Fiduciary Network Buys Stake In Brouwer, Janachowski
Fiduciary Network has purchased a minority equity position in Brouwer, Janachowski & Co., a San Francisco-based advisory firm with about 200 clients and slightly under $700 million in assets. The transaction is the fourth deal completed by Fiduciary Network since the Dallas-based holding company was launched in early 2007. Terms of the transaction were not disclosed.
"We've managed to create some career tracks here, but we wanted to expand ownership and bring in some new people as well," CEO Kurt Brouwer says. "Our new shareholders will be able to buy into the firm by borrowing from Fiduciary Network."
The deal also provides an eventual business plan for Brouwer and a put option on Janachowski's equity. "This was a deal with a long tail and lots of business planning," Fiduciary Network CEO Mark Hurley says. He adds that the firm could use their stock as a currency to purchase other firms in the Bay Area.
Hurley reports that some of the three other firms Fiduciary Network has acquired-which collectively manage about $4 billion-are involved in such sub-acquisitions, though he did not provide any details.
"We've never done an acquisition," Brouwer says. "Others had approached us in the past, but we didn't have the means. It certainly is something we'll take a look at."

Morningstar Names Top Fund Managers
Chicago-based investment research firm Morningstar last month named its top fund managers of the year: Will Danoff of Fidelity (domestic-stock category); Hakan Castegren at the Harbor International fund (international stock) and Bill Gross of PIMCO (fixed income). The winners were chosen for their solid long- and short-term track records, along with excellent fund stewardship.
Danoff has run Fidelity's Contrafund since 1990 and Advisor New Insights fund since its 2003 inception, accounting for roughly $90 billion between them. Both funds closed to new investors in 2006, but Advisor New Insights reopened to new accounts in November.
Contrafund's 10-year annualized return through year-end 2007 was 10.9% versus 6.2% for the S&P 500. Advisor New Insights' three-year annualized return is 16.9% versus 8.8% for the S&P 500.
Castegren, manager of the Harbor International fund since its 1987 inception, and his four-member analyst team at Northern Cross follow a disciplined strategy of picking bargain blue chips with strong market shares or high barriers to entry, and they typically hold onto their stocks for years and maintain an annual turnover rate of less than 20%.
The Harbor International fund gained more than 20% last year, beating the vast majority of its foreign large-value counterparts. Castegren was Morningstar's top international fund manager in 1996.
PIMCO founder and chief investment officer Bill Gross, Morningstar's first three-time winner, was honored for his success managing the PIMCO Total Return fund (the world's largest bond fund) and the Harbor Bond fund. In 2007, both funds topped the Lehman Brothers Aggregate Index by nearly 200 basis points.
The runners-up in 2007 were: David Williams, lead manager of Excelsior Value & Restructuring fund (domestic stock category); James Moffett and his team at UMB Scout International fund (international stock); and Dan Fuss and his team at Loomis Sayles Bond and Loomis Sayles Strategic Income funds (fixed income).

Advisors Gather At Tech Show
More than 300 advisors and software professionals recently attended the third annual Technology Tools for Today Conference 2008 at the Gaylord Palms Resort and Convention Center in Orlando, Fla.
The conference, held January 10-12, was cosponsored by Virtual Office News and Financial Advisor magazine. Virtual Office News Publisher Joel Bruckenstein and Editor David Drucker included sessions on every imaginable topic relating to the use of technology by financial practitioners. More than 40 sponsors participated.
At a breakout session entitled "Different Approaches to Software Integration," David Grace (IAS Software) and Ken Golding (Junxure/Your Silver Bullet) debated the merits of integrated Web site solutions versus integrating software applications efficiently. Grace's IAS is a Web-based platform with customer relationship management, financial planning and portfolio management/reporting software programs that share the same database. Golding developed Junxure, a CRM application now used by more than 700 advisory firms, and is involved in Your Silver Bullet, an effort by about 20 technology vendors to integrate software products.
At one of the general sessions, "Security Beyond The Firewall," David Drab, principal of information and content security services for Xerox Global Services and a former FBI agent, provided a fascinating and often frightening look at how easy it is to penetrate security software.
Other sessions looked at new backup procedures, technology and software that attendees could use to protect their operations in the event of a catastrophe, such as a fire, windstorm, flood, theft or major computer malfunction.
Linda Strachan of EISI/Naviplan and Laurence Kotlikoff of ESPlanner in the final general session debated "The Proper Role of Living Expenses in Long Term Financial Planning." Kotlikoff, a professor of economics at Boston University, didn't flinch when several advisors criticized his iconoclastic approach to retirement income planning. Strachan questioned some of the assumptions behind ESPlanner, but acknowledged the program contains some interesting and innovative features.

State Of The Industry
The number of independent financial advisors is rising. There are roughly 400,000 financial advisors among wirehouse and other employee brokers; life and property & casualty insurance agents; bank brokers and trust officers; and independent reps and independent RIAs, according to Tiburon Strategic Advisors, a financial services consulting and market research firm in Tiburon, Calif. Of these, the number of independent advisors (both independent reps and fee-only financial advisors) now exceeds the number of wirehouse & other employee brokers (112,000 versus 92,000).
Tiburon managing principal Chip Roame highlighted this and other industry trends in the firm's year-end letter to clients. Among the other trends:
Wirehouses and retail banks continue to control the most consumer investable assets (31% and 27%, respectively), but independent advisors continue to outgrow the competition-18% asset growth rate for fee-only financial advisors and 14% for independent reps versus growth rates of 11% for wirehouse and 4% for retail bank advisors.
Fidelity Investments recently surpassed Merrill Lynch as the largest financial services firm ranked by client assets, and The Charles Schwab Corporation will also surpass Merrill Lynch at current growth rates in two to three years. This spotlights the growth in new channels such as discount brokerages, fee-only financial advisors and independent reps.
Mutual funds are the dominant investment product ($10.8 trillion assets), and are heavily used by both independent rep and fee-only financial advisors (39% and 61% of assets, respectively).
Packaged solutions, particularly target-date mutual funds, have quickly gathered more than $100 billion. Unfortunately, many investors misuse these funds by mixing them into portfolios containing other funds and inadvertently misaligning their overall asset allocations.
Exchange-traded funds may be the fundamentally most important product invention since the mutual fund in 1940, and may ultimately shift many financial advisors' role to that of managing a series of index products while focusing more efforts toward various wealth management services.
Despite the push to serve high-net-worth clients, the fast-growing independent rep channel has an average account size of just $142,000.
As competition heats up, marketing will play an increasingly vital role. Client retention and consolidation is now more critical as baby boomers liquefy their wealth. Similarly, client referrals appear to account for 55% of new clients. Yet few financial advisors utilize target-market strategies even though these techniques have proved to increase referral rates, boost close rates and lower costs to serve clients.
Merger and acquisition activity is rising, led by well-capitalized firms such as Focus Financial Partners and United Capital Financial Partners. Other exciting transactions included the merger of Kochis Fitz and Quintile Wealth Management, and City National Bank's acquisition of Lydian Wealth Management.