Three RIA items of interest

Brooke’s Note: We have written in some depth about Mag Scott’s ambitious plans, FallLine’s emergence as a consultancy after having designs as a rollup and Matthew Hutcheson’s indictment. But because these are good stories they have lots of chapters. Here are the next ones.

Beverly Hills Wealth Management LLC is continuing its push to expand with the hire of Steven Stahlberg as its new Western Division director.

The hire is in line with president and chief executive Mag Black-Scott’s plan to build out the two-year-old firm to 20-30 offices in a half-dozen states. See: Advisor spotlight: A trailblazer at Morgan Stanley, Mag Black-Scott has a new RIA and an ambitious plan. In February, BHWM, with $250 million in assets under management, hired Morgan Stanley vet Bart Albrigo as a senior vice president.

He opened the firm’s first office outside Beverly Hills in Phoenix. See: RIA items of interest: Mag Black-Scott expands beyond Beverly Hills and BAM adds an advisor who contributes to The New York Times.

Now, the hire of a division director with experience in building branches from the ground up puts the firm on the expansion path, with other new offices already in the works. “It’s a small firm right now, but we really want to grow,” says Stahlberg, 58. The RIA will open its first Northern California office in Roseville in the coming weeks, he says.

Previously, Stahlberg was Western Regional director at Robert W. Baird & Co. Inc., where he built out the Milwaukee-based securities firm’s West Coast presence with five new offices. Before that, Stahlberg was a district manager for Morgan Stanley under Black-Scott. He also spent 11 years at Wachovia Securities and its predecessors, hiring more than 100 advisors and creating the Northern California offices.

The chance to work with Black-Scott again was one of the job’s attractions. “I really enjoyed working with her,” Stahlberg says. He was also drawn to the opportunity to work at a smaller RIA on a growth trajectory. See: Mag Black-Scott partners with Intel and brings aboard serious MSSB talent in quest to.

Many investors and advisors are discontented with large firms and warehouses, and RIAs and hybrid offices are able to offer clients complete independence without pushing certain products, plus a higher level of service, Stahlberg says. “I don’t think in any wirehouse environment you can get that anymore.”

In addition to opening offices and hiring advisors, he also hopes to reactivate his old book of business from his many years as a broker.

Stahlberg will have an equity share in the firm and his pay will be tied to performance.

“Steven’s background in recruiting the best talent and his proven track record of success will bring tremendous value to the firm,” Black-Scott said in a press statement.

“I think we have a great stage to build something,” says Stahlberg.

Graflund is third 'Fall’ guy

Three months after John Straus and Peter Ruhlin launched FallLine Strategic Advisors LLC as a boutique management consulting firm, the duo is adding a third partner. See: Former Morgan Stanley and UBS wealth management chief flirts with roll-up model then pivots to management consulting.

Scott Graflund joins the Darien, Conn. firm as a full partner. Previously, he was managing director and the head of technology and operations for private wealth management at Morgan Stanley, and the former president of Morgan Stanley IT Holdings. Not surprisingly, Straus and Ruhlin sought him out to add technology expertise to their offerings.

As Straus and Ruhlin have met with clients a number of issues have recurred: growth, transitions, strategic options, and technology and operations solutions. Many of their clients are RIAs, investors, and large wealth management platforms.

“The tech platforms out there did not lend themselves to delivering a consistent experience repeatedly,” says Straus. Ruhlin adds,
“We said to ourselves, 'perhaps we should go out and seek that capability.’”
Graflund worked with Straus at Morgan Stanley, where Straus was head of U.S. private wealth management, and they’ve known each other for nearly 20 years. “It wasn’t a tough decision to make,” says Graflund.

Scott Graflund: It wasn’t a tough
decision to make.

“Scott is the rare professional that can distill complicated technology and operations issues and effectively and efficiently apply them in a business environment,” Straus said in a press statement.

After “doing just about everything I could in the wealth management space at Morgan Stanley,” Graflund left five years ago to work as a consultant to technology companies. But he was eager to get back into the wealth management business and the opportunity to work with Straus and Ruhlin as part of a small, high-end consulting team was appealing.

“It’s not really a new experience, it’s a better experience I’m looking for,” he says.

Graflund won’t have a title beyond partner. The three work together in a team approach with each client, depending on their needs. “We are very complementary in our skills and backgrounds and experience,” says Ruhlin.

While they won’t comment on revenue or clients, Ruhlin and Straus say that business has been good — good enough to bring on a third partner.

“We’re very busy,” says Ruhlin.

More woes for former fiduciary star

Fiduciary advocate Matthew Hutcheson, who in April was indicted for 17 counts of wire fraud and 14 counts of theft, received more bad news this week as the Department of Labor obtained a preliminary injunction against him and Hutcheson Walker Advisors LLC. See: What to make of a fiduciary flag-bearer’s alleged misappropriation of $5 million from clients — and his denial of the charges.

Hutcheson, a long-time fiduciary expert and Eagle, Idaho-based independent fiduciary who has testified before Congress on fiduciary issues, is denying all the charges and maintains that he made the best decisions for his clients.

The injunction prevents Hutcheson from continuing to oversee a multiemployer retirement account. U.S. District Court Judge Edward Lodge in Boise, Idaho, granted the order, citing likelihood of continued loss to the 500 participants in the account if the injunction were not granted. He wrote that the evidence suggests a “real threat of immediate and irreparable injury, loss, or damage will result if the preliminary injunction is not issued.”

Hutcheson is alleged to have stolen $3.2 million from the multi-employer retirement account, Retirement Security Plan and Trust, and used the money for personal purchases and in an attempt to buy Tamarack Resort.

In May, the Department of Labor filed a temporary restraining order and injunction to prevent him from continuing to serve as the fiduciary on those accounts. That injunction was granted June 13.

Hutcheson is denying all the charges and maintains that he made the best decisions for his clients. See: Head-to-head: How one advisor went up against a giant of the retirement plan world and won.

Jeanne B. Bryant of Receivership Management Inc., based in Brentwood, Tenn., has been appointed as the independent fiduciary on the account. Hutcheson continues free on bail under his father-in-law’s supervision as he awaits his trial on the federal charges later this year.

“Hutcheson did not engage in any of these activities for the benefit of participants and beneficiaries of the plans that actually owned the funds that were intended to provide retirement security,” Labor Department Solicitor Patricia Smith wrote in documents filed last month. “Hutcheson took this money for his personal benefit.”