Breakaway Team Opens RIA

Going Independent and Turbo-Charging a Track Record of Success

Since John Beirne’s first day at Merrill Lynch, he was always considered something of a pioneer. He recalls being the first advisor at the firm to convince a public pension fund to use independent money managers – that was in 1978. John’s innovative thinking and his partnership with Jim Betzig and now, his son, John-Oliver Beirne, was instrumental to his track record of success at Merrill, growing the Beirne Wealth Management Group’s practice in New Haven, CT, to $4.7mm in production on more than $2.3B in assets (two-thirds private client and one-third institutional consulting—foundations/endowments/pension plans).

After many decades of documented success and happy clients, John and his team began finding the wirehouse environment and culture changing—and not for the better. As an entrepreneurial team within Merrill, they chafed as compliance restrictions tightened and the firm cut back on important technology investments. We had been in conversations with the team for many years and could hear their growing dissatisfaction with the firm. They felt they were losing control and were frustrated by a lack of management responsiveness as they escalated issues. A tipping point was coming.

Finally, we received a call from Jim Betzig, the team’s self-elected due diligence point person, saying that he and his group was ready to make a change and it needed to happen sooner rather than later. Although the catalyst was the changing rules that applied to their institutional practice and compensation concerns relating to new business in that sector, it was becoming increasingly clear that the wirehouse world was no longer the only – or best – place for their business.

The Need for Change

Because of our longstanding relationship with the team, we were familiar with many of their hot button issues. We also knew that they wanted to give Merrill every opportunity to remediate their frustrations and the impediments to doing business. Plus, there were some key questions that the team had, as well as specific requirements that needed to be addressed before they would consider leaving the firm where they spent their entire careers:

• The team manages money for a number of institutional clients including public pensions. Was there a platform out there sophisticated enough to accommodate a $500M client?
• They needed a place where they could control the business and be able to make the right decisions for their clients. According to Jim, “Even as a team managing over $2B in client assets it often felt like we were treated as junior employees. There were lots of nuisance fees and restrictions that made our clients unhappy.”
• They wanted to assure their existing institutional and high-net worth clients that a move would guarantee an uptick in service so all would feel comfortable making the move with the team.

The Process

John and Jim spent many months voicing their frustrations and sending emails up the chain of command at Merrill to try to ameliorate their situation…to no avail. While they met multiple times with the Institutional Consulting divisions of UBS and Morgan Stanley during this time, they were concerned that they would run up against the same restrictions that they were currently facing with Merrill. They continued to hope for change within the firm, but their patience was wearing thin and business was beginning to be impacted. It eventually became clear to the team that nothing was going to change for them at Merrill and in order to protect their clients and to continue to build their practice, they needed to make a move.

After diving further into their needs, business model, long-term goals, and growth objectives, we agreed that they should “touch and feel” several different firms and models in order to clarify IF, indeed, they would be better off elsewhere. We created a customized plan, arranged initial meetings and the process began in earnest.

They met with representatives of HighTower Advisors and Wells Fargo FiNet, and also spoke with a boutique firm. In the end, these firms either could not accommodate their business, weren’t going to open offices in New Haven, CT, or wouldn’t allow them to own and operate their own business – something the team became increasingly convinced they wanted to do. We next introduced the team to Focus Financial Partners. Focus was clearly the best fit for the team, and all became excited about the idea of joining a partnership of like-minded advisors.

The Right Solution

Focus Financial provided the team with the perfect balance of risk and reward: some liquidity in the equity value they were creating without losing control, and the ability to build enterprise value. Furthermore, Focus was a partner that could build a truly customized high-end, high net worth/Institutional Consulting infrastructure capable of serving their client base, even their institutional clients. It soon became obvious that the benefits of going independent were far-reaching, and that their new business would realize benefits not just economically, but also in terms of enhanced efficiency and ability to grow. Clients would receive unconflicted fiduciary advice, superior service and access to investment products that no longer carried a markup from the firm. Moreover, the team would be able to access independent research, systems that made their day-to-day business more efficient and could brand and market themselves as a truly independent entity.

After much due diligence, Beirne Wealth Consulting launched an independent Registered Investment Advisory firm with the support of Focus Financial Partners. Within the first three months of independence, over 90% of their individual client base moved with them. As anticipated, in the institutional consulting business, every responsible board needed to conduct a Request for Proposal (RFP) process, and (also as expected) within ten months, the team successfully won over 75% of their large RFP agreements.

In their first year, Beirne Wealth Consulting brought in over $100mm of new assets, including three new institutional clients, and increased their revenue through a repricing effort and the ability to bill on assets previously held-away. Firm revenues are higher than they were when they left Merrill – and at a far higher margin.

In addition, the team brought on three new associates and is looking to continue to grow their enterprise to expand their capabilities. Ultimately, the decision to go independent with Focus enabled Beirne Wealth Consulting to monetize a highly successful business while also capitalizing on the previously untapped growth opportunities, all within their first year of independence. The team looks forward to continuing to brand and market their practice in a way that was previously impossible and believes that there is no end in sight for the new business that they will be able to win.

What We Can Learn

In many cases, wirehouse teams are not sure of how to get out of the frustrating cycles they are caught in within their current firms. We find that many advisors start the exploration process and either become overwhelmed with the options or are unsure of whether they are more focused on short-term rewards or long-term upside. For many, as in the case of the Beirne team, getting clear about priorities- “we are looking to build an enterprise that will succeed us” and then conducting an extensive yet strategic due diligence process, can result in an extremely positive outcome. For Beirne Wealth Consulting and Focus Financial Partners, the stars aligned and the team was able to regain control of their business and unlock their growth potential in ways they never imagined.

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