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 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."