It is not surprising that Derek Holman and Brian Parker ended up as co-founders of Torrance, Calif.-based EP Wealth Advisors.
After all, they’d been friends since middle school in their hometown of San Diego, and started their working careers together at a yogurt shop.
Today, Parker and Holman, both 43, run EP Wealth, an up-and-coming RIA firm with $2.3 billion in assets, serving nearly 2,000 clients through six offices in California (Torrance, West Los Angeles, Irvine, Valencia, Lafayette and San Diego), plus one location in Denver.
The firm’s history is a classic start-up story of two entrepreneurs figuring it out as they went along. After stints at separate colleges, Parker and Holman ended up together again in Los Angeles, sharing a rented house in Manhattan Beach and working as advisors during the latter stages of the ’90s dot-com boom at different brokerage firms—Holman at Paine Webber and Parker at Signator Investors.
But they didn’t like the traditional brokerage model and its sales culture. So, being brash 26-year-olds, they formed Premier Financial Management in 1999.
“What really led us to start [Premier] was the Wall Street model, which didn’t seem to work,” Holman says. “We just wanted to offer advice that was conflict-free.”
They scratched and clawed for new clients, running up credit card debt and living on the cheap. They hosted small events and got word out any way they could about their independent, fee-based model. “We benefited from being young, and already poor, so it wasn’t like we could give it just three to six months before getting another job,” Parker says.
The implosion of the tech bubble helped bring in clients. Losses in hand, many investors were looking around for new advisors. “A lot of assets went on the move then,” Holman says. “A lot of people found out that the financial advice they were getting might not have been as good as they thought. … Our biggest pitch was, ‘Wall Street is broken.’”
The duo stressed transparency, accountability and conflict-free advice. The question they posed to prospective clients was: Did they know the fees they were paying for the performance they were getting?
“It seems pretty simple, but everyone we would meet had no idea what their return was and what they were paying,” Parker says. “And the question to them was always, ‘Isn’t that something you should know?’”
By 2004, the firm had grown to about $70 million in assets. That was when Premier made a major expansion step by buying another local firm, Enright Financial Consultants, bringing on well-respected veteran advisor and owner Stephanie Enright, her six-person staff and an additional $120 million in assets.
Organic growth and a tailwind from the bull market took assets at the firm (now renamed “EP Wealth,” from the “Enright” and “Premier” names) to about $1 billion by 2011. That’s a healthy size—but a difficult one for two owner/advisors to manage.
So in 2011, Parker and Holman recruited Patrick Goshtigian, then head of Nuveen’s global operations, to run EP day-to-day as president and partner. Goshtigian, a veteran from Los Angeles-based NWQ Investment Management before it was bought by Nuveen in 2002, is a Hermosa Beach neighbor of Parker’s. “Our kids went to kindergarten together,” Parker says.
The two had no prior business relationship before Parker approached Goshtigian about the new position. Goshtigian had been thinking about making a switch to the wealth management side, and he liked EP’s vision for growth, its determination to build an institutionalized process and its “good footprint in the local community,” he says.
On The Prowl
EP currently has 20 client-facing advisors, called wealth advisors, and 55 employees in total, but the firm is intent on adding more advisors and firms when the fit is right. In addition to succession planning, the attraction for a potential merger partner is EP’s financial planning support, its client-referral base, and its ability to take administrative work off advisors’ plates.
A five-person investment team performs all investment functions, including running a large-cap portfolio, and a 15-person operations team handles the back office and interfaces with the firm’s three custodians (Schwab, Fidelity and TD Ameritrade).
In January, Erin Durkin joined EP as director of financial planning to run what is now a four-person planning department. EP wealth advisors still do planning, but the dedicated team adds expertise and the ability to handle complicated cases.
Kevin Ashworth, investment director and partner, and a veteran from Enright’s firm, leads the investment team. A 10-person investment committee meets every Monday and sets overall strategy. “We’re trying to provide one voice from the investment committee to the advisors, which in turn gets disseminated to the client,” Ashworth says. About three-quarters of the firm’s clients follow one of EP’s model portfolios.
The setup doesn’t appeal to everyone. Founders of wealth management firms are notorious for not wanting to give up control, especially of the investment process.
EP has seen plenty of cases where the fit just wasn’t right with potential acquisitions. “We’ve spent a tremendous amount of time and resources on deals that eventually did not work out, and usually the reason was ultimately the cultural fit wasn’t there [with] the same investment philosophy [or] the same financial planning philosophy,” Parker says.
But lately, several recruits have fit right in. In January 2015, a longtime friend of Goshtigian’s, Denver-based advisor Jon Moore, 46, joined EP to form the firm’s first non-California office.
Moore needed a succession plan and a firm with more resources. He had been working in partnership with his father, who was recently retired. “I had 100% of the equity, so if something happened, that just concerned me,” he says.
EP was a natural choice, what with the personal connection and the fact that 40% of Moore’s clients were located in the South Bay area of L.A. where EP is headquartered, near the affluent beach communities and the upscale Palos Verdes Peninsula. “With their financial planning and investment team, they have a really good holistic wealth management offering,” says Moore, who brought along $60 million in assets.
A similar story played out with EP’s biggest acquisition to date, the $300 million Northern California firm Ballou Plum Wealth Advisors. Ballou Plum, based in the Oakland suburb of Lafayette, joined in January 2016 and gave EP its first outpost in Northern California.
Now both in their 60s, owners Lynn Ballou and Marilyn Plum also saw the need to get serious about succession planning. They were affiliated with LPL Financial at the time of the merger, and had looked at a number of possible partners, but nothing stuck.
In May 2015 their merger consultant, David Selig of Advice Dynamics Partners in Mill Valley, Calif., told them he’d found the perfect partner—EP Wealth, a planning-focused advisory firm run by relatively young owners on a growth curve. “When we talked on the phone with [EP Wealth], it was so bizarre, it was like talking to people we’d known forever,” Ballou says.
It was also a homecoming of sorts for Ballou. “I grew up in Southern California, literally down the street from where their Torrance office is” in the South Bay’s main business district.
“In addition, they were focused on the financial planning process,” Plum adds. “And that was so important to us because we met so many firms where that was not a priority, where they were just money managers.”
Ballou Plum also needed a larger partner with more career opportunities for younger staff. “In the [San Francisco] Bay area, we’re just a small fish in a big pond of lots and lots of planning and wealth advisory firms,” Ballou says. “It was getting very hard for us to compete for that next generation of advisors and staff.”
Their competitive position is now secured, Ballou says, and her Lafayette-based staff now have expanded opportunities in working for all the firm’s advisors and branches. Other recent office openings included an Irvine (Orange County) outpost in September 2015, and a San Diego location in July of this year.
Ryan Serrecchia, executive vice president and partner, who came on board in 2008, heads the Orange County office, a convenient 30 miles or so closer to his Orange County home than his former Torrance workplace. The new San Diego office is headed up by advisor Sean Cartin.
Serrecchia, a veteran of TD Ameritrade, knew EP’s principals from the custodian’s branch-referral program. He reached out to EP when he decided to make the switch to wealth management and away from the institutional money manager he worked for at the time.
The attraction for new hires at the expanding branch network is the growth opportunities and client referrals EP offers, Serrecchia says. At the same time, as EP management brings on new firms and advisors, “they are not going to compromise their values,” he says.
Selig, the M&A consultant, thinks EP is well positioned for more expansion. “You can’t put a value on culture, but they’ve developed a youthful, collegial culture that is infectious,” Selig says. “When I’ve brought teams in [to meet the firm], that really resonates.”
EP also does well in executing on custodian referral programs, and uses seminars and social media effectively, Selig says, adding that EP’s proven ability to grow organically is a big draw for advisors looking to join a firm.
Changing The Experience
In an age when robo-advisors and low-cost indexed products threaten margins, EP execs insist their fees aren’t under pressure. Their strategy is to make sure financial planning and other client services allow them to differentiate themselves and add enough value to keep current clients and attract new assets.
Making financial planning accessible and relatively pain-free is step one. Planning is “the crux of what we do,” Durkin says. “We plan first and invest second.”
Durkin and her staff find that new clients may have done some rudimentary planning, like cash-flow projections, but not the type of comprehensive plan EP wants to work from. While wealth advisors typically manage client relationships, the firm has recently begun including planners in client meetings, using an interactive process that helps clients own the plan. “We send them off with an action plan” and follow up with a “gentle nudge” to implement, Durkin says. “We’ll reach out to mortgage brokers, insurance agents, CPAs and estate planning attorneys [to] make sure the client is actually doing what we recommended.”
Beyond just implementation of a plan, a big focus is getting clients to buy in emotionally. To that end, last year EP created a new position, director of client experience, filled by Breene Murphy, a former advertising professional. Murphy’s charge is to listen to clients and find out what they really want, and to spearhead events and develop client materials to better communicate all that goes into the planning and investment process, and how the process aligns with the clients’ personal goals.
“When you start to frame the discussion around what matters to people, then they’re more inclined to go and do it,” Murphy says. “We’re trying to demystify the experience and help them understand that it’s not impenetrable.”
Holman says the objective is to simplify things and distill the conversation down to the goals that are truly important for clients.
“Somewhere along the way, the financial services industry decided complexity equals value,” Parker adds, “so the more complex you made it, the more valuable it became and the more you could charge. We’re trying to do the opposite, so people will find value in making their lives simpler.”
Another client-engagement effort is EP’s women’s initiative, led by Ballou and Plum. The goal is to bring in more female clients and staff. The two advisors know what they’re doing: Since first teaming up in 1997, they’ve built a practice serving women—specifically women going through divorce or the loss of a spouse.
Being known as a welcoming place for female investors is something EP wanted to re-establish after Stephanie Enright retired in 2010, Ballou notes. “She was a very strong advocate in our industry, and also for women clients.”
Enright started in the business at a time when there were “very few women business owners, and even fewer in the financial services industry,” Holman adds.
Ballou and Plum’s first step with the new initiative was getting EP’s female staff together to brainstorm ideas. “We’ve started to define the … internal process for talking to each other about how we talk to women [and] what are the important things women are looking for,” Ballou explains, things like education, a consistent delivery process, a team approach and empathy. “We want our clients to be treated at least as well as we would treat our own mothers, sisters and daughters.”
In September 2016, the firm held its first event for female clients, called “Finance and Fashion Through the Decades,” covering the different financial needs women have as they age. An outside speaker also talked about “how you can design and craft a wardrobe that is appropriate for different ages in your life and different events, and still have money left over to retire,” Ballou says.
The client experience initiatives go to the heart of EP’s plan to double assets in about four years. EP management has no particular end destination in mind, but “we’ve made a determination we want to be a big firm,” Goshtigian says. “And it’s not growth for growth’s sake. It is so we can provide a better service for clients, and a better work environment and career path” for employees.
Ballou and Plum, now the firm’s elder stateswomen, know well the challenges in trying to grow. They think EP Wealth is on the right track. “There are all sorts of opportunities to get big but not necessarily get smart,” Ballou says. EP “really wants smart, and wants clients to be sticky and feel they can be here for the rest of their lives, and the rest of their families’ lives.”