“If I make a bad investment recommendation that doesn’t work out … I’m not really at risk for being sued if I followed a documented process for how I arrived at that decision to select the investment and if I monitored it effectively afterwards.” For compliance, Captrust has fashioned its CRM with custom add-ons for documentation.

Pairing Practices

Captrust decided to go national in 2006. It was always part of the plan to move into the high-net-worth wealth management space, says Miller, but the firm needed a way to capture a brand presence in all its cities, and DC plans offered the easy remedy. It’s harder to differentiate yourself from other wealth management advisors after all, and he had the hardware to distinguish himself and his company in the 401(k) space. But now that it’s done that, the firm wants to use its presence to take on more wealthy clients and serve all their needs, not just their 401(k) plans.

Captrust bought seven firms in 2017, and had pinched three others in 2018 by November with letters of intent for two more. The 2018 firms include Morton Wealth Management in Greensboro, N.C., which brought in some $450 million in assets; the $1.4 billion firm FCE Group on Long Island; and Catawba Capital Management in Roanoke, Va., a $1 billion firm with a 21-state footprint).

“Now we’re going back into the same markets and trying to buy wealth management firms in the same cities and pairing them up,” Miller says. The hope is that the retirement advisor with 40 clients is able to introduce the wealth management teams to those clients and then they bring their personal business over.

Margins do have something to do with this business strategy. They are simply better in wealth management, Miller says.

“Realistically, [401(k)s are] about 20% margin business,” Miller says, “and I think wealth management is about 25% to 30% margin business. That’s the crux of the difference.”

That means the slowly growing latter business has become a much bigger part of the firm’s revenue, Miller says. It’s currently a third, and should be half of Captrust’s revenue within a few years. That’s because institutional retirement revenue is about 5 basis points and wealth management revenue is about 70 basis points.

“We need a minimum of a million dollars [for wealth clients], so we’re not out there looking for $200,000 rollovers. There are very few million-dollar accounts [in the 401(k) space]. But often somebody with a half million dollars in the plan may have a million dollars outside the plan, and that becomes a good client.” Those accounts under $500,000 are better suited to asset managers, he says, and perhaps even robot sites, and he recommends people leave their money in the plans.

Wilson Hoyle has been with Miller’s team for 23 years since the Interstate/Johnson Lane days and is now a managing principal at the firm. He says the advisors who partner with Captrust now are looking for vision and scale. “We want to take the best of the consulting world and what made that effective and take the best of the brokerage world … and combine them to make this hybrid firm, and if we did that it would be this first step to create that fast track for advisors to run on.”