Sailing To The Coasts

Running On Top of a Tortoise
Bicknell emerged from the collapsing firm with his new one eight years ago. And Mariner is young in more ways than one. The oldest partner is 54; Bicknell is 46. The clientele tends to be younger entrepreneurs as well, too, says Bill Greiner, the company’s chief investment strategist.

“Our clients generally are people who created the wealth themselves,” says Greiner. “They are not second- or third-generation wealth recipients. They tend to be entrepreneurially driven people. Then tended to have owned their own businesses in the past or they are senior executives or corporate executives at a large company. Those kinds of people normally are very comfortable with balanced risk-taking, otherwise they wouldn’t have been a small business person.”

Because of the area they hail from, that has meant a lot of clients in agriculture, oil and gas, and small niche manufacturing businesses around the Kansas City area, but Bicknell says that, with the new push to the coasts, some of the firm’s newer RIAs cater to different types of clientele—even athletes.

At the same time the firm was building up its wealth management approach, it also found itself with the opportunity in 2009 to buy an investment manager during the depths of the financial crisis: Tortoise Capital Advisors, a specialist in energy infrastructure master limited partners that, according to Greiner, needed a capital infusion (MLPs, which work somewhat like real estate investment trusts, were fighting against slipping energy use and strained credit that hurt their ability to pay their much-loved distributions). Tortoise might have seemed like an exotic purchase for a wealth manager, but it became the cornerstone of an investment empire.

And the turnabout was tasty. At the time, Tortoise had $1.3 billion in assets under management; that has since ballooned to $16 billion, and the entire investment management business of Mariner (collected into the subsidiary Montage Investments) has $25.5 billion in assets in 14 asset companies. The Mariner Wealth side, which has $12.5 billion, started on its wealth advisory purchases in 2012 with four acquisitions. Bicknell calls that the year of Mariner’s coming out party as a rollup acquirer.

These are firms owned by younger people, and the plan is to let them keep 40% of their ownership so they still have a vested interest in the company (and little incentive to go start rival firms after they make their earn-out). “The firms we buy [have] to look at the investment management business the same way we do,” Greiner says. “The center of the equation is wealth management.” In other words, the firm is looking for style-agnostic firms whose ideas and variety can be plugged into the wealth management wheel and the strategic and tactical asset allocations. Plain vanilla large-cap managers aren’t on the radar.

To outsiders, it might look like Mariner made a cagey decision to start small, build up a fleet of investment management firms and then find RIAs as a pipeline for the products. Bicknell says that it wasn’t planned as such, and opportunity simply played a big part. The two sides of the company fed off each other. He also stresses that the wealth management business, Mariner Wealth, is open architecture, and Montage products represent only 20% of Mariner Wealth’s client assets.

“When 2008-2009 occurred, it gave us an opportunity to approach growth and approach our kind of strategic thought a little bit different, and that’s mainly because we were able to attract talented individuals that, if it wasn’t for the turmoil going on, a firm our size and age wouldn’t have been able to attract. And that’s when we really began to get into the asset management side.”

David DeVoe, the founder of DeVoe & Co. and a consultant on RIA mergers and succession planning in San Francisco, says that companies with bulk like Mariner’s and Savant Capital’s have reached a tipping point where they can buy things like investment banks (in the former’s case) and tax planning firms (in the latter’s), that might have otherwise been considered outside their expertise, to create a bigger service offering.

Bicknell describes a wheel with clients in the middle and all the services around the edges. “We want to put our advisor in the center of that wheel and bring them tools and resources to serve the client,” he says. “So we actually have three tax and accounting practices, we just acquired a 401(k) provider, we bought the investment bank, we started a trust company, we have an insurance agency for life insurance around estate planning and things like that.”

A Steady Acquisition Diet
DeVoe says it’s also notable that Mariner has moved into larger cities like Philadelphia. “Mariner has created a value proposition with Midwest executives that could resonate with investors in large cities. One could say [Bicknell’s] delivering that with Midwest values.”

Last April, Mariner bought Housen Financial Group, a Manasquan, N.J., concern, after Chris Housen, an Arthur Andersen vet who had founded his namesake CPA and high-net-worth planning firm with a cell phone and laptop in 1994, was wowed by the toy store of investment products and back office help he’d get from Mariner. Housen, whose office stands out in its town by being based in a replica of an old train station, hadn’t even been thinking of a merger or any other kind of transition before. But he saw what being part of Mariner had done for Brinton Eaton, a competing firm, and RR Advisory Group in New York, “two young guys, and I heard they were growing like mad, and I was wondering how two guys younger than me were in growth mode.”

“I had been approached by banks and rollups, and it never really fit,” Housen says about the sale of his firm, which had $817 million in AUM. “I wasn’t looking for a cash-out. I wasn’t looking to be part of an IPO down the road. I knew growing our business to be what I wanted it to be required more people, more talent, depth, trust company, CPA firm, lawyers, all those things. … When I met [Bicknell] he had all these things built. He had the resources to do what I wanted to do.” Housen was also able to palm off things that most entrepreneurs don’t want to deal with on his larger partner—cumbersome human resources chores such as payroll, medical plans, employee searches, IT, etc.
“I didn’t want to grow a compliance department, grow a technology department, hire controllers. They do that.”

What Mariner can’t do at this point, it can buy. Greiner says that Brinton Eaton brought along a ETFs mainly, but they had deep strength in strategic allocation modeling.

“Actually their strengths are much deeper than ours,” Greiner says. “So we inherited and adopted a lot of their processes on strategic allocation modeling.” That means looking at more than expected return, standard deviation return and correlation coefficient and seeing where they are historically. It also means looking at potential markets we’re in—normal market, inflationary and deflationary—and looking at how those “regimes” have worked historically before plugging in expectations.

Bicknell’s financial resources can’t be overstated in Mariner’s ownership structure. He owns 90% of the company. But Mariner Holdings, the company that holds both Mariner Wealth and Montage, are held by a series of trusts. “They’re perpetual trusts, so they’re dynasty trusts,” he says, “that are intended to last forever. And the majority of those beneficiaries don’t exist today.”

If he were to get hit by a bus tomorrow, in other words, the corporate structure is in place to allow the company to continue for its own sake. He’s not interested in an IPO or a sale to a competitor.

“We’re trying to build a company that lasts well beyond me or frankly anyone that exists here today,” he says. “One that can provide benefits to those trusts for a really long time and for employees that don’t exist here today.” He says he’s visited 200 firms a year for the past three years to make just a handful of acquisitions. The plan was always to go national and even build a $50 billion firm. “Today national means something different to me than it meant then. It’s much more important to us today that we have the right people, the right locations and the right strategy than pure AUM or pure size.”