Big Midwestern RIA buys itself a national presence in deal with CBIZ

Mariner Wealth Advisors has made another big acquisition in its quest to become a $50-billion RIA within the decade — and the company broke its unofficial no-coastal-locations rule.

The Leawood, Kan., advisory firm bought CBIZ Wealth Management, a part of the national rollup of accounting firms, to add 24 wealth managers in Cumberland, Md., Kansas City, Denver, Los Angeles, New York, Philadelphia and San Diego. The deal closed on Jan. 1. CBIZ Wealth Management LLC has $357 million of assets under management— mostly non-discretionary, according to its SEC ADV form.

Mariner now has total staff of 270 professionals, and it manages about $8 billion of assets. Terms of the deal were not disclosed.

Snapped-up Tortoise

Mariner is a fast-growing, high-profile RIA that’s part of Mariner Holdings, which also includes Montage Asset Management. The latter has produced some hot fixed-income closed-end funds under the Tortoise Capital Advisors brand that fellow advisors snapped up in search of yield last year.

Mariner sets itself apart with its ambitions and its willingness to execute them, according to Steve Austin, spokesman for Fidelity Institutional Wealth Services, the firm’s custodian.

“So many firms talk about the desire to acquire. Marty and his team have clearly emerged as leaders in the acquisition space, and they have done so
while truly embracing and serving the dually registered advisor,” he says.

Mariner was founded in 2006 by the scion of a entrepreneurial family that once owned the largest Pizza Hut franchise in the nation.

“The entrepreneurial spirit runs deep in my family,” says CEO Marty Bicknell, who was a broker and branch manager for A.G. Edwards before breaking away to start his own company.

The importance of the deal for Mariner – besides that it’s another big step on the road to its $50 billion goal – is that it helps the company establish a national presence.

Midwestern strategy

Bicknell had made some public proclamations that his company would never put locations on the East Coast or West Coast. He believed that sticking to the Midwest made sense because he wanted to maintain close management control and because the coastal cities are more saturated with competition. Now, suddenly, Mariner has five Coast locations.

The terms of the deal with CBIZ overcame Bicknell’s objections, he said.

The CBIZ wealth managers – between two and 15 per office — will remain in their current offices, which typically number 100 to 150 people. Mariner will pay their pro rata share of the rent.

CBIZ will pass referrals to the CBIZ wealth managers and get a cut of revenues. Mariner uses Fidelity Institutional Wealth Services as its primary asset custodian. CBIZ splits its asset custody evenly between Schwab Advisor Services and Fidelity, and Bicknell said his company will not transfer any assets after the deal.

CBIZ executives decided that wealth management is not the company’s core competency. As CBIZ rolled up accounting firms nationwide, it had somewhat accidentally ended up employing wealth managers at these firms. CBIZ’s wealth management operations are based in Cleveland but there are no advisors there, and that wealth management office will be closed.

Office-in-an-office

Bicknell says the office-in-an-office structure means that he won’t have far-flung, hard-to-support offices far from his Leawood, Kan., headquarters.

“It’s definitely about growth geographically, and we’ve struggled with it,”’ he said.

The CBIZ deal was sparked by a conversation that happened because there is a CBIZ office across the parking lot from the Mariner headquarters and one discussion led to the next, Bicknell says.

More firms are spreading out nationally, including Edelman Financial Services and Aspiriant, says Dan Inveen, principal of FA Insight, a Tacoma, Wash.-based research firm that just completed a Pershing-sponsored study entitled: “Creating growth: The rewards and challenges of the multi-location model.”

(Aspiriant completed a similar deal to the Mariner-CBIZ merger in July. Aspiriant Investment Advisors, a subsidiary of Aspiriant, acquired Deloitte Investment Advisors LLC , an RIA with $2.9 billion of AUM owned by Deloitte Tax LLP to take its AUM to $7 billion.) Also, see: Edelman expansion slows; back office 'overwhelmed’.

Widened labor pool

“As big brands become tarnished, folks on the RIA side may be driven by the ambition to start national brands,” he said. “The more locations you have, it widens your potential labor market pool.”

Dan Inveen: It widens your potential
labor pool.

Other advantages include greater scale and responding to the mobility of clients, he added.

In Mariner’s case, the acquisition allowed the company to better balance Mariner Wealth Management and Montage Asset Management. The latter unit had the explosive growth in 2010 and now has $6 billion of AUM compared to $2 billion in Mariner Wealth. Mariner Holdings brought aboard more than 100 people on the Montage side of the business in 2010 alone.

“Mariner’s acquisitions have largely been in the asset management space; the acquisition of CBIZ’s Wealth Management business further confirms
Mariner’s commitment to the Wealth Management segment,” said Austin of Fidelity.

For Bicknell, it’s also personal.

“At the heart of the matter, I’m a wealth manager,” he said.

Non-Edwards CEO

Indeed, Bicknell, 42, spent 15 years as a producer and branch manager for A.G. Edwards. He began to get antsy when in 2001 when the company hired a non-Edwards family CEO for the first time and began to make the company more of a run-of-the-mill Wall Street broker. Subsequently it was sold to a wirehouse, Wachovia.

In 2006, Bicknell broke away from A.G. Edwards as part of a four-man team that managed about $300 million of assets and formed an eight-person firm. Since then the company has been growing both organically and by acquisitions to go well beyond $8 billion of assets and 250 employees, he said.

The start-up and acquisitions capital for Mariner Holdings were financed out of Bicknell’s own pocket initially but current expansion efforts are being funded out of the company’s cash flow.

The time to expand to multiple locations has never been better because improving web technologies make it so much more manageable, Inveen said. Mariner’s wealth managers use the web-based version of Advent Software (APX) and they buy it directly from the San Francisco-based company. See: Outsourcing begins to catch fire at Advent Software

The glories of expansion aside, Inveen warns that there are potential downsides.

“You can’t go in to this blindly,” he says. “...There are dangers of weakening a brand.”

Forced communication

There has to be a conscious effort to preserve corporate culture and keep consistent client experience. Methods he discusses in his report include more regular forced communication, rotating people through offices and creating oversight functions.

Bicknell says these pearls of management advice ring true.

“We just had a meeting this morning and you’re spilling my lines,” he said with a laugh.