"A lot of the recruiting probably happened before the end of '08, but most of those clients came in that '09 time frame as people transitioned their book of business from their former firms," says Martin Bicknell, Mariner's CEO. The firm brought five wirehouse reps into the organization at the end of 2008, including two from Wells Fargo (which at the time was still Wachovia), two from Smith Barney and one from UBS. "I would tell you that without the financial debacle of 2008, I would not have recruited any of those people," Bicknell says. The firm is also continuing to court people from other RIAs and trust companies as part of its grown plan. Mariner is bifurcated into two entities-one is an open architecture wealth management family office firm and then there is a money management firm that provides different asset-class managers offering stocks, bonds, quantitative investing and things like MLPs for other RIAs, trust companies and small independent B-Ds.
"We're a fairly young firm," says Bicknell. "We just had our fourth-year anniversary on May 11. We started with about eight people and roughly $300 million under management in May of '06, and today we're up to 115 employees. That growth from '08 to '09 was wirehouse producers that we recruited over in addition to an asset management acquisition that we made locally."
Fighting For Clients
Despite the growth overall in clients in the survey, some 89 firms reported losing them in 2009, either a sign of continuing market uncertainty or a Darwinian struggle for clients in a time of cataclysm when nobody knew who to trust, lots of money was in play, and nervous investors were trying to shake off their torpor and return to the markets after being paralyzed.
The $2 billion family that came over to Convergent Wealth had previously been with Goldman Sachs.
"If I had to pick one thing [that made the family look elsewhere], it would be having products shoved down their throat," Lockshin says. "These guys were sold every deal under the sun that Goldman would sell. And again, I don't think these firms are ill-intended, but there's no such thing as bad projections and it's hard when you've got a conflict not to push that product."
The family was mainly looking for "objectivity," Lockshin says, "someone who understood they're a taxable client, and somebody who understood their complex issues, which included alternatives, concentrated public stock positions, Section 216 issues, estate planning and obviously overall asset allocation and manager selection."
Onofrio, the SEI consultant, says that more than anything, new client acquisition is going to be the name of the game for RIAs. He said that in the middle of the past decade, it was easy to cruise along. But that's over.
"I think over the years with increased appreciation and more of a passive growth process, they were comfortable. You had a little bit of market appreciation, some passive growth through passive referrals. Now that the market appreciation is down from 2007, it directly impacted fee-based advisors' bottom lines because you couldn't take fees on the market. So their proactive growth programs haven't been as engaged as they've been in the past."
That has forced many advisors to make decisions like layoffs, even though the smaller firms, because of loyalty to workers, might not do it. So instead they focus on their top line.
Onofrio suggests the situation is more dire than the numbers would say. He says that typically an advisor with, say, $100 million and a 10% growth plan is going to lose some $10 million as clients unwind their assets, and the advisors will have a hard time catching up.
"If you have $100 million, we know that every year typically the advisor will lose 10% of that market value to their client income and distribution needs," he says. "So $100 million becomes $90 million right away. That's going to happen throughout the year." Even if there is 6% appreciation, they need $14 million to get back to the $110 goal. That's 28 new clients worth $500,000 apiece. If there is no market appreciation, they'll need $20 million to reach their growth goal and 40 new accounts.