Harris Direct Institutional To Buy Sullivan Bruyette

Harris direct Institutional has entered into a definitive agreement to acquire Sullivan Bruyette Speros & Blayney (SBSB), a successful, high-profile, McLean, Va.-based advisory firm with about $800 million in assets under management. The transaction comes three months after Harris paid an estimated $30 million to purchase major assets of myCFO.com, which had been a flashy startup firm funded by prominent high-tech billionaires to handle the financial affairs of, among others, Silicon Valley's wealthy elite.

Officials at Harris and SBSB confirmed the definitive agreement and said only that they were in the "quiet period" and expected the deal to close within the first two months of 2003. Harris' apparent interest in acquiring major players in the wealth management arena could trigger the start of the consolidation boomlet among advisory firms that has long been predicted. Based on the pace of their recent acquisitions, the SBSB deal is unlikely to be Harris' last transaction in the financial advisory arena.

No purchase price was disclosed. But in 2001, SBSB officials told Financial Advisor its revenues were about $6 million annually. Consultants familiar with the profession at large say such firms can earn a net profit margin (profits after fair-market compensation to all principals but excluding distributions to owners) of 15% to 25%. Firms of that scale can sell for prices ranging from seven to ten times net profits or more than two times revenues.

As a firm with above-average profitability, SBSB partners had no pressing need to sell the firm, raising the question of why they did so three years into an extended bear market. "This was not just to monetize the business. We think they are the right partner and the time is right," says Greg Sullivan, CEO of the firm. "We were looking for people we could work with for a long time. Philosophically, we're very much the same, so it was a unique opportunity."

Far more than most advisory firms, SBSB places a major emphasis on creating career paths and room for advancement for its staff of more than 30 people. It grew at a faster pace in the 1990s than many similar advisory firms because its principals agreed to share clients and resources without engaging in territorial disputes. Last year, Sullivan told Financial Advisor that SBSB's decision to abandon the "eat what you kill" mentality of many smaller practices was instrumental in fueling the firm's fast growth rate.

One example of the firm's radically different approach was its decision early on to make Eleanor Blayney a partner without expecting her to bring any clients to the firm (although she later did). In recent years, other professionals have advanced far in the firm under similar circumstances.

SBSB and myCFO.com may have synergistic opportunities. SBSB has many high-tech clients, particularly at Microsoft and AOL TimeWarner, and myCFO.com has lots of Silicon valley clients. Sullivan says no plans have been discussed about how to capitalize on this opportunity, but acknowledges the two firms "complement each other pretty well."

Harris' decision to acquire advisory services and asset management-oriented firms marks a new direction for the business. Originally formed as the institutional arm of DLJ direct in 2000, the unit was initially intended to be a competitor to Schwab Institutional, Fidelity's advisory services business and TD Waterhouse's institutional business. However DLJ, a large investment banking firm, was sold to CSFB, which in turn sold this part of the business to Harris.

Harris reportedly conducted a painstaking review of the business over the last year with several executives who have been there from the DLJ days. Though they never came out and said so, sources believe that Harris concluded the custodial services business was a highly competitive commodity business and with far fewer attractive characteristics than the advisory and asset management arena. Officials at Harris would say only that they had great respect for the "honor and character" of the principals at SBSB.

Consultants to the profession, who asked to remain anonymous, agreed with that glowing assessment of SBSB and said the firm would make a great launching pad to acquire other advisory firms.


Royal Alliance Announces Affiliation With Tax Firm

Royal Alliance has brought 100 new advisors under its fold through a new affiliation with a tax preparation and financial services firm.

The broker-dealer began its affiliation with Pinnacle Tax Advisors of White Plains, N.Y., on Dec. 10-giving Royal Alliance 602 new advisor affiliations for the year, says Mark Goldberg, president of Royal Alliance.

Pinnacle Tax Advisors was recently formed through a management buyout with Gilman & Ciocia Inc., a publicly held tax preparation and financial services company based in Poughkeepsie, N.Y., says Thomas Povinelli, Pinnacle's president and CEO.

The company has advisors in 50 offices located in New York, New Jersey, Florida, Ohio, Illinois, Nevada, Arizona and Washington, Povinelli says.

Pinnacle's advisors formerly used Prime Financial, a broker-dealer owned by Gilman & Ciocia, before switching to Royal Alliance, Povinelli says.


Life Insurer Stresses Growth As Number Of New Policies Drop

In the face of repeated declines in the number of new life insurance policies written each year, an industry executive recently urged his colleagues to widen the scope of their marketing activities.

"During the last two decades, the life insurance industry has increasingly concentrated on the needs of affluent Americans," says Robert Kerzner, executive vice president and director of Hartford Financial Services Group's individual life insurance division. "Although we're doing a good job of serving the affluent, we need to touch more people, particularly business owners and emerging affluent families."

There were 17 million new policies written in 1983, according to LIMRA International, a life insurance industry research group. The number of policies written has dropped every year since, with 10.1 million new policies in 2001.

The declines have happened despite evidence of increased demand for life insurance. A recent survey found that 35% of the heads of U.S. households say they need more life insurance, according to LIMRA.

Former Brokerage Executive Dies

Claude J. Peay, former senior vice president of FSC Securities and president of Keogler, Morgan & Co., died on November 19.

The 82 year-old Peay passed away in his sleep after his weekly bowling match with friends. The father of eleven children and sixteen grandchildren began his career as a pharmacist and practiced for many years in Fort Collins, Colo. In 1955, with eight children at home, Peay went into the mutual fund business, starting his career as a commission salesman. He later moved into management. According to friends, he lived by a simple philosophy: "What you think, what you believe, what you expect-will always happen."


Boomers Cite Health Care Costs As Top Retirement Fear

The ups and downs of the Dow apparently aren't the only things that worry Baby Boomers as they enter retirement.

A new survey by Allstate suggests they're also worried about their physical health. In the second annual survey, called "Retirement Reality Check," 67% of Baby Boomers cited health care costs as among their top fears going into retirement. That's up from 39% in 2001.

Not having enough money was cited by 52%, and the fear of Social Security disappearing was a concern of 47%. Only 10% said they have no fears.

But health appeared to be the biggest worry, as nearly half of respondents said they were afraid of their health failing after retirement-up from 27% in 2001. And 36% said they expect health care costs to be their biggest expense in retirement.

The survey suggests that one reason for the heightened concerns about health costs is that employees in recent years have been forced to pick up a bigger share of their medical benefit costs.


Advisors Who Respect Women Have An Edge

Affluent women don't care what the gender of their financial advisor is, but they do want advisors who treat them with respect, according to a new survey.

The survey by Nationwide Financial Services also found that women report having a high level of trust in their advisors, but 20% also say they feel investment professionals have treated them differently because they are women.

"Investment professionals who understand how to approach and maintain relationships with affluent women have a tremendous opportunity to attract and retain new clients," says Kim Greer, vice president of Nationwide Financial.

The study, which used a combination of surveys and focus groups, found that 87% of respondents had male investment advisors. But more than 90% of women said the gender of their advisor was not important. "The bottom line has no gender," one woman said.

But not everything was tied to the bottom line, as many woman said that trust and respect were also deciding factors in choosing an advisor.

For example, a woman in one of the focus groups said, "I stopped doing business with a financial professional who, when we sat down with my husband, kept asking my husband for all our documents. A half hour later, I said obviously you don't think that I know what I am talking about and my husband knows everything. You've made a large mistake because I do the finances in the house."


School Gets $2 Million To Expand Planning Program

Texas Tech University in Lubbock has received $2 million from the Certified Financial Planner Board of Standards to expand its graduate financial planning program.

The CFP Board's grant will be combined with $4 million in matching funds from the university, which has the only Ph.D. program among CFP Board-registered academic programs.

CFP officials say the grant is a pilot program designed to lead to other national and international educational initiatives.

"The CFP Board wants to increase graduate student production and diversity in financial planning so that more faculty will be available to teach in the fast-growing number of financial planning academic programs," says CFP Board Chair Elaine Bedel.

Texas Tech was among the first 20 academic programs registered by the CFP Board in 1987. Since that time, the number of CFP Board-registered programs has grown to 253, at 158 colleges and universities nationwide.


McColgan Named Fidelity Brokerage President

A 20-year financial service industry veteran has been named president of Fidelity Brokerage Co.

Ellyn A. McColgan, who has been with Fidelity since 1990, was named to head the company, where she will manage Fidelity's retail and institutional brokerage operations, and direct mutual fund sales. Fidelity Brokerage Company includes Fidelity Personal Investments, Fidelity Institutional Brokerage Group and Brokerage Operations and Technology, which manages more than 16 million accounts and holds nearly $700 billion in client assets.