RIA RISING: How a Merrill Policy Sent an Advisor Down Independence Road

RIA RISING: How a Merrill Policy Sent an Advisor Down Independence Road

The partners at Merrill Lynch’s Beirne Wealth Management Group in Milford, Conn. had talked off and on over the years about leaving the wirehouse, John Beirne Jr. told me, but it took a new sales policy from the company headquarters last April to push the practice out the door.

This week Beirne, who made Registered Rep.’s Top 100 Wirehouse Advisors list, and his partners announced they had launched their own registered investment advisor, Beirne Wealth Consulting, with the help of Focus Financial Partners, the New York City-based RIA aggregator. It ended a long relationship with Merrill; Beirne joined the firm in 1966. His partners—son John-Oliver Beirne, and Jim Betzig—had managed about $2 billion in assets. Beirne expects to bring about 90 percent of their assets over to the new practice; they formally left Merrill on Jan. 20.

At Merrill the practice had developed a specialty working with public pension funds; Beirne said it accounted for 60 percent of their revenue. In April, however, Merrill told its advisors that they couldn’t solicit new public pension plan accounts “of any kind,” Beirne said. Merrill had gotten stung in recent years on certain investment deals for municipal clients, he noted. In January 2008, the wirehouse agreed to repay $13.9 million to the city of Springfield, Mass. after a CDO investment that Merrill had sold the city tanked. (The state Attorney General’s office was involved in the deal.)

Merrill spokeswoman Selena Morris Defusco wrote in an e-mail that the wirehouse had changed its investment policy. “Regulatory, reputational and litigation risk are increasing in the public funds space. Because of these factors, Merrill Lynch Wealth Management has opted to take a more focused approach to segments of the space,” she said.

Beirne, 69, said the policy meant his practice couldn’t grow its revenues in the biggest part of its business. The partners also had qualms about the merger of Bank of America and Merrill Lynch, he added. “We went from an investment banking culture and an investment culture to a bank culture,” he said. “I’m not saying either one is better than the other, but it was different. For us, along with all these other changes, it just was an argument that it was time to go someplace else.”

There were offers from other wirehouses—“We turned down significant sums of capital to do what we’re doing,” Beirne said—that would have allowed them to continue in the public pension fund space. But the partners felt independence was a better long-term solution for operating free of the conflicts they thought would continue in the wirehouse channel, he said.

Beirne’s group may still have an outside partner. As part of its work with Focus Connections, the Focus program that helps advisors transition to an independent practice, the aggregator has an option to buy a percentage of their business in 13 months, Beirne said. Focus has worked such deals before, most recently with Sapient Private Wealth Management in Eugene, Ore.

(Read more from Senior Editor, Jerry Gleeson's blog, RIA Rising.)

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