Much of the financial planning industry struggles with succession plans as the advisor workforce continues to age—but succession planning is old hat for a firm like Bartlett Wealth Management.
As the firm celebrates its 120th anniversary this year, its leadership is reflecting on how it has had to change to remain relevant to its clients and to differentiate itself within an industry that’s grown in size and complexity.
“These days, I don’t think you can say in the mainstream of things that our investment management itself is so distinctive, or that our financial planning process is unique,” says James Hagerty, principal and wealth advisor. “My Monte Carlo simulations are not that much different from the next person’s. In the main, everyone in this profession has similar tool kits. The differences are all about subjective factors like relationships.”
In 1898, Benjamin Bartlett, a partner at a Cincinnati area private investment firm called George Eustis & Co., purchased a seat on the New York Stock Exchange. A new firm, Bartlett & Co., would eventually replace Eustis & Co. When the Investment Advisers Act was passed in 1940, Bartlett was among the first firms to register as an RIA. The legacy continues in Bartlett Wealth Management, which now has 48 employees and more than $4.2 billion in AUM.
For the bulk of Bartlett’s history, the firm was owned by principals working beside other employees, with the exception of a period in which it was owned by Baltimore-based Legg Mason, and with the exception of the current period following the firm’s recent purchase by Focus Financial, earlier this year.
Legg Mason bought Bartlett in 1996 hoping that Bartlett would bring an influx of high-net-worth brokerage clients, while Bartlett would enjoy the back office support offered by its parent firm. However, when Legg Mason sold its brokerage business to Smith Barney in 2005, many of the synergies it shared with Bartlett evaporated.
When she became Bartlett’s first female CEO and president in 2007, Kelley Downing began to look for ways to buy the firm back. “Legg Mason over time became a manufacturer and distributor of mutual funds whereas Bartlett was in the wealth management business,” says Downing. “We were no longer aligned in our visions.”
Bartlett had also moved toward a model of holistic, fee-based wealth management with financial planning, not investment management, as its centerpiece.
Today, New York-based Focus Financial Partners owns a majority stake in the firm. But the management and day-to-day operations of Bartlett remain in the hands of Downing and her leadership team. The firm sought a partnership that would allow it to retain autonomy, but also get enough financial support to ensure its continuity—by building an internal succession plan and potentially growing through acquisitions.
“Focus is also obviously focused on the growth of all their partners, so they have the capital to help us with acquisitions as appropriate,” says Downing. “That’s a great opportunity for that next generation in terms of how they grow the firm and the vision that they have.”
According to Lori Poole, principal and wealth advisor, it’s been only in the last 10 to 15 years that Bartlett has moved toward a financial planning-centric approach and away from a model that leads with investment management and offers financial planning only on the side. But the firm has offered some sort of financial planning almost as long as it has been an RIA.
In the past, that planning was often focused on clients’ early retirement, the exercise of stock options and figuring out how to work with clients’ low-cost basis holdings and legacy positions, Poole says. Today, Bartlett offers more granular services like cash-flow planning, health-care analysis and Social Security strategies.
“It’s a testament to how forward-looking this firm is,” Poole continues. “Engaging in financial planning allowed us to get more in-depth knowledge to spread around the firm.”
A commitment to the Cincinnati community is one element of Bartlett’s culture rooted in its past. Today, the firm and all of its employees are active in charitable and community organizations.
“I think all of us sit on a board or do some kind of volunteer work,” Downing says. “It’s a very strong part of our culture.”
Bartlett sponsors several events within the region, supporting arts, educational, civic and social causes, which helps infuse its identity into the greater Cincinnati community.
Downing herself is a founder of the St. Vincent de Paul Charitable Pharmacy, board vice-chair of the Cincinnati Shakespeare Company and a founder and member of the Cincinnati Women’s Executive Forum steering committee.
Hagerty is involved with educational organizations, and Poole works with arts organizations, the Junior League of Cincinnati and a financial literacy program organized by the University of Cincinnati Economics Center. Brian Antenucci, principal and wealth advisor, sits on the board of the Center for Respite Care, which helps chronically homeless people recovering from medical procedures.
“We have a culture of making sure that we’re building up our community to be the best that we can make it,” Poole explains. “We’ve adopted a charity each year that we raise money for throughout the year, and we engage in other fun, smaller activities, like delivering a food drive to a local charity. It’s a core part of our culture.”
Bartlett has tried to stay ahead of the curve by forward-looking thinking that involves not only trends in planning and investing, but also recruiting, developing and promoting next-generation talent and establishing continuity for its clients.
The firm’s planning approach allows younger associates to work beside established advisors as part of a client-facing team. Bartlett also has a mentoring program to help prepare its next generation of leaders. Mentees are required to be engaged, active participants in the program, which often results in reverse-mentoring, where the junior advisor teaches something new to his or her senior.
“Most of these mentors are organically assigned through their roles and friendships with more senior advisors at the firm. There are a lot of opportunities for a younger advisor to help their mentor and other more senior advisors. If there is an investment or financial planning project an advisor feels passionate about, they then get the opportunity to help contribute or even lead the project.”
Bartlett does not have a formal training or development program, says Hagerty, because young employees are expected to be “self starters” with the initiative to learn and develop independently and under the auspices of their mentors. Shortly after buying the firm back from Legg Mason, Downing hired three young advisors and established a Progressive Leadership Committee (PLC) to help build the next generation of leaders at Bartlett.
“It’s a strong leadership development initiative: How do they become owners? How do you lead a company?” says Downing. “In a lot of accounting, law and investment management firms, you enter the business expecting to someday do those things, but when you’re in a small-to-medium-sized company, you have to understand how to manage a company.”
The PLC is being groomed to take the helm at Bartlett. Along with professional development to instill leadership skills, members of the committee are also taking on leadership roles in volunteer and community organizations and boards, says Downing.
Bartlett also supports employees seeking credentials, designations, further education or other forms of professional development. Currently, the firm has more than a dozen chartered financial analysts, six certified financial planners and two certified public accountants.
Part of the secret to Bartlett’s success lies in advisor retention, says Hagerty. Keeping advisors on staff often translates into the ability to retain clients as well. Hagerty estimates that the average Bartlett employee currently has 20 years of tenure with the firm, even with five or six relatively recent hires.
The firm’s employees work within a professional, but relaxed, environment, Hagerty says, where all employees are treated as stakeholders and given a great deal of personal freedom to pursue their own initiatives. An incentive structure that uses bonus pools with clear, transparent goals, like a certain level of client retention, is part of maintaining a happy, harmonious workplace.
“We include all employees in our strategic planning process and specifically train next gen advisors in leading strategic planning so that they become practiced in this regard,” says Downing.
Bartlett is also attending to the internal succession of its advisors. Because it serves many multigenerational families who have kept their assets with the firm for decades, continuity in the advisory relationships is key to retaining these large legacy clients.
“Succession here is by no means flawless, but we make it work,” Hagerty says. “Generally speaking, every account has two professionals involved, and genuinely two professionals, not a lead and someone who has a handshake and then stays in the background for a decade or more. It’s genuinely a couple of people who attend the meetings.”
As they reach 55 years old, Bartlett’s advisors are required to take occasional sabbaticals. For a minimum of four weeks, a senior advisor will leave the office and retain no e-mail contact with clients. During this period, an “understudy” advisor will meet with all the senior advisors’ clients to help cement a relationship.
Maintaining multigenerational client relationships involves more than advisor continuity, Poole says. Bartlett’s planners are offering fee-only advice to younger clients with less wealth on a retainer basis.
“I work mostly with individual families,” Poole says. “We do also have a subset of institutional, nonprofit and endowment clients. I have been working a lot with clients who are at the beginning of their careers. They have debt, are coming out of school, and are prioritizing how to set themselves up for the future, buying a second or third house, taking care of their parents.”
Many of Poole’s clients do not have assets outside of workplace retirement plans. They receive assistance on issues like expense management, maximizing savings, debt management and insurance analysis.
Bartlett goes to some lengths to get clients’ children involved in the process. In the past, the firm has offered a “Kids’ Day” involving educational outreach to clients’ children to help teach them about finances and their families’ legacies.
“Over the years we have adapted to the needs, whether that is the type of advice, the technology or the investments that they are looking for,” says Poole. “Based on the goals and desires of our newest generation of clients, we are using more investments which are aligned with a client’s core values.”
Even as Bartlett has grown into a massive wealth advisor, its leadership has tried to retain the human feel of the firm, keeping client discussions live and in-person when possible.
From its leadership to its junior employees, Bartlett emphasizes the accessibility and openness of its people. Personal e-mails and office phone numbers are listed on its website for the public to see. All employees work in the same office. The idea is that clients shouldn’t be served by voice mail or automated menus; instead they have direct access to the firm’s advisors and its management.
“I think we’ve always put our phone numbers and e-mail out there. We like to be pretty accessible,” says Downing. “It may be that all of us still work directly with clients, and we’re all involved in the community.”
The firm tries to take a customized approach with its clients, recognizing that most forms of generic financial advice are already available to Americans for free online. It has developed expertise in planning around divorce, inheritances, stock options, legacy planning, caring for elderly parents, coping with the death of a spouse and domestic partner and philanthropic planning.
“We provide advice around different transitional points,” says Poole. “The plan really becomes important as someone is chugging along, but timely advice is most important during a transitional point like a first job, [or when someone is] starting to save, graduating from college, buying a house or starting a family.”
Much of the firm’s history and legacy revolved around its investment management—as it helped high-earning employees from companies like Procter & Gamble, Kroger, Macy’s and Cintas make key decisions about their portfolios and their financial lives.
To continue to serve those clients, Bartlett has kept its in-house investment management and research capabilities so it can offer expertise on single securities. The firm’s investment strategy overall, however, focuses on wealth preservation through broad diversification across and within asset classes.
“Keeping investment management in house is a key differentiator for us,” says Antenucci. “We’ve been providing customized solutions to our clients for the last 120 years, and this continues that tradition.”
The internal investment capabilities integrate well with financial planning, Hagerty says, as Bartlett customizes portfolios for each client.
Over time, Bartlett’s managers have shifted from single securities toward more mutual funds and ETFs, allowing managers to choose from a roster of funds screened and followed by its analysts, who emphasize risk characteristics, long-term returns, quality and tenure of management and expense ratios in their process.
The firm is also harnessing alternatives to further diversify client portfolios. “Currently, all our alternative allocations are in ’40 Act mutual funds with low or negative correlations to stock and bond markets and below-average fees beyond what a client could get from a direct purchase of an alternative strategy,” says Antenucci. “We’re looking at categories like reinsurance, commodities, managed futures, variance risk premium and put selling, and alternative fixed-income funds.”
In the future, the firm may incorporate more private opportunities as part of its alternative offering, Antenucci says.
Bartlett claims the mantle of socially responsible investing pioneer, having first offered such investments to clients in 1977. “It started with religious organizations unwilling to invest in things beyond their core values,” says Poole. “That was more of a negative screening out of bad actors. Now people want more of a positive screening of companies who are doing better for our environment and our economy.”
Today, Bartlett’s ESG strategies typically follow the same discipline as its equity and fixed-income strategies with both positive and negative ESG factor screens overlaid. The firm also uses some ESG-oriented mutual funds, Poole says.
Thus far, Bartlett has mostly been focused on organic growth—though in the past, the firm made some acquisitions, its growth generally comes from new clients and clients adding new assets.
That may change with the Focus Financial acquisition, says Downing. Bartlett has retained a new marketing provider and is beginning to explore ways it can target high-net-worth clientele and high-earning millennials through digital channels.
Hagerty and Downing are also open to the possibility of buying other advisory firms, but have little interest in becoming “serial acquirers.”
Why? “There are smaller firms that lack the infrastructure that we have,” says Hagerty. “The business is changing, regulations are changing, handling investments is changing. These firms may be dealing with their own succession issues. We think there will be some consolidation in the industry moving forward and we may be an attractive platform for some smaller firms.”
Regardless of which channel drives its future growth, Bartlett’s leadership aims to preserve the firm’s culture of openness, service and innovation as it enters its 13th decade of business.