The latest advisor team to be recruited by United Capital Financial Advisers has a story that might resonate with other practices that are feeling a change in the industry’s climate.
Harold C. Brown & Co., a dually registered b/d, had roots in Buffalo, N.Y. going back 80 years. Despite its standing in the local market and assets under management of more than $750 million, former partner Peter Grogan says, he and the six other partners in the firm decided to go their separate ways last month. Grogan and two teammates, Will Kelly and Mimi Schanzlin, have signed up with United Capital, bringing $240 million in assets under management and 350 family relationships along with them. The other four partners joined Wells Fargo and Raymond James, Grogan said; he described the parting as amicable.
Brown & Co., family-owned until the early 1990s, was used to oversight on both the b/d and RIA side, Grogan said. Fee-based business had been a growing part of the firm’s revenues, making up about 90 percent at the end. The partners, who worked in three separate teams each with their own book of clients, noted over the years that a growing segment of the business was moving to the RIA side. “We analyzed that a few times to look at whether we should close the broker/dealer and just be pure RIA. We had a lot of conflicting opinions about that. It was something of a challenge,” says Grogan, 63.
There were other issues too: higher SIPC premiums, for example, and growing compliance responsibilities. Because Brown had custody of certain trust assets, it was subject to additional audits by regulators. The staff of 28 had to be supplemented by outside consultants for some of the firm’s responsibilities, Grogan said. In deciding to shut down their firm, the partners decided they each needed to choose the direction that they felt would be most effective for their clients, he said.
He, Kelly and Schanzlin wanted to stay with the RIA model. They signed on with United Capital, each becoming managing directors working under the United Capital brand. (United Capital, based in Newport Beach, Calif., reports about $16 billion in assets under advisement at mid-2011.) Grogan said they were impressed with the aggregator’s ability to provide back-office service and help the practice with its plans for growth. It also was a good cultural fit, he added; the Brown team liked the client-focus at the aggregator.
“They got the right structure in working with clients, versus focusing exclusively on investment solutions. That’s important, obviously, but that shouldn’t be driving the bus,” Grogan said.