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Why Moss Adams signed a big contract with Fortigent

The Seattle-based RIA is looking to grow investment capabilities without adding staff

Wednesday, March 24, 2010 – 5:15 AM by Brooke Southall
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Rebecca Pomering: I would not say we have outsourced. We are using them as an additional source.

Brooke’s Note: In a sense most RIAs are making up strategy as they go along. They are entrepreneurs and there are not a lot of blueprints out there for growing big practices. If there’s an exception to this “rule”, it would have to be Moss Adams Wealth Advisors. After all, much of what it did to become a $1 billion RIA happened under the same roof as a team of the premier consultants to advisors in the industry — including Philip Palaveev, Mark Tibergien and Dan Inveen. The latter three consultants left for other jobs but another Moss Adams consultant — Rebecca Pomering — is now its CEO. I interviewed her with interest about how she concluded that teaming up with an outsourcer was the best move for her fast-growing RIA practice.

Moss Adams Wealth Advisors LLC has hired a well-known outsourcing firm to help bolster its client communications and manage due diligence.

The Seattle-based RIA with the famous name hired Maryland-based Fortigent LLC at the start of the year to avoid making additional hires to its portfolio management team.

“I wouldn’t say we’ve outsourced,” says Rebecca Pomering, CEO of Moss Adams Wealth Advisors. “We’re using them as an additional source rather than an outsource.”

Moss Adams, which manages nearly $1 billion of assets, currently employs eight people who are responsible for reviewing investments for the firm. It plans to keep them.

Varying levels

Gary Carrai, Fortigent’s senior managing director of consulting and sales, says the majority of the company’s clients have varying levels of research in-house. Fortigent’s services are a supplement – Carrai says Fortigent acts as “teammate.”

“I think pure outsourcing is something more common with small RIAs and IBDs that have very little staff and a small but potentially growing books of business,” he says.

Moss Adams has a history of paying for investment research from a variety of companies, but its contract with Fortigent is a departure from past practices.

“Fortigent is more organized and comprehensive than anything we’ve used in the past,” Pomering says.

Team of 12 to 20 CFAs

Seattle-based Moss Adams was growing to the point that it would have needed a dedicated research team of 12-20 chartered financial analysts, she adds.

Moss Adams Wealth Advisors, a division of the big accounting firm, Moss Adams LLP, acquired an RIA in San Diego with $200 million of assets under management in January and it is seeking to acquire more RIAs – particularly in the Portland, Ore., market. The firm has 9 locations with 32 people. The other locations beyond Seattle include: Portland, Santa Rosa, Calif., Los Angeles, Sacramento, Calif., Yakima, Wash., Everett, Wash., Spokane, Wash., and Tacoma, Wash.

Fortigent is not inexpensive for Moss Adams, according to sources. Though Fortigent declined to disclose its rates for fear that they could be taken out of context, a contract of this nature comes with at least a six-figure price tag, sources say.

Here’s what Carrai had to say about Fortigent’s pricing:

Rarely the obstacle

“I can share that we are a premium provider of services to high net worth advisors in the marketplace but would not be having the type of success we are having if we were considered expensive,” he says. “Cost is only an issue in the absence of value and the fee is rarely the obstacle preventing us from working with firms.”

Charles “Chip” Roame, managing principal of Tiburon [Calif.] Strategic Advisors agrees that firms need to weigh what they are getting in evaluating price.

“One hundred thousand dollars is not all that much to pay as a firm would have to hire at least one chief investment officer to follow all this stuff,” he says.

Fortigent serves 68 firms with $35 billion of assets under management, up from about 48 firms at this time last year. It has about 25 advisor clients located in the western third of the United States, and last week announced that it is opening a West Coast office in San Francisco. That office is being run by a former Thomson Reuters executive, Chad Givens.

Companies that can provide good due diligence on asset managers may be in a good position in the market, according to Roame.

“I think as investment products are getting more sophisticated firms are looking for the extra research,” he says.

Gut check

Pomering said she wouldn’t contract for the help unless it provided substantial value. “It’s not an inexpensive gut check,” she says.

Moss Adams’ research team primarily does due diligence on mutual funds. It uses a core-satellite approach and most of its passive investing is done using mutual funds from Santa Monica-based Dimensional Fund Advisors. It does not use exchange-traded funds.

In addition to research, Fortigent’s economic updates and quarterly reports that can be fashioned to serve as client communications also appealed to Moss Adams.

“We liked the sophistication of the communications,” Pomering says.

On tap

She adds that she likes to have some of Fortigent’s back office services, such as performance reporting, on tap even though she isn’t currently using them.

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Mentioned in this article:

Tiburon Strategic Advisors
Consulting Firm
Top Executive: Charles Roame

Moss Adams
Consulting Firm
Top Executive: Rebecca Pomering

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