How One Wealth Management Firm Intends To Grow Amid Competition

At a time when recruitment activity in the independent broker/dealer channel has slowed, Capital Guardian Wealth Management, a hybrid firm, is undergoing a major growth initiative, with plans to add 15 advisors by year-end as well as several independent and branch offices around the country. It intends to triple in size in a few years.

At a time when recruitment activity in the independent broker/dealer channel has slowed, Capital Guardian Wealth Management, a hybrid firm, is undergoing a major growth initiative, with plans to add 15 advisors by year-end as well as several independent and branch offices around the country. It intends to triple in size in a few years.

The hybrid independent broker/dealer and registered investment advisor currently has $1.5 billion in assets under management, but will likely add another billion or two in the next 12 months, said Tony Montanari, director of business development, Capital Guardian.

With about 85 advisors in its network at the moment, the firm plans to reach 100 by the New Year and 300 to 500 in the next five years, Montanari said. He expects average production for the next 25 advisors to be $400,000. Cap guardian is a hybrid in more ways than one: Currently, half of its FAs are independent contractors and the other half are employee FAs.

But competition for top FAs will likely remain fierce, experts say. According Cerulli Associates, the IBD channel is forecast to grow by just 0.8 percent over the next five years. The estimate is 2.8 percent for dually registered firms. But recruiters and analysts told Registered Rep. the fight for good talent is only going to get worse.

While 2009 was a record year for recruiting at some independent b/ds, advisor movement out of wirehouses into the IBD channel didn’t quite materialize on the scale as some IBD executives had predicted. In 2009, headcount grew by just 0.1 percent over 2008, Cerulli found.

While there was record movement, half of the wirehouse FAs who did move stayed within the wirehouse channel, according to Discovery. That is at least in part because the firms are offering big sign-on bonuses of over 300 percent for the best recruits, spread out over nine years or more. For example, UBS Wealth Management Americas recently snagged three advisors from Morgan Stanley Smith Barney, bringing with them a combined $2.1 billion in assets. Merrill Lynch just rolled out a new deal that requires new hires to stick around for 14 years to receive their full sign on bonuses, and is offering bonuses to selected smaller advisors that it hopes have potential to grow.

Despite the competition, Capital Guardian has already made some progress; it now has 85 advisors, up from 10 when Montanari first joined in January 2009. Recruiting firms provide the firm with at least five names a week of advisors interested in coming on board, including those within the independent channel and others looking to come out of a wirehouse or regional operation.

Montanari still believes that many advisors are still disillusioned with the large investment firms—and even some regional firms. “There’s never been a better opportunity right now to bring on seasoned advisors.”

Capital Guardian also has the ability to structure a branch as its own entity, giving the branch manager and other select advisors ownership in the branch office entity. “This puts advisors on the same side of the table,” Montanari said.

Technology was also a key draw for Bob Hodges, managing director of the firm’s new Naples, Fla., office. He said Capital Guardian was very eager to offer what he needed in terms of portfolio-driven, evaluation tools. When he asked for the technology at his old firm, they told him it would cost $40,000. Capital Guardian’s clearing house, Pershing, was able to offer the technology he needed.

The firm also recently opened a new branch office in Naples, Fla., and Winter Park, Fla. A new branch is also being launched in Hingham, Mass. In the first quarter of next year, the firm will launch offices in Wilmington, N.C.; Raleigh, N.C.; and Boca Raton, Fla. Other potential new office locations include Louisville, Ky.; Chicago; New York City; Pittsburgh; New Jersey; and California.

In the next three months, the company is scheduled to finalize a strategic partnership with a private bank, which will become its sister company owned under the same holding company, Montanari said. He declined to name the bank. “We have capital behind the growth initiative,” he said.

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