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This Atlanta roll-up start-up plans to reach $1 billion right quick by using hedge fund cash to execute a Schwab template

Scott Wilder offers a 'home' for the $50M-$100M RIA with a no-fine-print 70% payout, Four Seasons offices and a piece of the pie

Wednesday, June 19, 2013 – 5:34 PM by Stephen Garmhausen
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Scott Wilder: We're gonna be a home for the pissed-off broker.

Brooke’s Note: When it comes to roll-ups, it is becoming more and more difficult to stand out because there is broad differentiation. This one has an interesting combination of elements. But my favorite one is the raw anger and disgust that is at the seed of this venture in the form of its the bearing of its founder, Scott, a former lunch pail broker, who got threshed by the corporate combine. Better yet, as you’ll see, he’s not afraid to own how fed up he is. I can attest through observation and experience that a little disgust can be just the asset that pays the big dividends for entrepreneurs when other resources dry up.

Scott Wilder isn’t the first disgruntled broker to leave a big firm, but his departure from Morgan Keegan & Co. Inc. in 2009 has turned out to be a bigger deal than he expected.

Thanks to a fortuitous conversation out in the woods with hedge fund executive Kyle Tomlin, Wilder’s Atlanta-based Lakeview Capital Partners LLC has deep financial backing.

Unlike most roll-ups, Lakeview is willing to scoop up what others consider small fry—individuals or teams with as little as $50 million or so in assets under management. Wilder sees his school of minnows might drive a sea change within the industry by disrupting its payout norms.

See: How a $1 billion Atlanta RIA is getting fellow RIAs to funnel it their small-ticket clients.

Wilder, 43 says his “cred” as a practicing broker will help distinguish Lakeview from the aggregators run by slick executives. Oh, that and a 70% commission split that Wilder insists won’t be whittled away by nickel-and-dime charges. See: A roll-up exec talks about owning a roll-up and calls out his fellow entrepreneurs to focus on genuine distinctions.

Another interesting wrinkle is that Lakeview counts two local heavies — Thomas Tracy, former CEO of SunTrust Robinson Humphrey, and John Rhett, retired chairman of SunTrust Investment Services, on its advisory board.

What seems to hold these elements together is a determined irreverence that can’t be missed in this interview.

Q: How did you go from being a Morgan Keegan senior vice president to running an aggregator?

A: There’s got to be a better term than aggregator—that’s such a violent, awful word. The only one I can think of is “home.” We’re gonna be a home for the pissed-off broker.

One day in early 2009, I was at home looking through accounts on my computer, and I just saw all these accounts that were managed in Morgan Keegan’s allocation models: Down 36%...Market down 38%...Down 41%...Market’s down 48%... Just client after client.

I got pissed off at the firm, I got pissed off at the system. I’m like, “You know what, I give 60% of revenues up to this place and I expect if the shit hit the fan this bad that someone would’ve told me to raise a little bit of cash.” I just got really mad. So I turned my wife and I said, “I’m going out on my own.” She smiled and said, “OK, where are you going?” I said, “I have no idea.” See: Why a FiNet advisor with $477 million of advised assets flew the coop but said 'no thanks’ to becoming a Schwab RIA or LPL rep.

'You want a partner?’

Q: You found your way to Schwab though, and they made an introduction.

A: I just wanted to get a place where I could do a great job for my clients from a technology standpoint and a pricing standpoint and maybe get a little more room so a couple of friends could join me. And where it turned was, Schwab introduced me to three fellows in Greenville, S.C., who were at a big-bank wealth-management shop and wanted out. They were running about $300 million. After about a year—two or three months ago—we opened up a shop for them. We went to Greenville, got the real estate, the equipment, the software, the assistant, everything so they could walk over and just do business.

Q: When did the roll-ups go from chance to a proactive strategy?

A: This is where the story gets interesting. About a year ago I was on an annual mountain-biking trip with 12 dads. We were drinking beer at 11:30 at night after having ridden all day and a good friend of mine leaned over and said, “How’s business? What’s interesting?”

The next morning we’re at breakfast and he says, “Why aren’t you getting these [roll-ups] everywhere? I said, 'Kyle, finding the right people is really tough. And it’s a capital thing—I don’t have that kind of capital, I just can’t possibly do. He said, 'You want a partner?’ And boom, from there it took off.

Our kind of people

Q: Your end-of-year goal is $1 billion of AUM. How do you plan to achieve that?

A: Our target is really “GHBs”— good human beings. And by that I mean good folks, no egos, honest, love the business, love their clients. And so—strangely—those guys are $50 million-to-$100 million advisors.

If we’re successful, I could see bringing in 12 to 15 good human beings averaging $70 million or so, and that puts you up at $700 million. You get 15, maybe it’s $1 billion.

The team of three in Greenville were previously managing $300 million and may end up with $100 million to $150 million when all is said and done.

We had a Wells Fargo advisor join us two weeks ago and a Morgan Stanley advisor joined us last Friday. When these two guys are transitioned, we’ll be at $250 million or $300 million. And I’ve got two more fellows joining in the next 30 days; [that will add] another $100 million to $150 million.

Q: One of your selling points for advisors is a 70% payout. Is that for real?

A: That’s hugely important; that’s the number that resonates with financial advisors. If you’re a wirehouse, maybe you’re [earning] 40% or 42%. Maybe at some of the places you get 50%-something or maybe 60%. Seventy is the number that resonates.

Now, everyone in the advisor community is [wondering], where are they nickel-and-diming me, where are they getting me? So the model had to be very simple. There’s no gotchas. It is 70%; we don’t ding you for this and that and we don’t pass on expenses —that’s huge. That’s what my guys are telling me resonated. See: Top breakaway panel schools RIAs on how to create a cushier deal for financial advisors than a wirehouse.

Schwab model

Q: With that payout, and the fact that you’re willing to take on smaller advisors, how will the financials add up?

A: I was so impressed with Charles Schwab and the way they’ve treated us. They do such an amazing job with our assets and our clients, and they charge us $8.95 a trade, that’s it. And as a result, they’ve got $1.9 trillion.

I told my backers we could do the same thing. We could provide the same level of service, incredible technology, and basically price this thing for market disruption.

Q: It sounds like the tradeoff will be your profit margin. What kind of margin are you willing to accept?

A: I think if we’re profitable in the 10% to 12% range, we will have slimmer profit margins but more people. It’s not unlike a Schwab model. The margins are arguably pretty thin at these big custodians, but they’ve racked up nearly $2 trillion.

Our model’s simple—we pay all our advisors’ fixed expenses, computer, software, legal, space. We even offer top-notch Fortune 500 health benefits. After all that, we pass through 70%. So our margins are thinner, and there is a point at which it’s not profitable to do that. But this is one of those big items my backers and partners had to trust me on. See: A look inside Schwab’s second big deal with a small asset manager.

Family office in a brokerage setting

Q: Tell us about another selling point for advisors, the opportunity to participate in equity.

A: A third of the firm is reserved for new hires. And so when they come on, they are granted equity in the mother ship, as we call it, and every year they are granted more. So in Greenville, if they generate $1 million in fees, we’ll pass $700,000 to them. Let’s say it costs $150,000 to run the office; there’s $150,000 left over—and that goes to buy the equity units. See: Seeing a clear path to $3 billion, Washington Wealth hitches its venture to LPL but quietly adds Schwab.

Q: Do you have a model to help these recruits grow, or are you just going to let 'em do their thing?

A: We hire smart, young, hungry people and they are going to grow naturally. And I know what it takes to help people grow. We have an entire floor in a Four Seasons Hotel, the nicest office space in Atlanta. The space gives them so much credibility. I’ve partnered with experts: an estate attorney, a business CPA and a personal CPA, two insurance guys—business and personal—and two guys that do 401(k). So my [brokers] can walk in here with their clients or prospective clients and just by walking around the office show these folks the capability that our firm has. Just by doing that, we’ve taken out every big firm in Atlanta. No other firm has a family office capability in a brokerage setting. It just doesn’t exist. We are providing an atmosphere and a suite of services that no one else here has that will naturally lend them to gathering assets and gaining business.

Feeling B-Ds’ pain

Q: You mentioned that you’re not under the typical high-pressure deadlines associated with hedge fund backing because these executives invested their own money.

A: The big decisions we do jointly. But the whole agreement was written where I maintain control. Ultimate decision-making is mine.

These [hedge fund] guys make private investments in things that they believe in. In fact they took my advice on a lot of things, like the pricing, that we came up with, and some of the things I wanted to do that were maybe foreign to them.

Q: You speak from experience about advisors’ pain. Has that empathy been helpful in recruiting?

When I was 23, in the early 90s, I sat in a bullpen and I cold-called strangers and asked them for money. I did it month after month and year after year and I’ve built a book. And you get a certain amount of respect with other brokerage community by having done that. I can go talk to a Morgan Stanley guy or a Merrill Lynch guy, and I know every bit of their pain. I know where all the bodies are buried and I speak their language. See: Merrill Lynch makes bold moves to train new recruits for an RIA-centric future.

Target: Wirehouse

Q: Two members of your advisory board [Tracy and Rhett] have had marquee positions within SunTrust’s investment business. Do you plan to target bank-based brokers?

A: Our target is wirehouses, only because that’s where folks are most unhappy. That’s the lowest-lying fruit. We’re really fortunate to have John Rhett on our advisory board. It’s going to be very important to us. That said, he’s got a non-compete with the bank for a year, and we’re going to be really respectful of that. Atlanta is a big town, but it’s a small town, and we don’t want to make any enemies. See: Fed up wirehouse advisors more eager to leave than ever, study says.

But I think long-term certainly that’s going to be an area of growth for us: [We’ll] just find good people over there like anywhere else. [But] maybe that call into SunTrust is a little warmer than most. In about a year. See: NFL Players Association raises the bar for financial advisors as more RIAs suit up to tackle the bottom lines of underserved sports stars.

Q: How do you compare the Lakeview business model to a HighTower or a Concert or a United Capital Financial Advisers?

A: We’re gonna follow the Schwab model and stay lean and mean. I don’t receive a salary to do this. I’m in there with [the brokers]; I maintain a book of clients. I’m asking people to come and do what I’ve done.

It’s all back to that advisor-centric model. These folks running other firms are backed by some really sophisticated money. But at the end of the day they are run by very smart attorneys or former corporate executives or whatever, and that just creates a different culture.

Our culture is an advisor culture. It’s run by an advisor, all the decisions are by an advisor, and we are not just going to have a bunch of salaried folks running around creating a bunch of overhead that really affects our ability to give our advisors what they deserve, which is 70%.

Q: Who is your broker-dealer?

A: One of the challenges of going independent is credibility, and on the hybrid side it gets challenging because broker-dealers by and large are names you wouldn’t necessarily recognize. Fortunately I was directed to Sterne Agee as the broker-dealer for all our new hires. See: Sterne Agee makes its RIA custody debut after customizing for Meg Green’s $650-million RIA.

Sterne Agee is a 110-year-old private firm with a tradition and a reputation. So where a lot of hybrids are having to deal with some little B-D—maybe it’s five states away and maybe they have 12 employees—our broker-dealer is something we can really promote.

Granted, it is not easy to maintain a hybrid firm. It’s so much work. And sometimes you really understand why no one has done it yet perfectly, but it’s worth doing because even if these advisers are 90% fee-based brokers, you can’t take away their ability to have a big hit, a big commissionable event. And so to maintain this broker-dealer relationship not only but to enhance it in ways other people aren’t doing right now, it’s just so critical in bringing people on.

Envestnet connection

Q: Integrating brokerage and fee-based platforms is a challenge. What do you tell brokers when they ask you about that?

A: That we are fully integrated. When I looked at Dynasty and Hightower and all of these great firms, I saw that the backbone often times is Envestnet. Sterne Agee (has a partnership) with Envestnet. One of the biggest challenges for a hybrid is having advisers sit down to one portal and do business. Through one login we have access to everything Envestnet has—their performance reporting, aggregation software, billing, all of it off of one screen.

Q: Any other selling points?

A: And our technology is lights out ahead of what the wirehouses have. These wirehouses are burdened with legacy systems; they have these old contact management systems that they designed seven years ago. But the best software was created three weeks ago by some MIT guy that you can either get for free or buy very efficiently. See: Top 12 crucial technology happenings affecting RIAs in 2012, Part 2.

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January 15, 2020 – 2:42 AM

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Mentioned in this article:

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

Stephen Winks

Stephen Winks

June 19, 2013 — 6:08 PM

Interesting how powerful “trust” has become in an industry once deriven by honor and integredity. Tom Tracy, former CEO of the old Robinson Humphrey, is of the old school, where honor and integredity were paramount considerations in running a brokerage business. This has long been lost through decades of mergers and asquisitions each distancing the surviving firm from the consumer and the brokers that serve them. The resulting insularity to the best interest of the investing public (today’s industry pushback on actually doing the right thing) has not only lost the trust and confidence of the investing public, but has lost the trust of the broker.

Lakeview simply illustrates the brokerage industry disconnect with the best interests of the consumer and the broker. The industry has a bad case of wirehouse insularity.

Great for Lakeview but very sad for a once proud industry.


Jeff Spears

Jeff Spears

June 19, 2013 — 8:51 PM

Told my Mom and Dad I was doing something unique.

Hope they don’t read RIABiz:)



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