MAI Capital Management, a Cleveland-based registered investment advisor, has acquired another Ohio wealth manager to expand its geographic reach and create an in-house insurance business.
The acquisition of John D. Dovich & Associates, an RIA in Cincinnati with nearly $600 million in client assets, brings MAI's total assets under management to $6.6 billion. All of the company's 10 employees will join MAI. Specific terms of the deal were not disclosed.
“The concept is simple: We want to become a national brand," said Rick Buoncore, MAI Capital managing partner. The RIA now has offices in seven cities, including Reston, Va., Ponte Vedra Beach, Fla., Nashua, N.H., Irvine, Calif. and Columbus, Ohio.
Buoncore said he met with five firms in the Cincinnati area before deciding on Dovich & Associates, which works primarily with high-net-worth families. MAI would have done the deal with the "like-minded and like-hearted" firm regardless, but the seller's insurance expertise made the RIA especially attractive, he said.
In addition to becoming a partner and regional managing director at MAI, John Dovich, who founded Dovich & Associates in 1987, will lead MAI Insurance Solutions, a new subsidiary of the RIA.
MAI has advised clients on insurance policies to help them plan and invest, but it's never been compensated for it until now. The RIA previously worked with unaffiliated insurance agents, who made a commission on the recommendations. An in-house insurance business will effectively cut out the unaffiliated agents, who sometimes seemed to be peddling products more than creating solutions for clients, Buoncore said.
By contrast, Dovich, who will leverage an existing relationship with Lyons Companies, an independent risk management and insurance brokerage, starts with client needs and finds a product to suit those needs.
“Normally when we bring in an insurance person, we don’t get that reaction,” Buoncore said.
Some fee-only RIAs would argue that getting paid for selling a certain product is a conflict of interest.
“We all have a conflict of interest in one way or another. What we try to do is embrace it, not run from it," Buoncore said. Clients can always choose an outside insurance provider, he added.
Along with MAI Insurance Solutions, the RIA also has its own private equity business run by a nine-person team. Most RIAs don't manage enough money to warrant the cost of an in-house private equity fund, but some firms, like Cresset Capital Management and Venturi Wealth Management, say clients want access to private investments and the RIA can save costs and deliver better returns.
Matt Sonnen, the founder and CEO of PFI Advisors, a consulting firm to RIAs, said he thinks it's a mistake to bring costly services in house because clients today are focused on whether they will achieve their goals, not seeking out the best returns above all else. However, he acknowledged that it might be beneficial to some firms and their clients. “Obviously, the truth is probably somewhere between these two extremes,” Sonnen said.
Dovich & Associates was the fourth acquisition by MAI since it partnered with Wealth Partners Capital Group, a financial services holding company with a minority stake in MAI, Forbes Family Trust and EP Wealth Advisors of Southern California. Buoncore said there are a "host of other ones in the pipeline."