SignatureFD just says no to hybrids, applies a family office approach and sticks around the Atlanta area -- for now

October 21, 2013 — 5:32 AM UTC by Steve Garmhausen

0 Comments

When Atlanta-based SignatureFD LLC snared six advisors from nearby PPA Advisors Inc. in September, it may have looked like a natural follow-on: Newport Beach, Calif.-based United Capital Financial Advisers LLC had bought a stake in PPA, and these advisors appeared somehow connected to all that. .

In fact, the coup was the result of a conscious recruitment strategy, according to SignatureFD chief executive and co-founder Jeff Peller. PPA dissolved and advisors working there went their own ways. The 16-year-old firm had been laying the groundwork for attracting advisors for several years, snaring high-profile recruits from Fidelity Institutional Wealth Services, Wachovia and U.S. Trust.

The latest recruits brought with them $225 million, pushing SignatureFD’s total assets under advisement above the $2 billion mark. The firm has doubled its assets in the last three years and, says Peller, it plans to keep up the pace. It now has 650 clients and 44 professionals.

One of the secrets to growing fast, it turns out, is to be affiliated with a CPA firm: SignatureFD is an offshoot of Frazier & Deeter LLC, a top-100 accounting firm that has been an invaluable source of referrals. Peller spent four years as a tax and financial planning expert before helping start the RIA. See: Why Deloite Touche talent is such a coveted building block at some esteemed RIAs.

Peller talked with us candidly about the firm’s recruiting-centered growth plan, its expansion goals and how its target client went from “anyone who could fog a mirror” to a much higher standard.

First $100 million the hardest

Q: Congratulations on your growth. What’s the back story?

A: We started in 1997; all our clients came through accounting referrals. We were able to leverage those referrals into more referrals over time and grow the practice. We have never really done any marketing or advertising—it’s all been grassroots efforts from strategic centers of influence and our accounting partners.

About five years ago we had grown the business staff-wise a good bit from ’97. The first $100 million was kind of impossible: It took us about four years. And now we’re just across the $2 billion mark, but it was a very methodical way of going, about five years ago, from the client acquisition phase to the advisor acquisition phase and positioning the firm to be attractive to advisors as well as clients. See: Mystery solved: Josh Brown and Barry Ritholtz start RIA — or is that actually where the intrigue begins.

Q: Why the emphasis on acquiring advisors?

A: We consider ourselves students of the industry. In this industry, without growth you don’t acquire talent, and without talent you don’t get results. In order to grow, we had to move the practice to a real business. We had a director of operations and a chief compliance officer, and we had to leverage that. We took our foot off the gas on the development of client books and moved towards building the business, recruiting advisors and building a platform that they could bring their clients to. See: How financial advisors should manage the record deluge of recruiter phone calls.

One a year

Q: So what were your selling points for prospective advisors?

A: Early on, it was bringing people up through the normal channels and developing them and transitioning books and clients. We have a career track where people go through the planning or investment route and then develop into advisors. As we developed two or three of those folks, we realized we also needed some business development channels as well; we joined the Schwab Advisor Network referral program and we also brought in a business development officer from GenSpring. See: How an RIA can capitalize on referral programs offered by Schwab, TD and Fidelity.

From there, each year we’ve brought in a person—one from Wachovia’s high-net-worth practice in 2010, one from Fidelity’s high- net-worth practice the next year, one from U.S. Trust last year. Then we also had a transitioning-down advisor who wanted a succession plan for his clients coming in as well. Then this year you saw the PPA deal. See: What Schwab’s new 401(k) study tells about the demand for financial advisors to manage retirement assets.

When 1 + 1 = 3

Q: What’s the key to expanding the advisor base?

A: It’s getting harder and harder in this industry to build business and grow a client base, so you really have to focus. That’s what we found with the PPA deal. They were looking to do what they do best — spending time with their clients. They didn’t want to deal with building the business and the compliance and legal and training and mentoring, recruiting, technology integration. It just gets to that point where folks are saying 'I really enjoy working with clients, and is there a way that one plus one equals three?’ That’s what we’re hoping to be able to provide to folks.

Q: It looks as if one team with that firm went with United Capital. The other went with you. What carrot did you dangle that a United Capital couldn’t?

A: Ours is a little bit higher-net-worth practice: Our average client is about $3 million and ours is the RIA model versus the hybrid model. I think the folks who went to United Capital were looking for the hybrid model and had more of a transaction-oriented practice. See: United Capital makes three exec hires, including a veteran recruiter from Raymond James.

The reason that folks join us is … obviously, we’re affiliated with a large CPA firm; we have a business development officer; we have custodial referral programs and (new advisors) are able to leverage the infrastructure and the management team that we have in place. The good technology solutions we provide as well as the marketing, branding and institutionalization process, that’s all very compelling,

Hometown competition

Q: What’s your value proposition for clients?

A: We’ve kind of brought the family office model down to the mid-tier millionaire: That $2 million to $25 million [client] is our bread and butter. Our people are highly trained, highly designated folks who are dealing with high-net-worth folks and going very deep with them. A lot of people kind of put that sugar-coating on having deep planning, but when you get into asset protection planning, estate planning, risk management, retirement planning, right down the list, we have different specializations within the organization and can go very deep on them.

Q: If United Capital doesn’t play in your space, who do you consider your major local competitors?

A: There’s a number of good independent firms here in town. Homrich Berg [Wealth Management] is one, Brightworth (Private Wealth Counsel) is another. Typically, folks who are interested in our type of model are going to look at those firms — a lot of our clients are not going to be interested in the big wirehouses anymore because of the conflicts and things of that nature.

Realize, too, that we’re early in the curve — typically a lot of our referrals are coming through the CPA firm or through estate attorneys or transaction-oriented folks who have money in motion. So we’re gonna do a lot of planning before that transaction ever happens with that client.

Array of custodians

Q: Who was your prototype customer back in 1997, and who is your prototype customer now?

A: Anyone who could fog a mirror in 1997 and who’d be willing to work with us! Fast-forward 16 years: Those clients are here to this day and they continue to be served, and served well. Right now, our average new client’s probably about $5 million. So it’s moved up, but we’re still taking care of our clients, and that’s our number-one priority.

Q: You have an open-architecture, multicustodial platform with Schwab, Fidelity, TD Ameritrade and Pershing. Why? See: “Joining the industry-wide trend, TD Ameritrade announces its upcoming project for “open architecture technology integration.

A: Each one has their pros and cons. When you talk about truly open architecture, you’re trying to find the best solutions: the best custodian, best hedge fund, best private equity. You’re trying to have efficiency but also trying to have the right solution for clients. If someone needs a banking solution with lending tied to it, that’s probably not going to be a TD. That’d probably be more Pershing with a Bank of New York affiliation. If it’s a trust client, [their money will be under custody] somewhere else, etc. It does require a little more effort by the team to be up to speed on all the different custodians, but when you have a centralized operations department, that’s all they do. See: Pershing and BNY Mellon unveil a unified, 'dream’ RIA and bank custody unit.

Q: Your main technology providers are who?

A: Part of the growth strategy is that we’re also going to be looking outside Atlanta at some point. So we have moved to a Citrix-based environment where we’ve virtualized all of our servers and all of our desktops. So if we want to plug in an office in North Carolina, we could do it within a week’s time. See: Schwab moves to keep 3,500 desktop-bound RIAs from walking onto somebody else’s cloud.

We’re also moving much more toward the cloud right now. iRebal is our portfolio rebalancing software, and we moved to Orion Advisor Services LLC last year. Our planning software is eMoney Pro, and we’ll most likely move to Salesforce within 12 or 18 months.

Beyond 15% growth

Q: What’s the game plan for moving beyond Atlanta?

A: Some of it has to do with the CPA firm and as they expand into different areas in the Southeast, it’s a tag-along strategy. And part of it has to do with firms we know, and they’re looking for ways to leverage our platform.

Q: What would you like to firm to look like in five years?

A: From a growth perspective, we’re going to give you the “15% growth” type of answer. For us it’s about creating community, so we have [community-focused] initiatives right now: Signature Women was our first one last year. It’s essentially bringing like-minded people together for education and communication-type opportunities. It really has been a firm-changing type of thing. You’re bringing these people together for different educational pieces and they really start to bond and become a network. See: At Envestnet event, Sallie Krawcheck alludes to Crager alliance, blasts women-as-niche marketers and edges perhaps closer to endorsing the RIA model.

If we look at entrepreneurs, if we look at attorneys or executives as well, what are their unique needs and then having a specialization to fill those. So, yes, we clearly want to grow by 15% plus, yes. We want to recruit advisors. But what we’re really excited about is building these communities within the organization.

Partner-funded

Q: What will your geographic footprint look like in five years?

A: That’s a harder question. That’s something that needs professional management and capital. We are going through that discussion as we speak. Right now we’re concentrated on a few key places in the Southeast — Nashville, North Carolina and the Palm Beach area. Until we decide if we want to raise capital and bring in additional professional management, we don’t know that answer yet.

Q: What else is different about Signature?

A: We’re heavily invested in the next generation. The advisors we’re recruiting are obviously fiduciary advisors who put their clients’ best interests first, but it’s not going to be your $2-million producer at a wirehouse. It’s going to be people who have been trained and are able to hit the ground running — but we’re going to make significant investments to move them over, realizing it will take two to three years for them to get up to speed. Some people in the industry are writing checks for the big producers; we’re investing in that next generation of advisor.

Q: What does that investment cost, and how do you pay for it?

A: It’s typically a two-year break-even for folks. It takes them a year to get going, and by the second year or third year, hopefully, they’re break-even. It comes straight out of the bottom line; [We] say we can only do two or three people a year. It’s all partner-funded.


Mentioned in this article:

United Capital Financial Advisers
RIA Welcoming Breakaways
Top Executive: Joe Duran

iRebal
Trading/Rebalancing
Top Executive: Benjamin Welch



Share your thoughts and opinions with the author or other readers.

Submit your comments: