Yet it soon became evident that the Bank of Montreal had bigger challenges. Moreover, the executives who were so enamored with SBSB’s financial planning approach to wealth management left the bank after several years.
If visions of a unique partnership began to fade away, the relationship between the two concerns remained friendly. “They were very ethical and great people,” Bruyette says.
When the financial crisis struck, little changed. “We were thrilled [our owner was a] Canadian bank,” Bruyette says. After all, Canadian banks came through the financial crisis in much better shape than their U.S. counterparts.
Sometime around 2014, co-CEO Greg Sullivan and Bruyette started to realize they’d like to keep working at the firm for another 10 years or more. Moreover, if they did so, they decided they’d rather do it as owners and expand equity ownership to more advisors than they had when SBSB was a much smaller firm with $800 million in assets in 2003.
Negotiations with the bank went on for over a year. While SBSB barely contributed a penny a share to the Canadian bank’s earnings, they had a fiduciary responsibility to shareholders to exact a reasonable price. SBSB understood this, but for obvious reasons it also knew the less it paid the sooner it could retire the debt it assumed to finance the buyback. With $2.6 billion in assets under management in early 2016, SBSB was no longer a small firm.
By all accounts, the repurchase of SBSB has been a huge success, despite the fact the firm had to take on significant debt. It now has $4 billion in assets, 66 employees and 17 owners—with plans to grow that number in 2020 and beyond.
“It created a lot of energy for a second line of management,” Bruyette says.
“When you own yourself, you are more willing to tackle the really hard issues.”
Having more shareholders also provided more capital, creating a more stable capital structure. Furthermore, expanded ownership not only helped the firm grow, it also enabled SBSB to attract two senior-level executives in the last year.
Mike Kabarec