"As somebody once told me, it's as difficult to name an asset management firm as it is to name a band," says Bob Andres, who formerly ran his own capital management firm and once served as president of Merrill Lynch Mortgage Capital Corp. When he and a couple of his colleagues were forming a new wealth management firm early last year, they drew inspiration from an icon located near their Berwyn, Pa., office on Philadelphia's tony suburban Main Line-Merion Golf Club, one of the country's most famous golf courses and site of the 2013 U.S. Open.
And that's how Merion Wealth Partners was named. "It's well known and it sounded like a strong, solid name," Andres says.
The folks at Merion have an even bigger task than finding a moniker: namely, building a company that stands out from other so-called aggregators that bring together financial advisors under one umbrella with aspirations of creating a national footprint. United Capital Financial Partners Inc. and Focus Financial Partners LLC are among the larger players, and HighTower, with its high-powered pedigree and knack for attracting marquee high-net-worth practices, is making a big splash.
Merion took shape in the first half of 2010 when key management was hired and three RIAs joined the fold, and it announced itself to the world in October. Its target market is independent RIAs whose clients have assets in the range of $1 million to $5 million, and whose practices have assets under management of between $300 million and $500 million. According to Merion, that's the level where many advisory firms hit a wall because they don't have the resources for further growth.
"They may lack access to products and markets to keep current relationships and get new business," says Paul Beideman, Merion's chairman and chief executive. "Or they may want to expand regionally, but need help getting there. Or they might have a product or a certain niche or strength they want to distribute to a wider audience."
Beideman says advisors who join Merion get access to a range of products and services that can cut costs and strengthen their practice. Plus, they can get an ownership stake in an enterprise he says will create wealth over the long haul by making them partners in a growing, self-sustaining business.
Beideman, 61, became CEO last summer after he retired as president and CEO of Green Bay, Wis.-based Associated Bank and returned to his Philadelphia-area roots. Previously, he was an executive with Mellon Financial Corp. Andres, 71, is the chief investment officer. Along with his Merrill Lynch background, he founded Andres Capital Management, a provider of consulting services to high-net-worth individuals and institutions in the independent advisor space.
Merion offers member advisors a proprietary, "one stop shopping" internal Web site with economic and market information that includes live quotes, instant analysis of key economic news, asset allocation models, and fixed-income blogs from a variety of sources-both in-house and beyond.
It's also building a fixed-income trading platform to help advisors successfully navigate the arcane world of bond investing. "I want to make sure advisors understand fixed income from a fundamentals standpoint," Andres says. "We'll provide education and execution, and we'll make sure they're getting the proper security with the appropriate structure at the right price."
To bolster its fixed-income capabilities, Merion says it's negotiating to hire people who formerly led bond trading desks at some of the nation's leading financial institutions.
Along with providing access to investment platforms from the likes of Pershing (Merion's primary custodian) and others, Merion is lining up its own block of investment managers. "We want to provide advisors with managers they'd likely not get with big firms because they don't fit into their little boxes," Andres says. "I've been doing this for 40 years, and I have relationships that can expedite this."
And Merion touts its strategic relationship with Ash Brokerage, the nation's largest privately owned insurance brokerage, as a differentiator. The Fort Wayne, Ind., company distributes life, long-term care and disability insurance, as well as fixed annuities, to customers including a network of 6,000 financial advisors. Merion says access to Ash's products can enhance an advisor's business model by bolstering its capabilities on the risk management side.
"There are a number of firms doing what we're doing, and we just can't provide advisors and their clients with what's already being provided," Andres says. "We are building components we think will separate us from the maddening crowd."
Advisors can join Merion one of three ways. One is through a full merger, where the ownership stake in Merion depends on the size of their business, and an advisor's practice is valued as a multiple of the earnings that would accrue to Merion in the deal.
Another option is what's called a regional launch partner, where advisors get smaller equity stakes in Merion and have access to capital and marketing resources to do tuck-in acquisitions in that particular region-or tuck-in acquisitions of advisors who share the same expertise as the launch partner-and integrate them into the practice. The profit generated above the original merger value is split 50-50 between the advisor and Merion going forward.
The third option to join Merion is as an affiliate, where advisors give up a percentage of revenue to receive marketing, product and investment research support to grow their business. They also get ownership units in Merion, but in much smaller amounts.
"It's a well-thought-out model with multiple ways to join," says David Selig, CEO of Advice Dynamic Partners, an M&A consulting firm in Mill Valley, Calif. "Each model is attractive to a different type of target."
The idea for what became Merion Wealth Partners was hatched in the summer of 2009 by two people. One is Greg Campbell, founder of the private equity firm CDV Capital Partners and someone with an extensive background in the health-care field. The other is David Green, formerly an independent advisor with DVFG Advisors who earlier in his career did software sales and sales management with the likes of SAP America and Dun & Bradstreet Software.
"We got our heads together and determined there was a real void in the independent advisor space in terms of the kind of support, capital and breadth of capabilities these guys need," Campbell says.
Campbell and Andres live on the same cul-de-sac on the Main Line, and one day Campbell shared his plans with Andres about creating a wealth management firm. "I pulled in Bob to sort of look over my shoulder as we put this together, and he got excited enough about it to where he wanted to join the firm," Campbell says.
Beideman was recruited by Campbell, and he joined a few months later. Merion's business plan evolved from targeting wirehouse advisors to becoming an aggregator of independent RIAs and creating an advisor-owned-and-operated enterprise.
"It's along the lines of an accounting or law firm model where the business is owned by the partners," Campbell says. "We've used the Goldman Sachs model prior to its going public to design ownership structure and how to transfer those stakes."
The first advisor to join Merion was E. Thorson Cheyne, president of Medallion Wealth Management in Farmington, Conn., and a former vice president of wealth management with Morgan Stanley. Around that time, Campbell was recruiting Gene Dickison, president and CEO of MTM Financial Group in Bethlehem, Pa. During that process, Dickison introduced Campbell to a Bethlehem business associate, Dan Nigito of Market Street Financial Advisors LLC, a shop with a strong emphasis on insurance, annuities and trust administration.
Nigito was intrigued by the résumés of the venture's main players and the type of company they wanted to build. He in turn introduced Campbell to Tim Ash, president and CEO of Ash Brokerage, whom he has worked with for many years and whom Nigito thought could be an asset to Merion.
Campbell and Ash hit it off, and Ash decided to join Merion's board and become-along with Campbell's private equity firm-one of Merion's primary investors.
Ash says he views the relationship with Merion as a long-term opportunity to partner with a company in the financial advisory space. "We're actively involved in anything we become an owner in," Ash says. "We're a buy, hold and build firm."
Pleased that Merion and Ash had joined forces, Nigito decided to merge his firm with Merion in the summer and become a partner. About that time, Dickison joined Merion as an affiliate.
"Merion is a small player now, but the potential to play on a bigger national stage with a company I own a piece of turns me on about this group," Nigito says. "I feel good about the crew and the growth potential, and I think we can be a powerful player in a niche marketplace."
Bucking a Trend
Merion hits the scene at a time when the aggregator model has seemingly stalled. United Capital is aggressively adding new member firms, but Focus Financial and others have slowed down, and some-such as WealthTrust-are no longer in the game. "We haven't seen much activity from aggregators since the market downturn," says Paul Lally, president of Gladstone Associates LLC in Conshohocken, Pa., a provider of transition advisory services.
But Merion says it has a lot of prospects in the pipeline, and as of early January reportedly had six RIAs-four merger candidates and two affiliate candidates-on the verge of joining.
The company had seven advisors and roughly $250 million in assets at year-end 2010, although the firm and Thor Cheyne at Medallion have mutually decided to split due to conflicting business models (he's more commission-based and Merion's emphasis is now on fee-based advisors). By 2015, the goal is to have about 80 advisors and $10 billion in assets. Merion says it's being selective about whom it recruits, but it's clear they envision big things down the road.
"We expect explosive growth in 2011," Campbell says.