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Aspiriant Closes Deloitte Deal, Seeks National Presence

Charles Paikert Contributing Editor New York October 4, 2010

Aspiriant Closes Deloitte Deal, Seeks National Presence

California-based Aspiriant, a well-known wealth management firm in the West coast, has taken a giant step towards its goal of becoming a national power by closing its deal to acquire Deloitte Investment Advisors, the wealth management business of the accounting firm Deloitte Tax, this publication can reveal.

The transaction was completed last week and will be officially announced today. Terms of the agreement were not disclosed.

The move nearly doubles Aspiriant’s assets under management from $4 billion to $7 billion and adds 400 clients and 40 employees to the firm, giving it a total of over 750 clients, 100 employees and six new offices in Boston, New York, Cincinnati, Detroit, Milwaukee and Minneapolis.

Aspiriant is also currently in negotiations to partner with another wealth management firm and expand its national footprint even further, Family Wealth Report has learned.

“We’re continuing a conversation that we started prior to the Deloitte transaction,” Aspiriant chief executive Rob Francais told this publication.

“The firm we’re talking to was at the top of our list and we’re excited about our prospects. We hope to be able to announce another merger by early 2011,” he said.

Aspiriant’s chances of establishing a national presence, which has long been a desirable, but elusive goal for ambitious wealth management firms, are promising, say industry observers.

“Their distributed ownership model gives them a big advantage by allowing them to successfully manage large-scale acquisitions,” said industry consultant Tim Welsh, president of Nexus Strategy, of Larkspur, California. “Recycling equity among employees gives them a more united front to bring in another organization and is also an appealing model for potential partners.”

Advantages of expansion

Tim Kochis, Aspiriant’s chairman said that achieving a national presence has been a priority for both him and Francais ever since they merged their two firms, San Francisco-based Kochis Fitz Tracy Fitzhugh & Gott, and Los Angeles-based Quintile Wealth Management in January 2008.

“By being larger we can provide a broader array of services and more depth to our clients,” said Kochis, who is also director of new business lines for Aspiriant. “By achieving scale we can also bring cost advantages to clients as well. We can negotiate lower custody charges, lower margin rates and obtain access to build customized solutions.”

Other advantages, he said, include “being able attract some clients we wouldn’t otherwise” and being able to recruit talent more aggressively – “the more markets you’re in, the more you can recruit in.”

An expanded national presence will also stave off the need for third-party capital and help ensure Aspiriant’s coveted independence, Kochis said.

“We can make a promise to clients and prospects that what you see is what you get forever,” he said.

Francais seconded Aspiriant’s commitment to growth.

The deal the firm is currently working on, he said, would address Aspiriant’s “need for additional infrastructure."

Full integration of the Deloitte offices should take 12 to 18 months.

When the deal was first announced Francais said Aspiriant hoped to open an office in Chicago to act as a hub for the new offices in the Great Lakes region as well as satellite offices in southern California and the Bay area to complement Aspiriant’s current offices in Los Angeles and San Francisco.

The firm’s stated minimum for new clients is $5 million in investable assets, and the average client size is $10 million. But Aspiriant also has a number of clients well below the minimum who constitute a profitable demographic, according to Francais and Kochis.

Aspiriant hasn’t set a target for assets under management, Francais said. Instead, the firm is measuring growth by achieving a “critical measure of talent and ownership that will ensure the perpetual durability of the organization.”

Partnership model

Attracting potential partners has been the easy part, he said, with one of the biggest draws being the firm’s partnership business model.

“We’re not buying firms,” Kochis said. “No cash changes hands. We’re folding them in to something that already exists and adding equity.”

Kochis is Aspiriant’s largest shareholder with 14 per cent.

As for cash flow, Kochis said the firm “generates a lot of revenue that doesn’t rely proportionately on labor.”

And as for transferring highly valued shares internally, “the verdict will be out for a while,” he said. “We’ll cross that bridge when we come to it, but it’s the kind of bridge we want to cross.”

And while growth will bring increased costs for compliance and marketing, Aspiriant is expanding from a base as one of the top firms in one of the country’s most lucrative wealth markets, noted Jeff Spears, chief executive of Sanctuary Wealth Services, a wealth management outsource solutions and services provider.

“They’re one of the two to three go-to firms in the San Francisco Bay area that anybody would consider who is looking for wealth management,” Spears said.

Kochis to receive industry honor

Tim Kochis will on Sunday be honored by the Financial Planning Association at the organization’s national conference in Denver.

Kochis, a Vietnam war veteran, will be given the P. Kemp Fain Jr. award for “outstanding contributions” to the profession and for being a “key leader and visionary.”


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