Two CPAs plan for growth and grow the
plan-with billion-dollar results.
In 2003, nine years into their St. Louis-based
advisory business, Bert Schweizer and Stuart Zimmerman had essentially
accomplished one of their primary goals.
The founding partners, both CPAs, proved that accountants could not only successfully take on an investment advisory practice, but could do so prosperously and without abandoning the principals that guided them as accountants.
At the time, their fee-only investment advisory firm, Buckingham Asset Management, had about $600 million in assets under management, while sticking to a passive, diversified and long-term investment style that makes heavy use of academically based Dimensional Fund Advisors (DFA).
BAM Advisory Services, a sister firm founded in 1997 to help CPAs move into the investment advisory field, was already providing services to 100 RIA firms-90% of them run by accountants-that as a group had $1.9 billion in assets under management.
The businesses were so successful that a third firm, Bemiston Insurance Services, was started so Buckingham and BAM could handle their clients' insurance needs in-house.
It was a time, Schweizer and Zimmerman recall, when the firms were faced with a new challenge: developing a strategy for growing the company, and passing that knowledge on to BAM's CPA clients.
With the help of a management consultant, the firm got to work on a detailed five-year plan that, among other things, set specific growth targets for managed assets, mapped out upgrades in technology and gave a formal organizational structure to all the firms in what is now called the Buckingham Family of Financial Services.
"We began to take a family approach to our companies," Schweizer says. "We stepped forth with a purposeful plan for growth. We set targets each year and we have been able to achieve them on a yearly basis."
In many cases, the firms have exceeded them. In three years, for example, assets under management at Buckingham Asset Management have more than doubled, to about $1.5 billion.
BAM Advisory Services, meanwhile, is providing services to CPA-run advisory firms that have about $5.5 billion in cumulative assets under management-nearly triple the amount of three years ago.
During the 2000 to 2002 bear market, the firm experienced a 138% increase in revenue.
The firm, which serves about 900 clients, at the same time has seen the size of its staff grow from 58 to 90. Three years ago, it occupied half the ninth floor of its suburban office building. Now, the firm has occupied the entire level, plus half the eighth floor.
Schweizer estimates that by the end of the year, Buckingham's operations will take up 25,000 square feet, double what it was three years ago. Technology upgrades, meanwhile, are funded with annual budgets in the seven figures, he says.
In April, the family of companies was named one of the top 25 fastest-growing companies in St. Louis for the eighth year in a row by the St. Louis Business Journal. The company ranked 16th in this year's list, with $29.5 million in annual revenues, according to the journal.
Buckingham raised its minimum account requirement from $250,000 to $500,000 during that time, and considers its "sweet spot" to be clients with between $1 million and $30 million in investable assets.
An ideal client profile was also established for BAM Advisory Services, one that focused on CPA firms "committed to creating a business enterprise for their investment or wealth management, as opposed to, 'Let's try and see what happens,'" Schweizer says.
To meet the demands of affluent clients, Buckingham and BAM are also setting out to expand their services into comprehensive wealth management. Zimmerman chairs a wealth management steering committee that will soon roll out a two- to three-year plan for delivering services such as estate planning and intergenerational counseling. "What we are trying to put together in a number of areas is a team of national strategic experts-players who are interested in this network of CPAs," Zimmerman says.
He notes that some of the clients of BAM Advisory Services are in the same position that Buckingham was in three years ago-with about a half a billion in assets and a desire to grow and deliver a more comprehensive level of service to clients. Some of the firms, he says, are sitting in an even better position for future growth than Buckingham because they have sister accounting firms that can provide a base of clients.
Zimmerman, however, feels that the key ingredient to growth for those firms, and Buckingham, is the same as it was when he and Schweizer left their accounting firms and went into the advisory business 12 years ago-namely, the trust people have in their accountants. "It's an implicit trust," Zimmerman says. "They know we would never try to sell them something."
It's also the expectation that due diligence, analysis and common sense will underlie investment decisions, Zimmerman says, adding that Buckingham's reliance on DFA funds has fulfilled those expectations.
The assets managed by Buckingham and BAM, in fact, have grown to collectively become DFA's largest client, with about $5 billion of the two firms' $7 billion in assets under management sitting in DFA funds, Zimmerman says.
It is an example of how the rapid growth has benefited Buckingham's family of firms and its clients, he adds. "For instance, because we are DFA's largest client, we get a lot of attention from DFA-their senior people are available to us," he says. The same holds true with the firms' dealings with its two custodians, Schwab and Fidelity. "We have more and more opportunities for top-of-the-line support from those kinds of players," he says.
The nuts and bolts of the strategic growth plan Buckingham drew up three years ago had many of the characteristics one might expect from a firm with its roots in accounting. It was detailed, systematic and the result of careful analysis, according to Schweizer.
The plan, as he describes it, had four main components. First was the setting of growth targets, which he said were set at 20% per year. Buckingham has met those targets the first three years of the plan, while BAM has exceeded them with asset growth sometimes surpassing 25%.
A second key component, he says, was a commitment to upgrading technology. Efforts in this area are ongoing, with a capital investment in the seven figures, he says. A third component was an increase in advisors, Schweizer says, noting that seven advisors have been added in the past three years. In addition to serving Buckingham clients, advisors also serve clients of BAM, he says. "Our advisors' intellectual capital is a major value to BAM advisor firms," Schweizer says.
A fourth part of the plan was the segmentation of the family of firms into operating units and the appointment of officers to lead them.
"What we thought was really critical was to start systematizing our organization, as well as processes in the organization," Schweizer says.
It was also a way to have people accountable for achieving results, he adds. This part of the plan led to the official creation of marketing, human resources, practice development and client services divisions serving all firms in the Buckingham family.
Operating officers were appointed for Buckingham, BAM and Bemiston Insurance. A fourth operating unit also was formed that focuses exclusively on fixed-income offerings for Buckingham and BAM clients.
Schweizer says that the need for the unit became apparent as Buckingham and its CPA clients began to work with higher-net-worth families. "There was a need for individual bonds to be part of their portfolios rather than mutual funds that invest in bonds," he says. The use of individual bonds, he notes, allows advisors to better tailor portfolios to client needs, gain tax efficiencies and lower administrative costs-resulting in higher net returns for affluent clients.
Another outgrowth of the segmentation was the creation of BAM Institutional and BAM Retirement Plan Services, two "emerging businesses" that focus on institutional clients and 401(k) clients respectively. BAM Institutional, Zimmerman says, has been set up to serve what he calls the "grossly underserved" small institutional market that lies in the range of $5 million to $100 million. This would include nonprofit organizations and endowment funds.
BAM Retirement Plan Services helps Buckingham and BAM clients identify prospects in the qualified retirement plan advisory business-a market that potentially includes business of varying sizes. Of the $7 billion in assets under management with Buckingham and BAM, about $500 million is in 401(k) plans, Zimmerman notes.
Bemiston, meanwhile, is also on good footing for future growth, he says. In fact, he feels the insurance arm of the family of firm reflects Buckingham in general-it benefits from a public perception that many CPA have yet to appreciate.
"All the studies show that the end client would rather obtain their insurance from their CPA rather than ever seeing their insurance agent again," he says. "What the CPAs don't know is that is the fact."