CAPTRUST Enters 3(38) with Freedom One Deal

On a steady course of expansion, CAPTRUST Financial Advisors in Raleigh, North Carolina, has acquired Freedom One Financial Group in Clarkston, Michigan.

Since starting on the East Coast and working its way west, CAPTRUST now has 19 offices coast to coast and clients in 50 states. They have been averaging two acquisitions a year since 2006. J. Fielding Miller, the company’s founder and chief executive, told PLANADVISER the firm’s 10-year plan is to establish a national firm.

The Freedom One acquisition stands out among CAPTRUST’s previous acquisitions because of the scale and focus on 3(38). Miller met Mark Wayne, managing director and former chief executive of Freedom One, at a conference and struck up a friendship a couple of years ago. At that time, CAPTRUST was starting to look into providing more 3(38) fiduciary services. Wayne had been building his entire business on 3(38) format, which Miller found intriguing.

“With a national reach, CAPTRUST could take what he had built, and that would be our foray into scaling out a 3(38) offering,” Miller said. The firm had already been providing 3(21) but had been seeing a need for increased fiduciary advice.

The Freedom One acquisition brings CAPTRUST about $85 billion in assets as well as new capabilities. “There’s a trend emerging in midmarket plans toward more discretionary and more fiduciary services,” said John Curry, senior director of marketing at CAPTRUST. “Freedom One has a history of working with discretionary managed accounts, and we’ve been exploring ways of providing this but finding better ways to scale it. With Freedom One’s 250 plans, the acquisition brings significant scale,” Curry said, as well as operational capabilities. CAPTRUST now has about 1,425 401(k) plans.

As plan sponsors have been trying to run their businesses, attempting to survive and thrive in the post-crisis economy, they find they are saddled with an ever-growing burden of fiduciary obligations while they are also trying to focus on participant outcomes, according to Curry. “They need help,” he said.


“Going from 3(21) to 3(38), there are a lot of moving parts,” Miller said. When you raise your fiduciary status, mistakes are more expensive, he pointed out.

“Another strategic benefit to the deal,” Miller explained, is “we sell advice. The quality of the advice is where you win or lose.” The acquisition enabled CAPTRUST to pick up great talent, he said, accelerating its move into providing 3(38) services, which Miller sees as a key part of strengthening the firm’s national presence.

“Overnight, we gained a very nice foothold in the Michigan market with fiduciary experience,” Miller said, “so this is a bit of a game changer for us in terms of both scale and operational backbone to build on. We found that providing fiduciary advice is not that much of a leap, but the operational experience is critical to being able to move into the 3(38) space.”

“Mark Wayne has a very strong operational background,” Miller pointed out. CAPTRUST plans to use the Clarkston office as a hub for discretionary advisory services and move some back-office operations from Raleigh to Clarkston, a suburb of Detroit. Wayne will head operations there.

Miller said the company operates more methodically than it might appear from the outside. The acquisition should not be viewed as a financial rollup, and the firm has no plans to go public, he said. He called the deal just one more step in a plan they have had for six years. “We’re not sensational,” he said, “we’re just kind of plodding along, doing our thing.”

The industry is benefiting from a lot of tailwind that started back with Sarbanes-Oxley, and the changes in fiduciary definitions, according to Miller. “The last 10 years have been downwind, and we’ve just been in the right place at the right time.”