New Firm To Invest In Advisory Businesses
The latest entrant into the consolidation game, Private Wealth
Management (PWM), opened its doors in mid-February. Created by former
Royal Alliance CEO Mark Goldberg, the New York- and Greenwich,
Conn.-based firm has raised $250 million in capital with the objective
of acquiring stakes in successful wealth management firms.
PWM plans to engage in private, separate transactions and is being
structured as a finance company, so it will have both debt and equity
capital. Goldberg believes that wealth management firms represent "the
optimum service model for the affluent consumer." Firms will
participate in any public or private exit strategies that might occur.
PWM has no intention of operating its own custodian or broker-dealer.
"We won't require firms to change their broker-dealer, clearing firm,
custodian or technology platform," Goldberg says. Nor is it interested
in branding the firms in which it buys stakes. That differentiates it
from National Financial Partners, which requires the companies in which
it acquires interests to move business to NFP's brokerage, and from
Focus Financial Partners, which requires its target firms to use the
Focus brand.
Although he maintains PWM is agnostic on the fees versus commission
issue, it is seeking to invest in wealth management firms with between
$500 million and $3 billion in assets. "We're interested in real firms,
not books of business," he says.
Though he refused to disclose any names, Goldberg says the principals
of PWM have over 100 years' experience and have headed some of the
major firms in the advisory business over the last few decades. The
concerns PWM is negotiating with are expected to have high-quality
earnings, a broad array of services, as well as standards of integrity
and clean compliance records. They also must be independently owned.
PWM will only acquire controlling interests in wealth management firms
at the principals' request as part of their succession plan. "If you
look at most of these wealth management [firms], they have real value
built up but they can't access capital to grow," Goldberg says. "Banks
look at them as brokers so they can't get any liquidity."
One of PWM's goals is to enable wealth management firms to realize the
valuations and multiples that were previously only available to large
institutions. "If you look at this business, assets go from custodian
to custodian, broker-dealer to broker-dealer, but the relationship
stays between the advisor and the client," Goldberg observes. "That's
where the real value is. Over the next decade, there could be a value
shift from broker-dealers and custodians to the real owners of the
business [relationship]."
Goldberg spent the majority of the last 20 years at AIG's Royal
Alliance unit and its predecessor incarnations, which were part of
SunAmerica before that giant concern was bought by AIG. Before becoming
CEO of Royal Alliance in 2001, he worked on AIG's Advisory Network's
Vision 20-20 platform and its asset management operation, which now has
more than $10 billion in assets.
Morningstar Launches SMAs
Morningstar Investment Services-the investment management arm of
Morningstar Inc.-has launched a new separately managed account offering
aimed at the independent advisor market.
Morningstar Portfolio Select Stock Baskets, offered exclusively through
advisors, uses Morningstar's proprietary research to tailor customized
stock baskets for clients with minimum accounts of $500,000.
The service is an expansion of Morningstar Managed Portfolios, which
since 2002 has offered advisors mutual fund and ETF investment
strategies based on Morningstar research. The new SMA offering extends
Morningstar Investment Services active management to individual stocks,
which are weighted in individual stock baskets based on Morningstar
ratings and a client's risk profile and investment goals.
"We've designed the service for financial advisors who have clients
with tax sensitive and sophisticated investing needs," says Art
Lutschaunig, president and chief investment officer of Morningstar
Investment Services.
Portfolio Select Stock Baskets charges an investment management and
research fee of 65 basis points for the first $1 million invested, 60
basis points for the second $1 million, and 50 basis points thereafter.
The administration fee is 8 basis points for the first $1 million and 5
basis points thereafter.
Americans Tops In Retirement Saving
Experts continue to warn that Americans are not saving enough for
retirement, but a recent survey claims they are doing a better job of
saving than workers in other large industrialized countries. The global
retirement survey by AXA Equitable found that U.S. workers save an
average of $696 per month for retirement, which was the best rate among
the countries surveyed.
The survey, 2007 AXA Retirement Scope, looked at workers in ten of the
world's largest countries and Hong Kong. U.S. workers, says the survey,
save twice as much as workers in Germany, Italy and France, and nearly
ten times more than workers in China.
The figures were compiled from verbal responses to queries about how
much people saved per month for retirement when all their savings
vehicles were included.
Axa says the survey is one of the first to look at retirement in China
and compare it to the rest of the world. The Chinese retire almost a
decade earlier than Americans, and retire earlier than anyone else in
the world at age 52. However, workers in both the United States as well
as China expect to retire later than people who have retired already.
The survey consisted of interviews of 6,915 people, between the ages of
25 and 75, in Australia, Canada, China, France, Germany, Hong Kong,
Japan, Italy, the United Kingdom and the United States. Among those
already retired, the survey found that U.S. citizens are happiest,
travel the most, receive the highest income, save the most, have the
highest percentage of home ownership and believe they have the best
financial situation.
However, all is hardly rosy in America. U.S. workers were among the
most pessimistic about U.S. pension benefits. Social Security is viewed
as "in trouble" by 95% of Americans, and 20% of those under 65 years of
age see it as a crisis situation. By comparison, people in Hong Kong,
China and Spain are "bullish" about their countries' pension systems,
according to the survey, with 90% of Chinese expressing belief in their
system.
"Overall, our survey findings suggest that Americans are confident-but
realistic-about the financial outlook for retirement," says Ken Gelman,
vice president and director of market research for AXA Equitable. "They
expressed a fair amount of optimism about their incomes and living
standards in retirement, but also realize they have to work longer and
understand that much preparation and planning are necessary to achieve
their goals."
Another finding of the survey: The Internet is going grey. In the
United States, 83% of working Americans have Internet access at home,
and 75% of retirees, more than any other country surveyed. Retirees
spend more time at home online than workers.
Focus Unveils Major Acquisitions
Focus Financial Partners LLC, a New York-based wealth management firm,
has announced a series of acquisitions that will bring with it $10
billion in client assets and a national reach that extends to 41 states.
The company announced that it has acquired The Buckingham Family of
Financial Services in St. Louis, Sentinel Benefits Group of Wakefield,
Mass., and Quantum Capital Management of Corte Cadera, Calif. The deals
give Focus Financial Partners a total of $15 billion in assets under
management.
The financial terms of the acquisitions were not disclosed.
"The Focus stamp of quality and expertise, and those of its partner
firms, will allow us to continue as the premier fiduciary wealth
management firm in the market," says Rudy Adolf, the founder and CEO of
Focus. "Our commitment to excellence and reputation for quality is only
further enhanced by our deals."
The purchase of Buckingham includes Buckingham Asset Management, a
wealth management firm, and BAM Advisor Services, which specializes in
offering services for CPAs entering into the investment management
field. In November, Buckingham Asset Management said its assets under
management totaled $1.5 billion-about double what it was three years
earlier. BAM Advisor Services said it was providing services to CPA-run
advisory firms with about $5.5 billion in cumulative assets under
management.
Sentinel Benefit is an employee benefits and independent investment
advisory firm and Quantum Capital is a money and wealth management
firm, according to Focus.
National Financial Had Record-Setting Year
National Financial, the brokerage arm of Fidelity Investments, ended
2006 with a record $649 billion in total client assets custodied, the
company announced.
The total represented a 19% increase from a year earlier. National
Financial also reported a 12% increase in commissionable trades per
day, to 166,988 last year from 148,587 in 2005.
Contributing to the growth was the addition of 21 new broker/dealer
clients. National Financial provides integrated brokerage solutions to
340 broker/dealer firms representing more than 78,000 brokers.
National Financial President and CEO Norman R. Malo says that "2006 was
a tremendous year for us, with an impressive roster of new companies
establishing relationships with National Financial and many of our
existing clients benefiting from new services and enhancements we
recently delivered."
Coalition Seeks To Standardize Electronic Annuities Sales
The insurance industry has launched an effort to standardize the
electronic sale of annuities-a savings vehicle that has been under
siege in recent years because of dishonest sales practices.
The standardization effort was announced by NAVA, a trade group
representing players in the annuity industry. The organization says the
campaign has the backing of a coalition of more than 30 leading
insurers and distributors.
Among the companies in the coalition, according to NAVA, are Allianz
Life, Hartford Life, Merrill Lynch, Morgan Stanley, Pacific Life,
Principal Financial, Prudential Financial, Raymond James, Transamerica
Life and Wachovia Securities.
Called the Straight-Through Processing Standards Initiative (STP
Initiative), the campaign is focused on standardizing suitability
requirements, electronic forms, privacy safeguards and records
management in the sale of all types of annuities, according to NAVA.
The standards would only apply in electronic sales of annuities. The
goals of the STP Initiative, according to NAVA, are to create a set of
operational standards for a process that is paper free, garner
regulatory acceptance of the process, and assist the industry in the
implementation of the standards.
Annuity sales have been scrutinized by regulators in recent years, with
critics contending sales too often rely on dishonest tactics that do
not take into account the suitability of the product for particular
clients. Regulators contend senior citizens are entering into annuity
contracts without being aware of steep surrender period penalties and
mortality and expense risk charges.
"The next wave of Americans approaching retirement have certain
expectations when it comes to financial planning transactions," says
Clifford Jack, chief distribution officer of Jackson National Life
Insurance Company and NAVA vice chair. He added NAVA is working with
many groups and regulators to secure wide-spread acceptance and
approval of STP.
FPA Offering New Performance Benchmarking
The Financial Planning Association is starting a new Practice
Management Scorecard-a benchmarking tool that allows advisors to get a
comparative view of their business performance. FPA says it is looking
for participants for the 2007 version of the Scorecard, which was
launched last year in partnership with McLagan Partners Inc., a
division of Aon Consulting that develops proprietary benchmarking
technology.
The Scorecard consists of a set of benchmarks that include data on
revenues, assets, clients, revenue by product, financial advisor
productivity, growth, expenses and profitability, according to FPA.
Advisors can register to input their own data into the Scorecard at
http://www.FPAnet.org/Scorecard. Practice results are available for $195 for
FPA members and $245 for nonmembers.
"Most experts agree that benchmarking one's practice is a critical
component of managing a successful business, but we've found that only
about half of our members currently benchmark their practices," says
Marvin W. Tuttle Jr., FPA CEO and executive director. "With the
Scorecard, advisors can raise the profitability of their own businesses
and will be able to check their progress on an annual basis against
current market trend information and practice performance."