Practice Management July 29, 2022

A Q&A With an Adviser to Advisers

AssetMark’s Matt Matrisian says leading firms in the retirement plan adviser industry are increasingly focused on business management issues, with many shop leaders having to step back from their preferred activity: spending time with clients.
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Art by Valeria Petrone


A little more than four years ago, Matt Matrisian sat down with PLANADVISER for a wide-ranging discussion about the topic of retirement plan advisory practice management following the publication of his book on the subject.

The conversation focused on the virtues of outsourcing, particularly in the area of portfolio management, as well as the importance of developing clear and provable value propositions structured around a goals-based financial planning approach.

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In a new interview with PLANADVISER, Matrisian offers his thoughts about how the industry has evolved during the COVID-19 pandemic and where advisers’ practices are likely heading in the years ahead.

PLANADVISER: To begin with, please give us your temperature check on the retirement plan advisory and wealth management industries. How are advisers feeling about their business prospects in the current market environment?

Matrisian: Coming out of the pandemic, many advisers are looking at different ways to grow their organizations. They are, broadly speaking, very focused on business management issues, especially as we see the high pace of mergers and acquisitions persist. Even if firms are not aiming to sell, more of them want to have a better understanding of their potential valuations and multiples.

As a result of this trend, advisers are starting to take notice of the issue of maximizing the value of the asset that is their firm. What we are trying to do is help advisers put a true growth plan in place and help them think about business management in a productive way—thinking about profitability in the overall organization and the reduction of risks across the firm.

PLANADVISER: Is this thinking leading to significant practice management decisions?

Matrisian: In some cases, yes. One example is the interest in firms of building out their own registered investment adviser entity as a means to create more stable enterprise value.

Remember, there are still many advisers out there who are traditionally commission-focused. Maybe they still have a lot of trail income that has been built up by products sold in the past. This is good revenue, but how stable or reliable is it? The idea of moving toward the fee-based RIA business is to recast the value proposition to be more about long-term, structured financial planning that is not tied to a specific product set.

One means of accomplishing this is to build out your business under the corporate RIA of your broker/dealer. That’s one relatively easy way to take the planning-based approach, but if you think about long-term enterprise value for the adviser, the model is less attractive.  

If you put in the effort and resources to become an RIA owner, your clients are all “owned” by the RIA, so to speak. The individual advisers’ revenue in your firm will all roll up together, and you are able to make the firm more flexible and marketable.

This strategy makes more sense from a succession planning perspective as well, and you can begin to think about different revenue models beyond the traditional asset-based approach. You could embrace a subscription advisory fee model, for example, and bring in planning fees that complement the AUM fees.

If you look at some of the largest B/Ds out there, they have started to build out specific hybrid RIA offerings within their organizations. They understand this is an important trend and that, to keep their talent, this approach is necessary.

PLANADVISER: Can you summarize for us some of the most common challenges you hear about these days in your discussions with retirement plan advisers and wealth managers?

Matrisian: The top challenge we are hearing about from advisers in the field is finding talent. This has just been a bigger and bigger issue over time.

One thing we are working on and aiming to roll out soon is a service to help advisers build an active recruiting model based in their local universities. The goal is to help them cultivate next-generation talent.

We all know this industry has a highly visible problem. The average age of advisers is high, in the range of 56 or 57, depending on the estimate. This means trillions of dollars of advised assets are going to see the adviser retire over the next decade, and there must be sufficient talent in place to facilitate that transition.

If you go back 20 years, the way we got talent into this industry was to hire young people to the wire houses and tell them to sink or swim. If you look at the next generation that is coming in, they have more of an altruistic mindset. They want to go into an independent practice and work with an adviser they respect. They want to be advisers because they believe financial planning helps people in their daily lives in a meaningful way.

PLANADVISER: Is growth a challenge for the adviser community at large?

Matrisian: It’s interesting. It depends on the study you look at—for example, last year’s Fidelity RIA Benchmarking Study. In that analysis of adviser growth over the last three years, average assets under advisement went up 13%, while revenue growth was closer to 10%. That’s pretty strong.

What is more interesting is to look at the data more closely and see that 55% of new growth is coming from client referrals, while 20% is coming from third-party referrals made by traditional centers of influence such as accounting firms. The final 25% is coming from other forms of business development—things like traditional advertising, traditional lead gen, public webinars and such.

Our analyses show those advisers who are really focused on growth and who put a defined marketing strategy in place are far more successful at winning new clients, but this only describes about 40% of firms, in our assessment. Those who have a defined strategy grow at double the rate of the firms that don’t.

Something else to point out is that, on average, a given firm only spends 3.5% of their annual revenue on business development activities. I would like to see that figure be closer to 10%, frankly.

PLANADVISER: What constitutes a well-defined marketing and business development strategy?

Matrisian: You know, it’s not very complicated when you boil it down. If you are focused on growth, spend some money on it. We know that roughly seven out of 10 times that the adviser finally gets in front of new prospects, they will close that business. The strategy has to be about getting in front of new prospects.

So, digital lead generation is one key. To the extent that you can do this on an ongoing basis, you will see better growth. In addition, if 20% of your growth is coming from third-party referrals, you need to have a strategy in place there to cultivate and protect those relationships. You need to have a service model around these centers of influence. For example, ask that CFA firm what they need from you so that they can be more successful with their own clients. Do they need you to provide better visibility into tax-loss harvesting strategies you might be using? Do they want to collaborate with you on the question of reducing taxes of mutual clients? Are there other things you could be doing from an education perspective that you could use as a value add for their client base? It’s about building trust and credibility with these partners.

The Fidelity study I referenced before would tell you that only about 5% of clients actually make referrals. Given what we have said about growth and referrals, that is an incredibly important stat to understand.  

Deals & People July 28, 2022

The ‘Why’ Behind CAPTRUST’s First 2022 Acquisition

Rush Benton says the firm’s acquisition pipeline remains full of both large targets that would add significant scale and smaller firms that can be ‘tucked into’ CAPTRUST’s existing regional offices.
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This week, CAPTRUST Financial Advisors announced its acquisition of Frontier Wealth Management, a sizable advisory shop headquartered in Kansas City, Missouri.

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Beyond its Kansas City office, Frontier brings an extensive Midwest footprint, with additional locations in St. Louis; Denver; Wichita, Kansas; and Omaha, Nebraska. As Frontier’s Founding Partner and CEO Nick Blasi tells PLANADVISER, Frontier offers a range of financial planning, investment, insurance and other wealth management solutions. In addition to serving individuals and families, the practice delivers advisory services to corporate retirement plans.

This deal marks the first mergers and acquisitions transaction that CAPTRUST has closed in 2022, and its 57th since 2006. Consistent with previous firms, Frontier will transition to the CAPTRUST brand.

Blasi says his firm’s leadership and staff are eager to get to work with their new CAPTRUST colleagues, and he cites CAPTRUST’s distributed equity ownership model as a major point of appeal. Frontier’s current book of business exceeds $4 billion in client assets across five locations, with 46 professionals in the firm.

Rush Benton, CAPTRUST’s senior director of strategic growth, says the addition of Frontier marks one of CAPTRUST’s more sophisticated acquisitions to date, as Frontier has itself engaged in meaningful M&A activity since its founding in 2007.

“Nick and his team have built an impressive business with many operational similarities to ours, which, along with strong cultural alignment, creates an excellent fit for CAPTRUST,” Benton says. “Frontier understands and shares our method of one unified practice, and we are excited to see how they grow and thrive as we join forces.”

The Acquired Perspective

As Blasi recalls, Frontier’s early days were focused on growing a private family office business with an “all-inclusive” wealth management service model. After that side of the business had been developed, Frontier started its institutional-focused services by picking up some endowment clients.

Eventually, through a series of acquisitions, Frontier brought on board its tax-focused team in Denver and a small trust-focused team in St. Louis. The firm’s most notable transaction, Blasi says, was the acquisition of its current Omaha office, which focuses on institutional advisory services.

Blasi says Frontier has had a cordial competitive relationship with CAPTRUST for many years, but the possibility of an acquisition started to become a serious topic in the last year or two. While Blasi sees himself as having a long runway in the industry, the firm began to focus on the importance of longer-term strategic planning and business continuity. It also began to consider whether the firm would be better off joining a larger entity that could take on the incredibly difficult aspects of back-office operations, from cybersecurity to marketing to investment services.

“The reason why we went with CAPTRUST, apart from the cultural fit, is the fact that they have such extended and scalable capabilities,” Blasi says.

He also observes that the firm’s staff feels enthusiastic and optimistic about what comes next.

“For me as a leader of the business, it feels great to be able to bring our people into an environment where they now have expanded career opportunities,” he adds. “We have a lot of young, talented people working for us, and they now have the opportunity to grow with such a great company. Importantly, they also have the opportunity to participate in and benefit from the growth of CAPTRUST.”

CAPTRUST, Frontier and their peer firms face several challenges, Blasi says, but he notes that the advisory industry is poised for tremendous success if it can meet them. Beyond the traditional challenges of securing high organic growth rates and keeping existing clients happy, there are new competitive pressures emerging as consolidation remakes the industry and new players seek to win influence in the space. There is also the “decumulation challenge” to consider, and a shifting regulatory framework for rollovers and prohibited transactions.

“One challenge that is not spoken about quite as much as it should be is the battle for talent,” Blasi adds. “There is no question that recruiting great talent is as difficult as it has ever been for this industry, and I don’t think that is going to change. This is another reason why scale matters and why things like the stock ownership program here at CAPTRUST matter. The smaller companies will struggle with this.”

The Acquirer Perspective

Benton says CAPTRUST is gratified to have revealed its first deal of 2022, after a red-hot 2021 for both the firm and industry M&A activity in general. He is adamant that the pace of M&A is not slowing down, despite some conjecture that increased market volatility and recession fears are raining on the parade.

“Are things slowing down? I would tell you that, from our perspective, things are not slowing down at all,” Benton says. “Sure, it is already late July, and we are just now announcing our first deal of the year, but frankly, that’s just a question of timing. We were busy at the start of the year closing some of the major deals we announced in late 2021, and this was a complicated transaction, with Frontier being a bigger and more sophisticated firm.”

Benton says CAPTRUST could end up inking roughly as many deals this year as last, which portends a busy fall for M&A news.  

“Look, we also don’t have a specific pre-set budget for the number of deals we are trying to do in a given year or given time period,” Benton says. “The main event remains taking care of our clients and growing organically. It’s a bonus that the M&A pipeline is very full. We are already looking at other large firms that will add substantial scale, and we are also looking at smaller firms with great talent, which we could tuck into our existing regional offices.”

Benton says Blasi has already introduced CAPTRUST to one such firm in the Kansas City region, and that a deal is being worked out to bring this group in.

“Part of the national M&A strategy is the realization that talent is scarce. You need to pick up talent wherever you can find it, and you need to be flexible,” Benton says. “Today, we have a more dispersed corporate workforce than we have ever had before. We have a centralized trading desk, yes, but the professionals running the desk are actually spread across two or three locations in the U.S.”

Benton says the accelerated pace of M&A activity and the increasingly dispersed nature of the firm’s talent puts an emphasis on protecting and emphasizing a collaborative firm culture.

“In an environment like this, you just have to be so purposeful about understanding and managing the culture,” he says.

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