One hundred firms make up AdvisorOne’s 2012 Top Wealth Managers, as measured by assets under management per client, with data as of 12/31/11.
Here we present a profile of the crème de la crème of the Top Wealth Managers—those 10 firms thattopped the list in in our 2012 survey.
View the list of all 280 firms in our 2012 Top Wealth Managers survey.
Silvercrest Asset Management Group, based in New York, was founded in 2002 by a group of portfolio managers formerly from DLJ Asset Management, which had been acquired by Credit Suisse. The firm is celebrating its 10th anniversary this year. According to Richard Hough, president, Silvercrest was founded “to create an independent employee-owned firm free of the conflicts of interest that existed at financial conglomerates” and to serve ultra-high-net-worth clients with the “personalized and customized service like old private banks”—and with very good investment performance.
The firm is 76% owned by employees and 24% by Vulcan Capital, an investment vehicle for Paul Allen, cofounder of Microsoft. Made up currently of 33 principals and a total of 85 staff members over all, some who joined the firm through the acquisition of four other firms but most thanks to organic growth, Silvercrest has grown by more than $1 billion a year since its inception.
Crisis Made Firm “Stronger”
While the financial crisis may have begun in 2008, Hough says, it didn’t begin to hit many companies’ financial situations until 2009. However, Silvercrest “remained profitable,” although profits were lower because of the toll the crisis took on the firm’s assets under management and, by extension, the fees Silvercrist charged. And despite the crisis, clients stayed. “We have an average annual client retention rate of 98% over the past five years,” says Hough, and adds that now, organic growth is “as strong as ever, if not stronger.”
During the crisis, Hough (left) says, the firm did not change its approach to client funds. “In fact, we stuck to our view of the role of asset allocation in client portfolios and maintained a long-term view,” he says, explaining that in the spring of 2009, with equities substantially lower in value, “we were attempting to allocate more client money into equities because we thought they were discounted at that point.”
What the firm did do to cope with the crisis, Hough says, was to “create as much efficiency as possible in our operations and technology.” Still, he adds that the “key was very carefully managing our cash flow.”
It may have been key, but neither it nor the changes to operations and technology were major adjustments, Hough says. “These were tweaks. The business was operating very well going into the crisis and came out stronger on the other side.” As the company grew out of the crisis, he adds, its profit margin grew too.
Although Hough says Silvercrest provides family office services and asset management advice its UHNW clients, he also stresses that “we are not controlled by or run for a particular family. This is truly an employee-run business.”
Asked to compare the firm with private banks, trust companies and wirehouses, Hough says, “They’re all very different. Private banks and trust companies typically don’t have a legacy of strong investment performance, trust companies in particular, whereas Silvercrest has very high-quality—institutional-quality— equity management from a dedicated team of analysts which has performed admirably over the years.”
While he adds that many trust companies and private banks of old sought to provide the kind of “bespoke customer service” that Silvercrest does, “with continued consolidation in the industry, much of that has gone by the boards in large institutions.” Clients are no longer served the way they used to be, and conflicts of interest in wirehouses are numerous. In addition, says Hough, wirehouses “do not necessarily have a fiduciary duty on behalf of their clients and often are providing proprietary products.”
Silvercrest, unlike many of its peers in the top 10, does provide proprietary products, but they are limited, says Hough, to those “which we think we can do on a basis of excellence, and we complement it with what we consider highly compatible outsourced capabilities.” Hough explains further that clients pay only fees; no “commissions, brokerage fees, sales incentives … and we receive a similar fee whether they use proprietary internal management or an outside manager.”
People and Long-term Plans and Concerns
Hough says that one of his major concerns is finding and retaining good people. The company is “slow to hire” because it takes its time to make sure a prospective employee is a good fit, and although it does advertise to find new people, “the most effective way” it finds employees is “through word of mouth and introduction through trusted sources.”
While it’s not always easy to provide career paths in a small company, says Hough, the company does recognize employees who are valuable to the business with bonuses.
In addition, he adds, Silvercrest is likely to add more principals, since he argues that it’s very important that employees “with a long-term future at the firm and who we think are significant contributors to the business have a stake in the business, and are aligned by owning a portion of it.” With regard to long-term running of the firm, Silvercrest’s operating agreement has a process to determine a succession plan.
Another concern Hough has is about regulation of the industry. “The regulatory environment is increasingly burdensome and uncertain,” he says. “It must place a significant burden on small businesses.”
Please visit the 2012 Top Wealth Managers home page for additional data and analysis.
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