Capitalizing Beyond 401(k)s

The 401(k) plan advisor space may seem kind of dry and unexciting—a place once stalked by record-keepers, bundled fund providers and HR departments—but that bird’s eye view is clouded by the actual huge changes going on and massive amounts of money moving around in this space.

This space has traditionally been ruled by mega consulting firms like Mercer and Aon Hewitt handling the giant companies and broker-dealers cleaning up with the smaller plans. But 10 to 20 years ago, the ground started to shift amid accounting scandals—and a new legal terra firma was created. That world made it safe for RIA Firms like Captrust, in Raleigh, N.C., to evolve and become giants in their own rights.

Captrust was calved from a broker-dealer in 1997 by J. Fielding Miller, who had started building up his DC business in the late 1980s. The firm, which has since planted a flag as 401(k) participant advisor in 37 cities, is now engaging in another kind of homesteading in those cities—acquiring wealth managers to bulk up its high-net-worth business. After an acquisition tear, the firm has built up some $10 billion in AUM to go along with its $270 billion in institutional assets under advisement (including 401(k)s). The company now boasts some 480 employees and 160 advisors spread across the country.

“When we started, there wasn’t really a retirement advisor industry,” Miller says. “We just kind of created in our neck of the woods a kind of cottage industry and there’s other entrepreneurs around the country that were doing the same thing.”

On The Backs of Trucks

Miller got his start at Interstate/Johnson Lane in 1987, hoping to follow his successful brother into the brokerage industry. He made the usual 30 calls a day from his office selling securities including stocks, municipal bonds and funds if he could keep people on the phone for five minutes. His first challenge was the 1987 stock market crash. “I called everybody with recommendations about buying in while things were on the cheap and got a lot of new customers that way.”

On a tip, he cold-called an engineering firm with a $250,000 profit-sharing plan, hoping to steal the business from a bank trust department. This was the advent of the 401(k) age, and retirement plans were the province of the UBSes, Merrill Lynches and Morgan Stanleys of the world, he says. But he heard tales of woe from the plan sponsors—not about the investments but about the service. “It had to do with all the ancillary things that go along with being a plan sponsor.” That included the plan design and documents, the audits and compliance. And, of course, the perennial problem: getting employees to sign up.

Miller saw an opportunity for a small advisor willing to work hard and cover a lot of ground—he and his team spread out across North Carolina trying to sign people up, Music Man style. “It’s hard to do that,” he says. “It’s boots on the ground.”

It meant signing people up at midnight on the backs of trucks. Tipping back a bottle of beer on the floor of a liquor distribution facility. “It could be a third shift textile company where you’re talking to a single mom [with] not a lot of money and you’re trying to get her to set some money aside. … They’re looking at you like you’re a Martian.” These were often people who felt they needed every dollar they made. One participant at a trucking company was so angry about a clerical error made under the previous plan administrator that he threw a sausage biscuit at one of Miller’s team members.