After growing its assets under management to about $2.1 billion at the end of 2018 from about $1.45 billion in 2015, wealth management firm Keel Point is looking to continue growing across all four of its divisions, according to company executives.
But we shouldn’t necessarily expect to see it involved in another huge merger like the one that saw the firm, a Virginia-based hybrid RIA and broker-dealer, merge with Huntsville, Alabama-based RIA BlueCreek Investment Partners four years ago.
“We’re really trying to focus on growing our offices that we have brick and mortar in now,” Joe Agee, Keel Point chief development officer, told ThinkAdvisor. Pointing to the relatively small number of team members the company has at its Tennessee offices in Chattanooga and Nashville, as well as its offices in Greenville, North Carolina, and Washington, D.C., he said: “We still have space to grow within those areas and so our idea there is to focus on bringing in advisors into those areas” and the firm’s Leawood, Kansas, office also.
However, he was quick to add: “That doesn’t mean we wouldn’t necessarily do that if we found the right business to acquire in different areas. But we’re not necessarily in a numbers game. We’re not driven to just grow for the sake of growing. We want to make sure we’ve got the right advisor” each time it brings on a new wealth management professional — one who’s the “right match” for Keel Point. That means advisors with the right skills who are looking to join a fee-based wealth management firm that’s planning-based and out to make sure that “our clients are focused on their goals” and are “able to withstand” any downturns in the economy, he explained.
Something that separates Keel Point from many rivals is that the average age of its advisors is 40 now, he said, noting it tends to be higher at other firms. For example, the average advisor age was about 62 at Morgan Stanley, where he worked before joining Keel Point earlier this year, he said.
One need not look any further than Thomas O’Connor, a 33-year-old senior wealth advisor who said he “came on board about eight years ago,” to see that Keel Point is mentoring younger advisors to be able to continue serving the firm’s family clients for many years to come.
“One of our core objectives of the firm is for Keel Point to be a legacy company, and the way we will get there is by identifying, equipping and empowering young men and women who want to care for families” by becoming advisors, according to Keel Point CEO Robert Mayes. “We’re hyper-focused on that,” he told ThinkAdvisor.
Keel Point focuses on ultra-high net worth clients with assets of at least about $40 million with its Horizon Family Office that has 22 families, as well as its private client division that focuses on affluent clients with assets of about $1 million to $40 million each, Mayes said. The private client division now has nearly 1,500 households as clients and represents the “lion’s share of our revenue,” he told ThinkAdvisor.
Since the 2015 merger, much of the firm’s growth has been “organic,” but there have been a couple of smaller acquisitions, Mayes noted. For one thing, there was the Chattanooga-based DeMoss Capital that Keel Point acquired in late 2015. That move gave Keel Point “greater reach” in the Chattanooga area, boosted its AUM in that market to about $150 million (about $89 million from DeMoss), and also benefited DeMoss clients via additional resources, family services and investment opportunities, Keel Point said at the time.
About three years ago, Keel Point also bought Capital Concepts, a 30-year-old practice in Huntsville that has allowed the firm to grow a separate business division providing corporate services for small to midsize companies, including health care and retirement plans, Mayes said. That division and Keel Point Asset Management (KPAM) in Washington and Huntsville, which outsources investment solutions and other CIO services to RIA firms, are both “growing” businesses for Keel Point also, he said, noting KPAM has about $1 billion under advisement. Across Keel Point’s divisions, there are now about 75 people who work for the firm, he said. Although Keel Point won’t reach its earlier goal of achieving $5 billion in AUM by the end of this year, he said “we are proud of the growth that we have seen” since the company merged with BlueCreek, including the $1 billion or so in assets under advisement it’s gained, along with the approximately $2.1 billion in AUM, he noted.
Keel Point hasn’t been affected much by the market volatility of last month, according to Mayes. That’s “primarily because we are a goal-based firm” and “there’s really not a lot of movement” happening along the lines of what’s typically seen at retail investment-only type shops, he said.
Of other trends he’s seeing, Mayes said one comes to mind quickly: “Traditional asset allocation portfolio management that has worked for the last couple of decades will not work going forward in a zero interest rate environment — or at least as close to zero as you can get environment. And therefore, clients are more receptive to more nontraditional fixed income alternatives, where they can have the characteristics of the risk characteristics of the fixed income component but also … have it added to the overall performance of the portfolio.”
Keel Point specializes in nontraditional assets, he said, pointing as an example to the fact that his firm includes structured note components to “many of our portfolios” that can be used “across different asset classes to try to manage the overall risk range that we see with those asset classes.” Another example is environmental, social and governance (ESG) investments, which he said are still in a “pioneering stage.” Keel Point, however, started offering ESG investments to clients who are interested and “we’re not hesitant at all” to do so, he said.
Mayes also predicted a recession is “going to happen,” but he declined to predict when. Instead, he said: “I do know this…. How we invest money going forward is going to be very different from how we’ve invested in the last two decades.”
Part of the reason for that, he said, is a “lack of awareness” among many individual investors who don’t rely on fiduciary-dedicated firms like Keel Point about the importance of nontraditional investing to mitigate risk. He added: “When you see the institutional market moving more and more of their allocations towards alternative investments and away from traditional investments, you’ve got to wonder why clients are not — families are not — doing the same. And I think that part of [the reason] is that they just don’t know that those are out there.”
— Check out Navigating Volatility: 3 Strategies I’m Using Now on ThinkAdvisor.