Meet Tim Kneen and Clayton Hartman just once and you would know that they were never meant to be wirehouse advisors.
This billion-dollar Colorado-based duo, generating almost $8 million in annual revenue, with combined industry experience of not quite six decades left UBS in mid-January to form their own wealth management firm. It was the shot heard around the industry. Such a high-profile move will always attract attention, but when a team like Tim and Clayton’s goes independent, it is particularly compelling.
Serial entrepreneurs throughout their lives, Tim took his first company public at age 23 followed by the launch and sale of numerous successful businesses, while Clayton’s most impressive venture has been his work as a member of the Board of a family-owned restaurant chain, Taco John’s, with over 400 locations nationwide. Together in 2006, the pair realized their dream when along with a group of investors, they launched Colorado Golf Club, a top-ranked club and housing development sitting on 1,700 acres in southeast Denver. The course was named by Golf Magazine and Sports Illustrated just after it opened as the #1 new private course in the country. And, it hosted the Senior PGA Championship in 2010 and the prestigious Solheim Cup in 2013.
Tim and Clayton met as financial advisors in the 80s at EF Hutton. They worked together there and at successor firm, Smith Barney, for more than 20 years. Together, they moved to UBS in 2007 when they began to worry that Smith Barney was no longer the best home for their growing business. Despite continued success at UBS, their entrepreneurial DNA was nagging at them. We sat down with Tim and Clayton just 11 days after the launch of their new firm, Institutional and Family Capital Advisors (IFM),a Focus Financial Partners firm, to ask them how life has changed, what they are looking forward to, and why.
Mindy Diamond: Before we talk business, tell me about yourselves.
Kneen: I grew up in Iowa and attempted to play professional golf. When I realized that I was better suited for business, I joined Dean Witter at the age of 20 as an account executive. I moved to Smith Barney in 1989 and spent 20 years there. I love skiing, golf and am very involved in my church. I am married to Gretchen and we have two terrific teenage children.
Hartman: I was born in Wyoming but my father had a bit of gypsy in him and so as a child, we lived all over the world from Alaska to Peru. I almost went to WestPoint to play football but instead stayed closer to home to attend The University of Wyoming. After graduating with a degree in accounting and a minor in finance, I joined EF Hutton in 1980. With my wife, Kandy, we have two daughters. We love college sports and golf; Kandy was a professional golfer and forced me to up my game.
MD: Tell me about your business.
K/H: We act as co-CIO of a 22-person team based in three offices, Denver and Ft. Collins, Colorado and Sioux Falls, South Dakota. IFM serves a mix of high net worth individuals, family offices, and foundations, endowments and hospitals as institutional consultants. We have a multi-generational team that we are really proud of. The team’s core is the six Portfolio Managers and the staff that support them. Danny Gamache, Alan Beugg, Brian Sullivan, Wayne Jamerson, Tom Dempster and Jeff Gordon have been with us for a long time and they quarterback all of the client relationships leaving us to find the best solutions for them. What we believe differentiates us most and allows us to be the best advisors to our entrepreneurial clients, is that we have walked in their shoes. On our own behalves, we have bought and sold businesses and structured sophisticated multi-generational asset transfers; things that can’t be learned from books. We are entrepreneurs and we believe that our collective life experience as such make us great investment consultants.
MD: What drove your decision to leave the wirehouse world?
K/H: For a long time, we felt stifled as employees of a major firm. The firm’s high guard rails prevented us from delivering optimal solutions to clients. In the latter years, our staff spent too much time shuffling papers and we felt certain that their time would be better spent serving our clients. Our desire to create a business that puts clients first, second and last was our motivation for building IFM.
MD: You had only joined UBS six years ago. Were you concerned that your clients might feel it was too soon for another move?
K/H: Not at all. Our clients knew we would always do what was in their best interests. In hindsight, we should have made the move to independence six years ago when we left Smith Barney, but the compliment of options in the independent space simply didn’t exist at that time.
MD: What other firms and options did you consider this time around?
K/H: After much due diligence and soul searching, we knew we didn’t want to go to another wirehouse because we felt that wouldn’t allow us to move the needle for our clients. We were truly honored though by the number of firms that pursued us. We recognized that we wanted a complete change in how we could run our business. Because we needed a capital partner as well as a strategic one, we ended up eliminating many independent options too.
MD: Do you feel that the decision to work with a recruiter was a good one?
K/H: The value that you brought to the table was in allowing us to leverage the breadth of your relationships across the industry. To source all of the options for us and dig deeply into each was invaluable. Your objectivity and depth of knowledge allowed us to focus on our business. We could never have done this on our own without sacrificing service to clients.
MD: Why the decision to partner with Focus Financial?
K/H: When we looked across the industry, it became clear that Focus had the team, scale, transaction experience and other partner firms to make this happen for us. We felt it was a great cultural fit and we were excited about the chance to collaborate with the 27 other firms associated with them. In fact, what we realized was that more than anything we were looking to recreate the brain trust that was Smith Barney in the old days. It was a spectacular culture and we felt that the community that Focus built was the closest reincarnation of it. Focus made a real impact by being able to teach us things we didn’t know. We thought that we might have been able to make this leap on our own, but it would have come at the expense of our clients and we were not willing to do that. Focus showed us ways to dramatically reduce expenses for our clients and they received a massive improvement through superior reporting. And, for the first time we can show clients all of their assets on one statement.
MD: How was the transition?
K/H: Virtually seamless. We believe we avoided many potential pitfalls by leveraging Focus’ transition expertise. They knew our business as well as any member of our team.
MD: What do you expect to be able to do as an independent business owner that you couldn’t do before?
K/H: We will be able to source loans at multiple banks in order to deliver the best rate and terms to our clients. That’s a huge uptick for us and our clients as opposed to being limited to one firm’s solution. Additionally, we can now charge a consulting fee for this service and still save clients’ money. We can also charge consulting fees for estate planning, buying and selling businesses, and we can work with clients outside of the U.S. In essence, we will be able to serve our clients’ entire lives, rather than only the part contracted with UBS.
MD: How did your clients react to the news? What did you say to them?
K/H: Our clients, as entrepreneurs themselves, sensed our frustration level and asked ‘what took you so long to do this?’ We told them that they would have the same team at IFM, the identical investment process delivered with less expense and far better transparency and reporting. That’s a combination hard to argue with.
MD: What did your families think of your move?
K/H: They are elated and wholeheartedly behind us. In fact, many are here in the office working with us since after all, we ourselves are a family office. In short, they are all in.
MD: I know that taking care of your staff was a major part of your decision. Tell me more about that.
K/H: We believe that IFM is only as good as our partners (staff). If you want to keep the best people, you have to allow them to earn ownership and give them the freedom to own some of the important decisions. IFM will exist for decades to come because this multi-generational approach has always been an essential part of our team and its decision making. In the wirehouse world, you can share earnings but you can’t give ownership because you don’t truly own anything yourself. We don’t have staff anymore; we have partners. Our partner in Sioux Falls said it best, ‘we have had more fun in the last 10 days than we have had in our whole careers.’ There is a pride in ownership that transcends being an employee at the best of firms.
MD: What’s next for the business and how will you leverage Focus going forward?
K/H: We are really excited to build an enterprise. We will rely on Focus to introduce us to likeminded wirehouse advisors who want to monetize their life’s work in a more independent environment. We would love to be the landing pad for soon-to-be retiring advisors who want to transition to the next stage in their careers but ensure that their clients are well cared for. We expect that Focus will provide the capital and expertise to get the deals done.
MD: Finish this sentence: ‘The best part of leaving our old firm and starting IFM Capital will be…’
Kneen: The ability to serve our clients without barriers or sidebars that restrict us from finding the best solutions.
Hartman: Knowing that every day when I walk into my office I will truly be able to help our clients achieve their dreams in the best way possible.
As seen on Forbes.com…