start its platform, which combines asset management with financial planning, estate planning and insurance services. Samoset also intends to acquire a private banking and trust division, Milhaupt says.

Two pending acquisitions are now in “active discussions” and others are in earlier stages, both with existing RIAs and with wirehouse advisor teams eyeing a move, Milhaupt says. Samoset will offer them elements such as an open architecture investment lineup, built with an internal due diligence team; succession planning financing; a client planning and reporting system that can take in liquid and illiquid assets; and a suite of advisor practice systems to handle matters such as portfolio accounting and trade order management.

Samoset will also handle central matters such as compliance and human resources, as well as marketing and best practice research. The firm plugs into five custodial partners.

While the model is akin to “holding companies” that had been active buying up RIA firms in recent years, Samoset appears to be aiming more exclusively to high-end firms than its peers. It also will offer access to its platforms on a private-label basis to similarly focused RIA firms.

Milhaupt says the goal is to create a national brand, though the early focus will be on the East Coast. The plan entails opening 10 to 12 “beachhead” offices that will serve as hubs for other offices, including acquired RIA firms, within their regions. “The last thing we want is to have hundreds of offices dispersed around the country that need to be managed individually,” he says.

Published by FUNDfire – An Information Service of Money-Media, a Financial Times Company
By Tom Stabile

A new wealth firm with offices in Florida and Ohio launched last month catering to high net- worth clients with investment and family office services, as well as an affiliated law practice. The three partners – former private bankers and directors with National City Bank and its Sterling multi-family office division – opened shop on Dec. 18 aiming to serve clients with more than $5 million.

Willow Street Advisors, based in Naples, Fla., is adding a twist to the relatively uncommon affiliation of wealth advisory and law practices. Such set-ups usually start with established law firms, but the new firm’s core focus is wealth management. The law practice might only break even, says Christopher Bray, managing director and co-founder in Florida for Willow.

“We see growth in the independent channel, especially from clients leaving the traditional firms,” Bray says. “Even though asset values have gone down so much, people realize they want and need professional advice.”

The timing for an independent start-up is probably good, given the financial markets havoc, says Andrew Klausner, principal of AK Advisory Partners, a strategic consultant in Boston.

“If they have the financial backing and a good initial client start-up and prospect list, it’s not a bad time to be starting,” Klausner says. “Unhappy clients are going to continue to move [away from traditional firms] and look for alternatives.”

Bray says Willow is awaiting the transfer of $120 million in assets from its initial 15 to 20 clients, and expects to have about $200 million in assets by the end of the first quarter. It has a few $30 million clients, and has taken on a few investors with portfolios as low as $2 million from prior relationships, but Bray says Willow aims to stick to a $5 million minimum after the first year. The three partners have put forth all start-up capital, Bray says.

The firm will offer both proprietary portfolio management and investing throughseparately managed accounts (SMAs), alternative funds, and other investments. It signed on this week with Fortigent, a turnkey asset management platform provider that focuses on product sets and portfolio construction for high-net-worth clients.

The mixed approach stems from the roots of the founding partners, who came out of both National City’s private banking arm, which runs proprietary products, and Sterling, which uses open architecture.

Bray and co-founder Richard Stevens, who is Willow’s CIO, had both worked forNational City’s private bank in Florida before they left in 2007. Bray previously had worked with the Sterling division in Pepper Pike, Ohio, and when he moved to Florida, a colleague named David Kearns took his slot. Kearns is now Willow’s third co-founder, and works out of Akron, Ohio.

Stevens, who in the past had managed money for the Bacardi family through the Bank of Bermuda, serves as portfolio manager for Willow clients who want in-house asset management. Bray says initially only a few clients are tapping into the Fortigent platform, with about 25% of the firm’s asset base, but he adds that he expects the share to grow to 40% in a few years.

Investment management will be Willow’s basic offering but it will add in family office services – such as tax, estate, and generational succession planning – for larger accounts.“The family office world is the main space we want to play in,” Bray says.

The firm has seven staffers on the wealth management side, but only Bray and Kearns will staff the boutique law firm they are calling Kearns Bray. That’s because it ispositioned as an extra service for Willow clients, though Bray says it could also generate some referrals to Willow. The two partners, both of whom are attorneys, will only spend about 20% of their time on the law practice, Bray says.

Many professional practices have opened wealth management arms, but most are accounting firms. Many of the top 100 regional accounting firms have wealth practices, with a handful topping the $1 billion mark in assets. The practice is less common with law firms, though Boston has various examples, such as Nixon Peabody Financial Advisors, an offshoot of the Nixon Peabody law firm, and Silver Bridge, which was renamed last year but remains affiliated with WilmerHale, a large law firm.

Willow and Kearns Bray will be separate entities so that Stevens can have a full stake in the wealth management arm, Bray says. He would not be able to hold a stake in the law firm because he is not an attorney, Bray says.

The idea of starting up a law firm simultaneously is unique, says AK Advisory’s Klausner. He says a key to making the model work is ensuring that the partners offer referrals to other practitioners from either practice in case some clients have concerns about conflicts of interest.

“The partnering approach is certainly right for this marketplace,” he adds. “Clients are looking for trusted advisors.”

Cleveland-based National City, battered by the recent financial markets tumble, was recently acquired by PNC Financial Services Group of Pittsburgh in a deal that closed at year’s end.