Boston Private Bank has been an active acquirer of registered investment advisor firms for many years, having acquired Florida-based Banyan Partners in a $60 million cash and stock deal in 2014 and KLS Professional Advisors Group in 2004. Now, the bank’s new CEO, Anthony DeChellis, who joined in November, has lofty plans to grow the wealth management business from $16.1 billion in assets under management today to $50 billion by 2022—not necessarily through acquisition. He plans to recruit an additional 100 advisors to his firm in that time by attracting folks from larger firms who are looking for a less bureaucratic, more boutiquelike environment.
“Some of these firms have just gotten too large, and particularly for the private wealth businesses, they're kind of all rolled into this broader sales and marketing machine if you're looking at the very big broker/dealers,” DeChellis said, in an interview.
The firm will focus on recruiting in its core markets—Los Angeles, San Francisco, Boston, New York and Palm Beach,Fla. The firm estimates nearly $6.8 trillion of high-net-worth wealth is in these markets.
DeChellis recently shared his growth strategy with WealthManagement.com, as well as his thoughts on the recent Luminous breakaway and how he overcomes advisors’ perceptions around cross-selling.
WealthManagement.com: What’s your strategy to recruit and attract advisors to your platform?
Anthony DeChellis: Advisor teams who are interested in moving from one big broker/dealer to the next big broker/dealer, they're probably not for us. But large teams that are considering either joining an RIA or are thinking of going out and starting their own RIA, we want to get in front of those conversations. We still carry with us all of the banking services and trust services that in most cases they'd be leaving behind or have to create via some sort of strategic alliance in their new business.
People who are departing the big firms to start their own RIAs are looking for a more consistent environment of like-minded people who are moving toward creating the same sort of value for clients in a boutique delivery system. So it allows you to grow your business much faster because if you think about it, if you're inside a really large organization, they tend to have relationships across the major markets. If you're trying to grow a business, the first obstacle you have to get over is, your institution may already have a relationship with that family or that business, and even if it's a small or undeveloped one, you still have to get all sorts of clearances to cover that account.
If you start your own RIA or you join a smaller firm like ours, you very rarely run into those hurdles. So that's a big edge in recruiting. And then also taking down a lot of the bureaucracy that can exist in a big organization.
WM: Do you expect some of the growth to come through acquisition?
AD: The prices for acquisition have gotten a little ahead of themselves in my opinion, so I think we'll do more recruiting and organic growth because there's also a lot of embedded value in our own client base. Families or businesses that have been here for a very long time, that are using us one-dimensionally, I think we could be doing more.
I'm not opposed to an acquisition if it makes sense based on cultural, strategic and price considerations.
WM: I'm sure you heard about the former Luminous team that broke away from First Republic recently, taking $17 billion in assets with them. Does that give you pause in terms of recruiting independent RIAs?
AD: I think it definitely should cause any organization to consider the type of contract that they're going to make.
I would argue that First Republic still got a benefit from that group being there because it kind of really accelerated their growth in wealth management and gave them an institutional knowledge by bringing in some really experienced wealth advisors that helped the organization better understand the wealth business and help recruit some significant talent that is still there.
But if you're going to go back and analyze, you probably want to look at it from a cultural standpoint, how to integrate them better or certainly how to have the contract that protects the business and shareholders a little more.
WM: Speaking of integration, I know you're working on integrating the KLS business, which has been operating somewhat independently, into the rest of the wealth business. How are you doing with that?
AD: KLS is really strong on a tax planning and wealth transfer side. Boston Private also has that capability but probably developed a stronger capability on the asset management side, just given how the organization developed over time. So while KLS also has an investment process and investment management committee, what they realize is that, the combined strengths of the two will put forth a much more fierce competitor. That was really the thinking behind it, and both sides of them have embraced it really well because they can see the obvious enhanced capabilities for their clients.
WM: In a recent presentation to investors, you said the commercial bank, private bank and wealth businesses are starting to work more closely together. How are you going about doing that?
AD: When you think about our commercial banking side, we're not banking S&P 500 there; we tend to bank family-owned businesses, large real estate developers, venture capital, private equity, professional services firms. They can usually be clients on the wealth management side.
So if they enter on the commercial banking side, we should be also taking a look at what we can do on the private banking side, trust and wealth management side and vice versa. A family-owned business that comes in on the wealth side, we also should be looking to cover their lending needs on the banking side of the business or cash management needs or what have you.
WM: Affiliating with a bank-based wealth management business carries a negative connotation for some advisors, particularly around cross-selling. How do you address that?
AD: We are not a product shop. We don't start the conversation as to what product we have to sell; we're a solution-focused, outcome-focused group. And so, to the extent that the client has needs or problems to solve, we should solve as many of those as we possibly can inside of one shop. I mean, clients want that. We know from speaking with them.
I completely agree with the employees or advisors who may push back and say, "Don't give me a list of products I need to sell and that I've got to kind of put forward a solution to my client or product to my client whether they need it or not.” We've all read the Wells Fargo horror show.
Typically what happens at a lot of organizations is, and rightfully so, you just tend to look at the solution set that your group offers them. It's just having a broader knowledge of what the organization does, so that when you see the problem, you can help clients address it.