Company Profiles
INTERVIEW: United Capital - The "Strategic Acquirer" - Reveals Its Growth History, Plans
This publication speaks to the CEO of United Capital - a national partnership of private wealth counseling offices - about the firm's genesis and outlook on several industry trends.
The idea behind the launch of United Capital Financial Partners in 2005 was “relatively simple:” To charge clients for financial guidance beyond just their investments.
The firm, structured as a national partnership of private wealth counseling offices, has grown from having $4 billion in assets and $33 million in revenue in 2010 to what its CEO Joe Duran expects will be north of $130 million in revenues and $13-14 billion in assets by end-2014. He envisages United Capital being a $250 million revenue organization in a couple of years' time – “if we do things the right way.”
United Capital has pursued growth primarily by acquiring independent wealth advisors around the US. Indeed, it describes itself as a “strategic acquirer” and for the first three years after having launched “all we did was acquire businesses,” Duran said.
Thus far, the firm has made 49 acquisitions – a figure Duran hopes will reach 75 in the next few years. Many smaller firms in the space have outgrown their current operating structure, and this is a market challenge which the firm has previously said “plays to our advantage.”
“Simply put, many need our help for their current back-office demands, managing the regulatory environment, lack of lead generation resources and a scalable investment management platform,” Matt Brinker, senior vice president of partner development and acquisitions, told Family Wealth Report.
The other two big sources of growth for United Capital have been through recruiting advisors who use the firm’s platform for a fee, and organically.
Changing industry landscape
What certainly hasn't gone unnoticed is that there has been a shift in the wealth management industry away from a heavy focus on investments; the term “holistic” advice has well and truly cemented itself in the wealth dictionary and many - if not all - players in the sector now consider clients' financial and personal life goals as key factors in the wealth planning process.
“When we started, everyone said that no one would pay for guidance or financial planning because it was being given away for free,” Duran said. “The fact that clients weren’t paying for what they valued most - financial guidance – just didn't make sense to me.”
So United Capital sought to create a new category in the wealth management space, which it labeled financial life management, or “FinLife.” The firm has invested heavily in creating behavioral economics tools such as Your Money Mind, which helps individuals determine how their biases affect may affect their decisions around money.
“We've had this period since 1990 where it's been a golden time for advisors, but I think the next 25 years will be a totally different world,” Duran said. “All the easy pickings of having all these Baby Boomers retiring, great technology, and the birth of the independent custodian, has calmed. Now you have the consolidation phase, the maturing of an industry. It's predictable because it has happened already in several industries.”
He believes that the dawn of so-called “robo advisors,” delivering investment solutions for 25 basis points, is forcing advisors of all stripes to really think about what it is they're actually charging for.
With that said, the extent to which robo advisors are a threat to firms like United Capital is limited because two things clients can't get from a machine are judgment and empathy - “they are unique human traits,” Duran said. “Our job is to make sure our clients understand complexity and help them avoid big mistakes.”
Culture
While United Capital has certainly been very aggressive in its growth strategy, it is nonetheless “obsessed with cultural fit,” Duran said, noting that the biggest challenge with running such a business is therefore “always the people.”
The firm has its eyes set firmly on recruiting those “with a desire to keeping growing,” not individuals who are approaching retirement and simply looking for a check, for instance.
“I think that [desire to grow] attracts a certain kind of advisor; a younger, more aggressive, more risk-taking and willing to change kind of advisor,” Duran said.
As an example of the firm’s latest efforts in this area, last year it rolled out Honest Conversations for Advisors, an interactive tool to help current and prospective advisors confidentially determine what type of career opportunity within the industry is best for them. As advisors take part in the exercise, they clarify, personalize and communicate their own goals and compare what they have self-identified as their priorities to United Capital’s priorities, services and operational offerings.
“When we have advisors who are looking to join United Capital, this tool helps us get to the ‘why’ of that decision in one meeting instead of three to five,” the firm said last year.
Meanwhile, Duran noted that the average age of advisors that are joining United Capital are much younger than he expected (in their forties as opposed to being in their fifties).
“This is probably because they see that they're not going to be able to work the way their prior generation did and they will have to have different offerings,” he said. “What we have found is that, if you're in the business of creating change, you need to have advisors that are willing to change, and as you get older, you're often less willing to compromise.”
Echoing this, very few advisors in their and 70s have ultimately transitioned to United Capital. “Some do, but it's not the majority,” Duran said. Most are in their 40s, but good amounts in their 50s and 60s have joined also.
He added: “What is fascinating is that everyone says there is this group of 70-year-old advisors who are trying to ‘transition,’ but what we're finding is that they essentially want to die with their boots on and stay where they are.”