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Portfolio > Alternative Investments

What Does He Like?

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Ken Fisher has more than an intellectual curiosity about smaller advisory firms: He’s also interested in buying them, and says he is currently in discussions with a number of advisory firms, with AUM of $200 million to $500 million, “building the pipeline” this year on deals. So what are the kinds of firms he’s interested in?

First is what he calls institutional firms that are “good on the manufacturing side in a product category that we don’t currently offer.” Second is a bit more to the point: Smaller advisors “with a high-net-worth customer base that they’ve largely built by referral, who basically want to retire.” The client-by-referral base is important because they complement Fisher’s current clientele, who tend to be what he calls “responders” to Fisher Investments’ direct mail or advertising efforts. “There’s another universe of people who are very different, and will not make a decision unless their brother in law tells them to, or their lawyer does, and we refer to these people as referred dependent.” Those are the type of people who will listen when their long-time advisor, he suggests, tells them to “Stay with Fisher; he’ll do better.”

As for the seller, Fisher says they’ll benefit by having an “easy exit out” without an earn-out period. “We’re going to let them write a nice letter, say goodbye to anyone they want to say goodbye to, then walk out the door.” Their clients will benefit because Fisher Investments’ sales and service folks will provide a “touch and feel that would be an upgrade, immerse them in the process.” The advisor will also benefit by getting a price that, Fisher says, is higher than he would get by auctioning his firm in the “disorganized” market for that size firm, noting that “If you’re a bigger firm, with more than $1 billion in AUM, there’s a ready market for selling your firm.”


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