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 that topped the list in in our 2012 survey.
View the list of all 280 firms in our 2012 Top Wealth Managers survey.
According to Tony Abbiati, managing director, the principals at SCS didn’t work together before uniting under the new aegis. Instead, they shared something other than a common work history: a goal of “building what we eventually hope to be the best-known and most respected independent wealth management firm in the country.” Abbiati concedes that it’s a “lofty goal, but if you don’t have that, you never get anywhere.”
SCS is certainly getting somewhere, at third place on the list of top 10 wealth managers. One factor Abbiati credits is something common to many others on the list: freedom from conflict—no shared fees, no commissions. The firm makes decisions in the best interest of the clients, says Abbiati, adding, “If you asked me 10 years ago, I would have said we’re still a little ahead of the curve.”
Another factor, he says, is that the firm takes all parts of the business seriously. “Many firms are principally financial planning firms,” he says; “their DNA is planning, and they sort of wing it on investments … [it’s] not robust. Others are just the opposite—they’re principally investment firms that do some financial planning because clients want it—and from day one, we said they’re equally important.”
SCS has an investment platform and investment people, he says, that stand on their own and that “anyone, even hedge fund managers, would be pleased” to have investing their money. It also has people who truly understand and “dig into” planning, from estate planning and taxes to insurance. “Most firms,” he adds, “lean heavily toward one or the other and fake the rest.” Since “some clients are really looking for holistic, integrated deep advice on investments and others want investment consultants,” failing to devote resources to both would underserve one group or the other.
Another differentiation, says Abbiati, is the method of its growth. “Firms like ours have two choices” about that, he says. In the first choice, the firm’s founders control the equity and even as the firm grows, the people at the top are “stingy with equity and decision-making power … We said we could do that, but the firm would only be as good as the people who started it.”
The other choice is to spread the wealth, and that’s what SCS does. “If we really wanted to be the best,” he says, “it can’t just be us; we have to be willing to share equity to recruit really good people who didn’t start the firm.”
And of course they’re careful about who they recruit; many come via personal connections and word of mouth. Once people have joined the firm, Abbiati says, the effort doesn’t end. “We’ve spent a lot of time trying to get the right people, and figuring out who are the right people in each division to take over” when the time comes. “We’ve worked really hard on grooming the right people, coaching them to take over leadership.” Starting From Zero
The fact that the firm has gone from nothing to about $9 billion in ten years, says Abbiati, is an indication that SCS’s approach is working. He points out that most firms get a “running start” but that for those forming SCS, they were leaving existing jobs and plunging in with no clients.
“We launched with zero,” he says. No one was able to bring any clients with them at the firm’s inception, thanks to noncompete clauses and previous employers “fighting hard” to keep clients from going with departing advisors.
However, the financial meltdown of 2008, despite the discomfort it brought “for everybody … with clients with money,” gave SCS a boost. “As a firm,” says Abbiati, “we ended up benefiting from it, because there was a lot of carnage in the period and we gained a lot of clients.”
The meltdown brought something else, too. Abbiati recalls, “Internally, the biggest thing that changed—well, it wasn’t really a change but it was meaningful—it significantly deepened the trust we had in each other.” He explains: “We’re a firm of people who haven’t worked together for decades. We launched in 2002, and more or less from 2002 to 2007, things were fine. People weren’t making mistakes; there might have been some variation on how well some equity managers did, but things were fine.”
The crisis changed the status quo. “But you really get to know people through times of stress,” he says. “What we realized was that we came together rather than splintered; people stepped up and worked harder, nobody hid from it, and we were really proactive and engaged, and leaning on one another to make decisions. It had meaningful, lasting effects.” Now, he says, the organization is much more tightly knit because they’ve all been tested and found to be up to the challenge.
Still, there are things they worry about—reputation chief among them. After 10 years of hard work building a brand and a reputation, says Abbiati, the firm is moving slowly regarding opening offices outside its Boston home, lest distance prove damaging. “Once a reputation gets tarnished,” he says, “it’s really hard to get it back … and we all know how fragile that is.”
A second concern is the macro environment, and where returns will come from in a difficult climate. Still, “We have ideas on that, and we think we execute on those ideas, but it’s a tricky time to invest, so we worry about that.”
For more on the 2012 Top Wealth Managers, please visit our home page.
For information on reprints of this profile and other 2012 Top Wealth Managers content, we invite you to visit our reprints partner, PARS International.