Kochis Fitz, Quintile Wealth Management and Deloitte are now $7.2 billion Aspiriant and there are more plans to grow -- carefully

October 3, 2011 — 4:30 AM UTC by Steve Garmhausen

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Name: Rob Francais
Position: CEO
Firm: Aspiriant
Locations: Los Angeles/San Francisco
Years in business: 20
AUM: $7.2 billion
Custodian: Schwab

Aspiriant, the product of a merger between San Francisco wealth manager Kochis Fitz and family office player Quintile Wealth Management in Los Angeles, is big. And the three-year-old firm wants to get much bigger by continuing to combine with other firms. That doesn’t seem unusual until you consider two things: First, Aspiriant is employee-owned. Second, it isn’t approaching growth like it’s a race. As Rob Francais, who took over the CEO post in 2009 from the much-respected Tim Kochis, points out, Aspiriant can and does take years between deals. The reason revolves around the firm’s desire to grow while maintaining the everyone-on-the-same-page feel of a boutique.

Steve Garmhausen: Rob, you worked for Deloitte and was managing director of myCFO’s Los Angeles office before helping form Quintile Wealth Management. Tell us how Quintile hooked up with Kochis Fitz to form Aspiriant.

Rob Francais: We – a group from the Los Angeles office of myCFO – founded Quintile back in 2002. Once we became Quintile, the question became: What was the future of the organization.

Our [vision] of client service included durability of the organization and the ability to remain independent and deliver value propositions to families for multiple generations. One of the biggest disadvantages to being an independent RIA is the endgame: Where will the organization end up, and how will the founders capture the value they created in a conflict-free way and continue to serve the clients and the people of the organization. That was the puzzle we wanted to solve.

I did a lot of succession planning for businesses as a tax partner at Deloitte in the ’90s. I applied that same consulting approach to our own organization. I invited all the founders, people and clients of the organization and asked what were this company’s goals and objectives, personal and professional. I also looked at the core competencies of the organization and I looked at the industry opportunity, the demographics in the industry.

The founders of the most successful RIAs are people in their mid-50s, coming up on their 60s. They were going to be looking for a way to transition their businesses. When we looked at the industry opportunity, it was how we create an environment where clients are best served and advisors want to be here. So we created a strategy for growth which was to find like-minded people who are committed to the same type of things we were from a client services perspective and come up with a strategy for combining those organizations- a governance structure, a compensation model that works with a set of core values.

I went on a three-year hunt for our first partner, and that was Kochis Fitz. Tim Kochis and Linda Fitz were consistent with the thesis that the industry was founded by people who are now in their 60s. In that circumstance, Tim was looking for a management successor for the business; they were in San Francisco and Quintle was in Los Angeles. We were about the same size, with the same core values; they served more corporate executives with financial planning. We were more the fee-only model. What made it work was the shared commitments and core values. What made it interesting and enhanced the client service we do was the differences. Both firms were catering to different demographics.

SG: With that deal, you went from being a big firm to an even bigger one. And you’re OK with that?

RF: We asked, is bigger better? Does it help solve the durability problem in the industry? In the end, we concluded you could aggregate talent in the industry, govern it, standardize the organization and institutionalize value propositions to clients. You could achieve a permanent organization that best serves families for multiple generations.

SG: A few years later, in 2010, came a deal to acquire Deloitte Investment Advisors, which advised $2.9 billion of assets.

RF: We had completely revamped governance and turned every stone over to create Aspiriant. Whether it was the brand or service offering, we started with a clean slate based on clients and advisors wanted. That was in 2008, and then we very intentionally spent three years focused on building this foundation we call Aspiriant. We didn’t do the [Deloitte] deal until three-and-a-half years after we completed our merger.

So now we’ll spend the next couple of years making sure we get that right in terms of those clients and people, the brand, the service offering. We’ll get that consolidated, and then look to our next growth story. It really is about aggregating and organizing talent in a way that best serves clients. Just getting bigger and bigger doesn’t necessarily accomplish anything. The value has to be to organize those resources in such a way that everyone in the organization benefits. As opposed to a collection of practices or books of business. We don’t think of it that way.

SG: Kochis Fitz, and now Aspiriant, is known as a heavy hitter in the corporate executive market. How did you establish that position?

RF: Our history in San Francisco goes back to being focused on the corporate executive market. We used to have many corporate engagements, where Fortune 100 or 500 companies would pay for their corporate executives to receive financial planning, and our organization would provide that for them.

Those programs waned; they aren’t that popular anymore. What I’d call the organization’s growth model now is referrals, and we hold events and stuff like that. Most of our organic growth comes from referrals. Today maybe over half of our clientele are corporate executives, entrepreneurs and business owners.

SG: Does your size and client roster exert a gravitational pull on prospects?

RF: The critical mass may be part of it. I think more folks would say a larger organization has the perception of being more stable, but it also cuts the other way: You can get too big for some families; they really want a smaller boutique shop. We like continuing to be the boutique shop. We happen to be much larger in scale [while] taking advantage of the same kinds of values you find in a boutique shop. The challenge is to maintain that feel. From a prospecting perspective, size helps, but it’s more about how we organize ourselves and talk about our durability. Most of the families we serve have more assets than they can consume. They’re concerned with how they transfer them to the next generation.

SG: How have your earlier career experiences come into play at Aspiriant?

RF: I had a fabulous experience at Deloitte. Really, it was the clients I served back at Deloitte who got me into this business. They were almost begging me to get into this business. I was a tax partner advising family-owned businesses in the middle market in L.A., and many of them ended up selling their businesses. Through that experience, I got a real taste of the solution sets for affluent families.

[At that time] it was a lot of products, not a lot of service. There were not a lot of people taking the “Financial Planning 101” approach and applying it to the affluent market.

SG: And how did myCFO influence your path?

RF: myCFO was founded by the wealthy for the wealthy, with the same set of value propositions that we use today. When they sold to Harris Bank, we were offered employment, and it was about choosing to remain independent. I was interested in being an independent organization, not owned by a public shareholder group. I feel that creates pressures that are inconsistent with client service.

So we decided to remain independent and continue going after those value propositions. We learned a ton from our experience at myCFO. I think they went from zero to 400 people in maybe 18 months at most. One of the things we learned is that you’ve got to pace yourself when you’re talking about growth. Just adding people doesn’t necessarily create value. You’ve got to create that culture as you go along.

In some ways, you can look at our growth in the last three-and-a-half or four years and say it’s off the charts, but it’s all been part of a very patient well thought-out process.

SG: You formed Aspiriant just in time for the financial crisis. What are some of the lessons you took away from that period?

RF: In the aftermath of the crisis, we conducted several client focus groups where we talked to our clients about what could we have done better. One of the takeaways was that when you’re in a crisis situation, most advisors want to understand the issues before they communicate them to clients. If you think about the environment way back when we were talking about “breaking the buck” and all these new government programs coming out, there was no way for advisors to know what they were about without spending a couple of weeks digesting them. We did what most advisors did: We wanted to dig and understand before we communicated about it. We heard loud and clear from clients that irrespective of whether we have all the answers [that] reaching out proactively is better than waiting.

We still apply those lessons today, even though we’re not in severe crisis mode. We apply them where clients might want to talk with us about, say, the debt ceiling. I’d say we’re communicating a lot more than we were prior to the crisis.

Another thing we learned from clients is that even though the industry, us included, do a lot of education with new prospects, just because you’re going over the material and the client seems to understand it, that’s not necessarily the case. We had such a great run in the markets for a 20-year period that I think people got complacent. So really coaching clients is another lesson. How do you convey volatility in a meaningful way? Really running their portfolios through that October and November [of 2008], all the way through to March, what would that have looked like; here’s what this certain allocation would have produced, how does that feel to you?

Trying to translate the emotional experience and present them with the emotional aspect of wealth management—we spend a lot more time on that today than we used to.



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