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Mercer CEO Dave Welling

Industry Spotlight > RIAs

Why Half of Mercer's 500 Advisors Are Women

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Mercer Advisors is uncommon in an industry that “sorely struggles with diversity,” as CEO Dave Welling frames it. Indeed, about half of Mercer’s 500 advisors are women, he tells ThinkAdvisor in an interview.

In 2018, a year after he came on board, Welling launched a major recruiting push to expand the number of female financial advisors in the firm.

“It’s about standing up for the right thing” since “one might say that [financial advisors are] ‘pale, male and stale’ across the industry,” says Welling, 53.

That is, 82% of U.S. financial advisors are white, according to the Financial Planning Association.

Only 15% to 20% of advisors are women, Barron’s says. Women constitute 23% of certified financial planners, the CFP Board reports. And the average age of a financial advisor is 55, a 2019 J.D. Power study showed. Twenty percent are 65 or older.

Mercer, with $40 billion in assets under management, is ranked eighth on Barron’s Top RIA list for 2021. The firm, headquartered in Denver, with advisors and clients in every state, has been doubling in size about every three years, “depending on what the market does,” Welling says.

In the interview, he talks about plans for growth, both organic and via acquisitions.

“We like to think of ourselves as the Mayo Clinic of wealth management,” says Welling, who was earlier with Charles Schwab for 12 years. “We’re trying to set a similar standard of financial care.”

Genstar Capital and Oak Hill Capital are investors in Mercer investors and strategic advisors for the firm.

Launched in 1986 as a fee-only final planning company, Mercer had expanded to 18 offices operating as one firm by 2015. The following year, it stepped into the acquisition space and bought six practices. It now has over 60 branch offices nationwide.

In the interview, Welling discusses the biggest challenge for RIAs today, as well as the three absolute essentials for an advisor succession plan.

ThinkAdvisor recently held a phone interview with the CEO, who was speaking from Boulder, Colorado.

Though Mercer fits the industry definition of a “rollup,” Welling finds the word distasteful (“an investment banker term and too clinical,” Welling calls it).  He prefers to describe the firm as an “integrator” — that is, definitely “not an “aggregator.”

Still, the practices that Mercer acquires become employees, Welling says, and “more important, one brand that stands for one client experience that we’re holding out to the market and offering to clients.”

Here are highlights of our interview:

THINKADVISOR: If I said that acquiring women-owned businesses is your niche, would that insult you?

I would take issue with that. I think it’s an insult calling women a niche when they’re 50%-plus of the population.

Well, then, does acquiring women-owned financial practices differentiate your company?

I do think it’s a differentiator, for sure. We’re starkly different than the rest of the industry.

The last numbers I saw [showed] that total female advisors across the RIA industry were in the mid-20%s. We’re more than double that. Over 50% of our advising team are women; in 2017, when I joined the firm, it came to about 25% or 30%.

Why has gender diversity been so important to you?

It’s really about doing the right thing and standing up for the right thing in an industry that sorely struggles with diversity.

One might say it’s pale, male and stale across the industry.

What led you to specialize in acquiring women-owned firms?

When I joined the company, I saw many talented women that already were in the organization; but I felt they weren’t empowered and that their voices weren’t amplified enough.

So in 2018, we launched a formal recruiting initiative [for women] and established mentorship programs.

You were targeting women-led firms, then?

Perhaps they targeted us as a different kind of wealth management firm for women-led businesses looking for an organization to join that shared their values, principles and the diversity they [wanted] to see in the industry.

When you took over as CEO five years ago, AUM was about $9 billion. Now it’s about $40 billion. Do you attribute that increase to acquisitions or organic growth?

It’s about half and half. We have very strong organic growth of new clients; we bring on about $1 billion per quarter of new business.

Is your firm an aggregator?

We call ourselves an integrator. The [practices] become employees of Mercer and more importantly, one brand that stands for one client experience that we’re holding out to the market and offering to clients.

What’s your long-range vision for Mercer?

A big part of that is already in place. We like to think of ourselves as the Mayo Clinic of wealth management. 

Mayo Clinic’s model stands out within medicine as the standard of health care. We’re trying to set a similar standard of financial care.

Is your firm a rollup?

I have a distaste for that word. Rollup is an investment banker term and too clinical. The industry also calls acquisitions “transactions” and “deals.” 

[With us], these are relationships that were forming when the principals decided to put the future of their life’s work in our hands.

What’s Mercer’s backstory?

We were founded as a fee-only planning firm in the mid-’80s, grew to 18 offices by the end of 2015 and were running all 18 as one firm.

The “rollup” part came after that. This stands in stark contrast to say, Hightower or Focus Financial rolling up stuff: There were no original businesses there. They’re just buying up advisor firms and trying to patch them together.

We’re something quite different than some of the other serial acquirers out there. Acquisitions have been a later chapter in Mercer’s growth story.

How many have you made?

About 56 since 2016 — 50 of those since I joined as CEO. About 10 of those have been female-led practices.

That’s been the result of extensive work we’ve done to drive diversity into our workforce — our advisor ranks and leadership.

Are all the acquisitions RIAs?

A couple were independent contractors with Raymond James, but they converted to an RIA model when they joined us.

We found that in the Raymond James independent-contractor universe many financial planning-oriented advisors were potentially operating as 100% AUM fee-based models, and they looked to Mercer to be the catalyst to get them to the RIA side.

Do you ever get queries from female FAs who want to form their own firm and would like to join you to get the support you provide?

We don’t offer our platform a la carte, like a TAMP [turnkey asset management platform] does, to people who aren’t part of the organization.

We have an active recruiting effort to hire people who are already advisors or on track to be advisors; maybe they’re studying for their CFP.

They can join a wealth management team in one of our local offices.

Of course, full acquisition would be at the other end of the spectrum.

How long does it usually take to arrive at an agreement?

There are lots of firms we’re in conversation with over months and even years, figuring out the right timing. We’re not in a rush. We want to make this decision once and make it right. 

[While we’re talking], we’ll [often] support firms. For example, we’ll step in with a disaster recovery plan if something happens to them in the event of a tragedy. 

What’s the biggest challenge in the RIA space today?

There’s a supply-and-demand problem. There’s huge demand from consumers. That’s driven by both macro factors like the aging population and continued wealth growth but also because people are seeking out very different solutions.

They’re really starting to see the value of what a true fiduciary can offer and deliver in expanding financial planning and helping execute what a plan provides.

What about the supply side?

There’s a pretty big challenge, with thousands of advisory firms that aren’t growing.

When the owners and principals were in their 40s, they were investing in growth and technology. Now that they’re in their 60s, they’ve done well and have perhaps taken their foot off the gas.

We see that a lot of high-quality firms dedicated to the fiduciary standard have just stopped growing.

Compounding that is what’s referred to as succession planning, or the transition to G2 [Generation 2]. It has become almost impossible for a sizable RIA to transition to G2. 

The talent is there, but the firms are very valuable and therefore very expensive for G2 to buy into over time.

So there’s a very strong next generation of talent across the industry that’s kind of captive in firms that aren’t growing and are reticent to share ownership.

If the principles haven’t done succession planning, they’re, kind of, in a quandary.

Do you ever help such firms at that stage?

We find ourselves as a facilitator of a succession plan, not just financial succession but stepping in if they haven’t found advisors to [help] their clients once the principal decides to take more time off and partially retire or fully retire.

What’s essential to a good succession plan?

Once the original lead advisor-founder isn’t there, you need (1) somebody to take care of decisions and deliver financial advice, (2) a financial succession plan of ownership and (3) the new leadership has to have an entrepreneurial mindset that’s going to lead the next phase of growth.

We see a lot of firms that have, maybe, one-and-a-half legs of that three-legged stool in place. But if you try to sit on a one-and-a-half-legged stool, it tends to tip over. All three things need to come into play.

This is a real challenge to the industry and not one that’s going to go away, because we’re all going to be a year older next year.

What’s the breadth of the services you provide?

We have a very active mass-affluent offering (we’re not trying to run an exclusive country club that nobody can get into); an ultra-high-net-worth offering for those that have the means and the complexities that sometimes go with that; and we have an institutional business serving nonprofits and companies as well.

What sort of acquisition-to-organic growth ratio are you aiming for?

It’s very viable for us to continue to grow at the pace we’ve been, which is basically doubling in size every three-ish years, depending on what the market does.

We’d like to see a pretty even balance between the organic and the acquisition sides.

Last year, we were about 60% acquisitions and 40% growth. But we want that to be an even balance. 

Over time, it’s relatively even, which would be consistent with our vision of where growth is coming from.