Acquisitions are what advisors do when they can't generate significant organic growth. That’s the view of some skeptics of the boom in merger activity in the advisory community.
David Bahnsen, who runs his own fast-growing, Los Angeles-based advisory firm, may put it a little more diplomatically, but it’s clear that’s his belief. His referral business, boosted by regular appearances on CNBC, Fox Business and regular podcasts, generates about $50 million to $100 million a month. For many RIAs, that would be a good year.
Earlier this year, the Bahnsen Group added the referral business of high-profile economist John Mauldin, whose electronic newsletter is widely read on a weekly basis by an estimated 900,000 investors. Mauldin says one mention of his relationship with Bahnsen about once a quarter can generate several thousand referrals.
Several years ago, Mauldin met Bahnsen at a media event and quickly realized he had published the theological work of Bahnsen’s father, Greg Bahnsen, a religious philosopher, in the 1980s. That connection was the beginning of what would turn into a friendship and partnership. Today, Bahnsen is a prominent participant in Mauldin’s annual Strategic Investment Conference.
The Bahnsen Group oversees about $5.6 billion in assets, and about 60% of those assets reside in the firm’s dividend growth strategy, most of it in separately managed accounts. Dividend “sustainability is a pre-requisite,” Bahnsen says.
The strategy isn’t particularly sexy but it seems to resonate with clients. The firn now has 63 employees and offices in Palm Beach, Fla.; Austin, Texas; Nashville, Tenn.; Phoenix; Minnesota; and Bend, Ore.
The current yield is about 4% and Bahnsen said that he aims for a yield that is at least double that of the S&P 500 and growing at a high single-digit rate.
The strategy typically owns between 25 and 35 stocks; currently it has 30. Bahnsen describes it as “all-cap and somewhat selecting.” Current holdings include Moelis & Co., Blue Owl and Lamar Advertising. Last year, the firm launched an ETF (TBG) for investors who want access to the strategy but don’t want to be clients for its other advisory services. So far the ETF has attracted about $70 million.
Bahnsen concedes that futuristic, high-growth investing styles have a lot of appeal but adds it’s difficult to “monetize a stream of ideas.” Even long-duration, venture capital-style investments “need to be attached to a timeline.” Cathie Wood, in his view, has been “right about a lot of things,” but most people “can’t deal with 80% drawdowns.”