In his career, former FPA president Jim Barnash has run his own advisory firm, worked for several large financial services companies, and run his own consulting firm to help advisors grow. Now Barnash has joined Merion Wealth Partners, a company backed with private equity, that is entering the somewhat crowded world of advisor firm rollup and consolidation firms.
Merion Wealth, though, highlights its differentiation from the HighTowers and United Capitals and Focus Financials of the world by design–the advisors will eventually run the firm and will decide among themselves its ultimate business destiny.
Richard Hughes, a former Envestnet PMC co-president and Rittenhouse Investments executive who joined Berwyn, Pa.-based Merion Wealth as president in March, said in an interview with AdvisorOne on Monday that as the company’s advisor network grows, “the advisors will have controlling shareholders votes; they’ll decide the ultimate destiny.”
Barnash (left), who will continue to live in the Chicago area but “will be doing a lot of travel,” noted that while a majority of the ownership of Merion Wealth “right now lies in the hands of the management team and board, the majority of the ownership will be in the hands of the advisors.” Partnership gives advisors “leverage plus scale on pricing. But it also provides for a long-term succession strategy to preserve your legacy … with a defined mechanism for how you’ll get out—or provide your own succession planning.”
Barnash, who is senior VP, said in an interview Monday with AdvisorOne that Merion Wealth is “providing a platform for a partnership, so advisors will have a say-so in the business.” The platform, he said, will provide a range of back-office services for advisors, and will have “great tools” for risk management, asset management and technology, but “the direction is to provide advice to clients and get paid for it—not just [levying a fee for] assets under management to get paid—the AUM trend is primarily meant for the largest firms to move from transaction to fees,” but that model doesn’t necessarily meet advisors’ best interests, or clients’.
Barnash’s role will be in business development, “identifying advisors who fit the target,” walking them through the process of joining Merion, “to make sure there’s a good cultural fit,” and then “helping them continue in their growth strategies.”
The partnership would be especially appealing to advisors from their 30s into their 50s who want to be in the business for a long time and who are already independent, though Barnash says “we wouldn’t rule out” breakaway brokers. The right cultural fit would be advisors who want to grow but have hit a “ceiling of complexity” in dealing with compliance, technology or capacity issues and “don’t have access to the capital to grow out of it.”
Merion Wealth, he states emphatically, is “not for those who are in their late 50s or 60s who want to park and then go away.” Barnash says part of the value to advisors is gaining access to Merion Wealth’s board, who he says possesses much in the way of entrepreneurial talent and which in the past “have figured out a way to make complicated businesses more simple.”
In addition to full partnership, Barnash said advisory firms could also join Merion as an “affiliate—dip your toes in the water, for perhaps a three-year trial period, with some cash and some exchange of equity. If it’s not working out, you can walk away; or you can join the broker-dealer using a flat fee, fee-for-service model; or you can join the [Merion corporate] RIA with no exchange of capital or equity, but you have access for a fee to the Merion services.”
While the right kind of advisor will likely be fee-based, Barnash said “we can take on any kind of advisor,” and that while “we’re not looking to compete with independent BDs,” Merion does have a broker-dealer in place that will allow advisors to continue their legacy commission business.
Barnash says the Merion model allows for “true independence,” but with scale, using cloud-based technology that won’t force its partners into using specific applications. While he said “we don’t want to use the term ‘clearing-firm agnostic,’ we have an existing relationship with Pershing, and we’ve had conversations with TD, Fidelity and Schwab.” Merion also has a relationship with a trust company [Sterling Trustees] and is about to announce a relationship with a private bank,” all so the independent Merion partners can compete. “We won’t have 15 relationships; we’ll probably have four.”
Speaking of Barnash, Hughes (left) said “he could have had a job anywhere,” and so is pleased to have him join Merion Wealth. “We have a team in place right now,” said Hughes, to handle the number of advisory firms in its pipeline, noting Merion has just hired a chief compliance officer and is in talks to hire a chief operating officer, “but much of the staffing will be determined by deal flow.” For advisory firms who join Merion Wealth—either using Merion’s corporate RIA or its broker-dealer, “there is a cash component and an equity component,” Hughes said, “which will go on in perpetuity,” until the advisor partners deem it time for a liquidity event, though he pledges “we won’t sell to a strategic partner,” and that those advisors merely looking to cash out won’t fit the culture test at Merion.
Hughes says that one of Merion Wealth’s founders, Greg Campbell, “used his private equity fund [CDV Capital] to get us started.”
What differentiates Merion Wealth from HighTower, United Capital or Focus Financial? “They focus on the wirehouse breakaway advisor—we’re not avoiding the breakaway, but odds are we will do more business with the already independent advisor,” says Hughes.
In addition, he says, “our capital structure is different than theirs. They need a liquidity event in five, six or seven years. We’re providing advisors with human expertise but also financial capital.” That capital will allow partner advisors to grow their businesses through acquisition, Hughes said, plus “our model allows for continuation of their own brand.”
“If you’re an entrepreneur who wants to grow, Merion would be a good choice for you; if you want to understand how to create greater wealth for yourself, then Marion’s an appropriate firm. And if you recognize that clients are in need of more comprehensive wealth management services [that you can’t deliver yourself] but you want to remain the quarterback of the relationship, Merion’s an appropriate firm. The collective whole is greater than the sum of its parts.”