One of the most storied names in international finance is the Rothschild family’s. The Rothschild brand, if you will, is steeped in the mystique of old world European banking from a long-gone era. But many descendants of the Rothschild founding generation from the 18th century have branched out to carry on the family name in the realm of finance—including in the U.S. wealth management business.
In May 2013, Bronfman E.L. Rothschild LP was formed as the successor by conversion from Baker Tilly Investment Advisors LLC, formerly a regional wealth management unit of Baker Tilly, one of the country’s largest accounting firms.
With four offices in Wisconsin and another in Minneapolis, the Baker Tilly wealth management firm’s humble Upper Midwest domain might seem like an odd place for a Rothschild to plant his flag. But the path from European banking dynasty to American Heartland financial planning was greased by Matthew Bronfman, scion of the family that owned the Seagram Company, the former distillery giant that at its peak was the world’s largest purveyor of alcoholic beverages.
Bronfman invests in private and public companies across a swath of industries, and one of his contacts gave him a tip that Baker Tilly, the CPA firm, was quietly shopping around its wealth management unit. One of the things that grabbed Bronfman’s attention was the firm’s repeatable cash flow.
“We thought it a good platform from which to grow and we loved the Midwest values,” says Bronfman, who’s based in New York City. “We like the management team and their ethics, and their one-client-at-a-time hands-on approach, as well as their independent fee-based model. I look at businesses all over the place, and I like this business a lot.”
The Bronfman and Rothschild families have known each other for a couple of generations. The Seagram Company imported Rothschild brand French wines—from Château Lafite Rothschild and Château Mouton Rothschild—for more than a half-century, and the families know each other through Jewish philanthropy.
During dinner one night, Bronfman discussed the Baker Tilly venture with Eli Goldstein, who runs the family office for British billionaire Sir Evelyn Rothschild and his American-born wife, Lynn. “He [Goldstein] said, ‘That sounds like something we might want to do with you.’ And that’s how it happened,” Bronfman recalls.
In 2003, Sir Evelyn and his wife started E.L. Rothschild LLC, a family investment company whose current holdings include the owner of The Economist magazine, along with energy development, infrastructure, real estate, agriculture and consumer goods operations on four continents.
In 2011 and 2012, the Rothschilds held a stake in Weather Central LP, the folks behind the Weather Channel, whose Midwest headquarters (one of the company’s three headquarters) is in Madison, Wis. “Baker Tilly was our auditor there, so it was serendipitous because we already had a relationship with them,” says Goldstein, explaining one of the reasons he and the Rothschilds were interested in teaming up with Bronfman on the Baker Tilly deal. More important, Goldstein adds, “the Rothschilds really like this space because wealth management uniquely fits with what we’re trying to do at E.L. Rothschild.”
The Bronfman/Rothschild combo makes for an impressive business card, but Bronfman, Goldstein and the firm’s management say there’s more to the company than just its nameplate. Indeed, they have big plans to make Bronfman E.L. Rothschild a formidable player in the registered investment advisor space via both organic and inorganic growth.
They took their first step toward that goal last April when the company acquired Lake Country Wealth Management, a small RIA in Delafield, Wis. In August, they went after bigger prey on the East Coast when it merged with Highline Wealth Management LLC, a firm with about $1.3 billion in assets under management with offices in New York City, and in suburban Philadelphia and Washington, D.C.
The transaction created a company with 72 employees, 1,253 individual clients, 29 institutional clients and roughly $3.6 billion in assets. The newly expanded Bronfman E.L. Rothschild is now run by the former CEO of Highline, Neal Simon, and the main corporate office moved from Madison to Rockville, Md., where Simon works.
Simon notes the early stages of the merger have gone well, and the unified management team is putting its collective head together to map out the company’s future. “We’re developing a five-year plan where we go from $3.6 billion to about $10 billion by 2020,” he says.
Rebranding
According to management at Bronfman E.L. Rothschild, Baker Tilly quietly looked to sell its wealth management business because it was a non-core division and it made sense to divest from it. But they weren’t looking to dump it just to get it out of their hair.
“They wanted to put the investment advisory business in the hands of somebody they knew wouldn’t mess it up and start doing things with their clients in a way that didn’t fit with what had been done before,” Bronfman explains. “They had to be careful with who they picked, so I was very grateful they had the faith in me, along with Eli and the Rothschild family, that we’d take care of their clients in a way they’d be comfortable with.”
Bronfman says that early on in his discussions with the Rothschild family they decided they wanted to rebrand Baker Tilly Investment Advisor for two reasons. First, to create separation between the accounting and wealth management firms (though they still share some clients). Second, to forge a powerful brand identity.
“Without wanting to sound arrogant, we thought having the legacy and brand [of the Bronfman and Rothschild names] was very valuable,” he says. “The Rothschild family has been in the financial services for multiple generations, and the Bronfman family has been in the deal business for multiple generations, and we also owned a bank, so we do have some financial services expertise. We thought putting our names on the door would resonate with people.
“It shows we made a commitment to this business by putting our reputation on the line here,” he adds.
The firm officially became Bronfman E.L. Rothschild at the end of the one-year transition after the acquisition. “We wanted to make the transition as easy as possible for our clients so they knew they were keeping their same advisors as we went through the transition of rebranding,” says Kelly Baumbach, managing director and principal at Bronfman E.L. Rothschild, who had been with Baker Tilly since 2000.
It wasn’t until last year that management started to aggressively remake the company into a bigger player.
Integration
The merger with Highline Wealth Management came about from a relationship between Goldstein and one of Highline’s shareholders, Evan Morgan, a private investor and partner at Revolution, a Washington, D.C.-based investment firm co-founded by AOL co-founder and former CEO Steve Case that aims to build disruptive, innovative companies.
Goldstein and Morgan are good friends who went to school together at the University of Pennsylvania. During a get-together, Goldstein told Morgan about Bronfman E.L. Rothschild, and Morgan replied that it sounded similar in structure and philosophy to a company he was invested in—namely, Highline. From there, Goldstein met Morgan and Neal Simon for dinner, one thing led to another, and eventually the deal came together.
“We had some meetings over a span of months to get to know each other,” Simon recalls. “One of the things that made [the merger] easier is they didn’t have a CEO.”
Bronfman E.L. Rothschild’s CEO left the company in 2014, and in the interim the company was run by committee. “What that means for the integration is you don’t have a clash of CEOs,” says Simon, who founded Highline in 2002. Before that, he had led three other businesses.
Simon notes that the similarities between the two firms’ investment philosophies, fee-only financial planning processes (it does have some commission-based business at its broker-dealer), company cultures and custodians (Charles Schwab and Fidelity) made both sides realize that a merger made sense.
Bronfman’s business entity and the Rothschild family are equal partners and they controlled most of the pre-merger Bronfman E.L. Rothschild, with the firm’s senior management team owning the rest. “When we merged with Highline, we did that both with cash and stock, and their shareholders took a combination, so Neal is now the third-largest shareholder of the combined group, and the management and his existing investors are also shareholders,” Bronfman says.
The pre-merger Bronfman E.L. Rothschild’s clientele was based primarily in the Midwest. Many of them have sold or own a business, but a sizable number have assets of less than $500,000. The firm also has a 401(k) retirement plan team that manages more than $1 billion. Meanwhile, Highline catered to a more affluent clientele with a typical investment minimum of $2 million, along with institutional clients.
To mesh the two client bases, Simon says the firm is creating three different product lines: BELR Select is for smaller clients; BELR Solutions provides more in-depth wealth management and financial planning services; and BELR Institutional is for the foundations, endowments and pension plans the company manages. “Each service offering is a little different, and we’ll begin to distinguish in that manner,” he says.
And while all parties involved say the integration is going well, there are challenges like with any merger. “We’re in the first inning of integration, and integration is something you have to continuously pay attention to because you can never take it for granted,” says Simon. “Over the course of my career, I’ve been involved in about 20 different transactions and I think as soon as you take your eye off of that ball, you’re destined to fail.”
He notes that Bronfman E.L. Rothschild 2.0 has created joint teams to tackle consolidation efforts ranging from forging a seamless technology platform to integrating the investment process. “We’re fortunate in that our investment approaches and our allocation models are very similar, and we have a decent amount of overlap in the products that we use,” says Simon. “But it’s not perfect overlap, and we’re making decisions about what products we’re keeping going forward.”
Bruce Laning, managing director and principal at Bronfman E.L. Rothschild and a three-year vet at the firm, says the merger enables them to create a more substantial financial planning process. “We have more access to institutional research and a broader team to do research on the types of investments we’re choosing for our clients,” he says. “And we have a bigger business to enable us to put together higher-end approaches for serving our clients.”
The firm’s seven-member executive committee comprises three people from the former Highline and four from the original Bronfman E.L. Rothschild. “My approach is to have different people from that group take charge of different parts of the company,” says Simon. “These deals are hard to get done because sometimes there are problems with cultures and personalities. In this case, the cultures fit really well and there wasn’t competitiveness about the company’s future direction. That’s why we feel like we’ve got good odds for success here.”
Expansion
The impetus for the Highline merger, Simon explains, is that both companies believe there will be more consolidation in the financial advisor business that will result in big regional and national independent, wealth management RIAs, and they want to play a role in that. “We both felt that together we could be better not just by learning from each other but by getting bigger and having economies of scale,” he says.
And that includes plans to grow from $3.6 billion in assets at the time of the merger to about $10 billion in five years. The company says it wants to grow the business in three ways: via organic growth with new customers and deepening relationships with existing customers; by hiring more investment advisors; and doing other acquisitions similar to the Highline deal.
Simon says the company wants to expand along the Northeast corridor and in the Midwest, both by building out existing markets and by opening offices in new cities such as Boston and Baltimore in the Northeast and Chicago and St. Louis in the Midwest. “The types of people we’ve always attracted have been those looking for a growing, independent wealth management firm,” says Simon. “They believe in the independent RIA business model with its lack of conflicts and the fee transparency. And they want to be part of an entrepreneurial, growing company.”
And, presumably, advisors who join the firm ultimately may want a piece of the action. “That’s something that’s desired and being worked on,” Laning says. “To the extent of our inorganic growth plans and possibly adding advisors or firms, I think the ownership part of it is part of the attractive component.”
Adds Baumbach, “It’s something we have to do right and be very mindful of as we continue to grow the organization.”
Simon offers that Bronfman E.L. Rothschild might go outside the Midwest and Northeast if an irresistible opportunity falls into its lap, but for now expansion efforts are focused on its existing territories. “We’re already there and have great infrastructure there,” he says. “And I do believe it’s important for people to see each other physically periodically—for management teams and investment committees to get together. And right now that’s still really easy for us to do that as we’ve all been back and forth many times during the past few months. That becomes difficult if your people are on the West Coast or someplace much further away than where we are.”
That said, he notes the firm has a decent number of clients in Florida, particularly in South Florida, so that’s a possible expansion opportunity.
Coins And Bills
The financial backing of Bronfman and the Rothschilds provides the currency for the firm’s expansion plans. And as board members, Matthew Bronfman and Eli Goldstein add their respective business chops to the mix. “Both Eli and I are the investment bankers in that our two teams do the analysis and negotiating [regarding deals],” Bronfman says. “So we’re very involved in this; this isn’t a passive investment.”
But the nuts-and-bolts decisions about running the advisory business rest with the firm’s principals. For the Rothschilds, the U.S. wealth management business is part of the family’s evolution within the broader financial sphere that started in the 1760s when Mayer Amschel Rothschild started dealing in coins and bills in Frankfurt, Germany. From there, his five sons created a banking empire across Europe, and generations of descendants have found their own niches in the world of business and finance.
As Eli Goldstein describes it, Sir Evelyn and Lynn Rothschild see the U.S. wealth management industry as a place to make a difference in people’s lives. “We’re dealing with high-net-worth people, but we’re also dealing with the mass affluent, and that’s an exciting opportunity because it offers the chance to impact a lot of people positively,” he says.
For his part, Bronfman is confident that Bronfman E.L. Rothschild is well positioned to boost its client service capabilities and become a significant player in the RIA space. “We’re not competing with Goldman Sachs or the private banks or the wirehouses,” he says. “We’re a middle-market, independent group, and we’re very optimistic we can grow our business by a significant number.”