Nepsis, a Minneapolis-based registered investment advisor and investment management firm, has completed its first M&A deal with the acquisition of Sevenich, Butler, Gerlach & Brazil, a CPA firm in St. Paul, Minn. SBGB has become the foundation of Nepsis Tax Solutions, supporting the firm’s family office “framework” while also providing a reliable pool of potential leads.
After shifting away from a third-party asset management model in 2018, Nepsis, which manages about $300 million in assets, began planning its new growth strategy of buying up tax and accounting firms. The strategy also involves a move away from seasoned advisors in favor of relationship managers, who can, supposedly, better communicate the firm’s core philosophy and management strategies.
“The CPA is the No. 1 most trusted advisor people use,” founder Mark Pearson told WealthManagement.com. “CPAs are the gatekeepers, particularly for high-net-worth clients. But CPAs are not great networkers. So, the way you solve that is you buy the CPA firm.”
Nepsis is set up to acquire and tuck in other wealth management firms as well, but Pearson said he’s found too many have unrealistic estimations of their own value.
“CPA firms, on the other hand, are a lot less expensive, and there is more long-term revenue than the short-term revenue generated by tucking in a wealth manager,” he said. “So, I would much rather bring in CPAs, bring in their clients, and put them into the exact same model in terms of technology infrastructure.”
The new tax division, headed by Bryan Eberle, will provide training and resources to help acquired accountants provide “higher level” and “more impactful” tax planning for a wider range of client needs, he said.
A financial advisor-turned-CPA consultant, Eberle spent more than seven years working with hundreds of tax firms as a partner at HaydenRock before moving to Heritage Family Offices, where he built out a CPA partner program as head of the tax division. He joined Nepsis in January.
Eberle said SBGB, which was established in the early 1950s, “operated like it was still 1980” and that much of the first year has been devoted to digitizing “a lot of paper files.”
Since Eberle joined the firm in January, Nepsis has changed its billing structure from hourly to fixed fee, introduced new products and begun transitioning some of its wealthiest clients from a tax preparation service to a more comprehensive tax planning model.
“That will be our focus going forward—we are not interested in doing tax returns unless they are truly engaging us to do more of the planning and the advisory services,” Eberle said. “We want them to engage with us so we can properly plan and help them transfer their wealth, help them build their business or help them sell their business at a higher multiple than maybe they would have on their own.
“The tax plan is a big piece,” he said. “The other big piece is the accounting—things like bookkeeping and financial reporting—and advisory side of it.”
In addition to multi-disciplinary wealth management for individuals and households under the family office structure, Nepsis offers two tiers of business advisory services. A controllership package provides cashflow and budgeting support on an annual basis, while a virtual CFO option offers more comprehensive financial oversight.
“So that’s what we've been working on,” Eberle said. “We’ve made some key leadership hires recently and we're moving fast.”
In October, Nepsis hired Richard Moore, Derrick Doerr and Jordan Riley to help guide development of the nascent tax division.
Nepsis’ new VP of accounting and advisory services, Moore was an attorney with Moore Law Group for more than 17 years before founding his own consulting firm providing tax, accounting and outsourced CFO services.
Doerr has joined as vice president of tax and advanced markets, where he’s responsible for development and training of tax staff and oversight of tax and estate planning services. He made the move from Wipfli, where he spent nearly three years as senior tax manager after more than a decade with the law firm Steingart & McGrath. Doerr also taught financial planning as an adjunct professor at Minnesota State University for more than 15 years.
As vice president of tax operations, Riley will manage production of services and ensure operational efficacy and efficiency. Prior to joining Nepsis, she helped develop and implement technology upgrades in a leadership role for a multi-family office.
Earlier this month, Pearson’s son Matt Pearson was named president of Nepsis. He originally joined the firm as a research analyst in 2013 and was most recently vice president of business development. In his new role, he will serve as a link between the tax and wealth divisions, as well as oversee further development and maintenance of in-house and client-facing technology.
Nepsis currently has about a dozen pre-existing advisor affiliates who are staying with the firm through the transition. They were given the option of remaining affiliates or joining as W-2 employees, but all future wealth advisory recruits will be hired as employees. Those with divergent ideas around how to approach investment management or planning need not apply, said Pearson.
He launched his firm as Anchor Capital Management in January 1995, providing investment management for end clients before growing interest from other financial advisors prompted him to pivot to an outsourced model managing funds for his peers. The name was changed to Nepsis in 2011.
“Nepsis is a Greek word meaning to be watchful, alert and vigilant, with a clear and sober mind against delusions and fear, thus obtaining ultimate clarity,” said Pearson. “I couldn't believe at that time with the whole Bernie Madoff situation that nobody was talking about clarity. Subsequently, we've added probably 20 to 25 trademarks around clarity. We own ‘clarity’ in the financial services business.”
Pearson eventually grew unsatisfied managing money for advisors he came to feel were taking advantage of his talents and decided he wanted greater control over the implementation of his investment strategy.
“I made the decision in 2018 that I was going to get out of third-party money management, hire my own advisors and start building Nepsis internally so we could train our advisors, guide them and control the brand in the market,” he said. “Because in the financial services business, there's nobody that has a story like ours in terms of how you can impact clients' lives.”
Nepsis has been cloud-based since 2000 and paperless since 2012, but the last five years have been spent developing a Salesforce-based technology stack Pearson describes as “cutting-edge” and “a real differentiator” for prospective employees.
All administrative work and housekeeping for around 1,900 accounts is currently managed by fewer than three back-office staff members, and work to incorporate certain AI technologies is expected to further streamline tasks like document management, marketing, compliance and financial planning. Meanwhile, a mobile app under development will soon offer an integrated hub where clients can track progress on their ‘Clarity Roadmap’ financial plan and connect with Nepsis advisors, CPAs and attorneys in the same place.
“Our advisors spend 100% of their time in front of clients,” Pearson said. “That’s the technology. We’ve been building it all through Salesforce to manage and continually build that foundation so that scaling is easy, and we can be proactive rather than reactive.”
Now that Nepsis has completed its first acquisition, Pearson said he feels all the pieces to launch a successful inorganic strategy are now in place.
“We’ve got the foundational technology built and the money management in-house is already done and proven for 30 years,” he said. “So, we’re going to start bringing in more tax talent, attorneys and additional support staff and really begin to scale.”
But he also emphasized he isn’t setting any hard expectations around the rate of that growth. Currently, the firm is in early talks with just one other acquisition prospect.
“I could care less how many people I have as long as the people I have are impacting lives,” he said. “I know everybody says it's not about the money, but it’s not going to be an issue for Nepsis. When you own and control such a powerful foundational component as Clarity is, the money follows.”