Why a $500-million RIA Rt. 495 start-up hired a no-book ex-BNY Mellon Asset Management CFO

He wears banker shoes, banker suits, and banker ties to go with his banker bona fides but has a bit of a non-banker accent and non-banker soul.

It is this list of strange-bedfellow attributes that has Patrick Sheppard chucking the big banking world and opting for a small RIA.

Sheppard started his career in retail investing, working at New York-based Scudder Kemper Investments Inc. from 1987 to 1998. After that, he served in a variety of COO, CFO and compliance capacities at firms including New York-based BNY Mellon Asset Management, Chicago-based William Blair & Co. LLC and most recently, at Stamford, Conn.-based MC Asset Management, an investment subsidiary of Mitsubishi Motors.

Now he’s joined North Andover, Mass.-based New England Investment & Retirement Group Inc, an RIA with $500 million AUM, as chief operating officer and chief compliance officer to bring his big-business skills to small business.

Doing what counts

Up until 2011, NEIR was an RIA with Commonwealth Financial Network, but it has since moved its RIA assets to “TD Ameritrade “:https://www.riabiz.com/d/71032 to execute a more ambitious plan. See: TD Ameritrade makes a clean sweep of five IBD reps in New England with about $1 billion of combined AUM.

“I feel like I’ve made a full circle and am back to the retail end and making a difference in client’s lives,” he says. “Getting back into the retail world and getting back into the high-net-worth world was more fulfilling than dealing with institutions on a global basis.” See: Why a disconnect between reporting software and advisors to UHNW assets persists — and what makes the problem so thorny.

Out of the back office

There is nothing new about the idea of people breaking away from Wall Street to go Main Street. What is different is the growing opportunity for people like Sheppard who lack the currency traditionally needed to make the switch, i.e. a book of existing clients and the assured revenue that comes with it. That’s because RIA principals need people with time and expertise on their hands to execute business development inorganically.

NEIR president Nick Giacoumakis explains that over the next one to three years his firm aims to recruit breakaways brokers, existing RIAs and the accounts of a few retiring advisors. The arrival of Sheppard announces the firm’s readiness for executing in this new field of complex endeavor.

“I think Patrick’s expertise in the [M&A space from where he came as well as his operational expertise will help us achieve those goals,” says Giacoumakis.

For Sheppard, the move to New England Investment and Retirement gets him, after decades in the corporate wilderness, back to the state where he was born, bred and developed his accent. More than this, however, Sheppard’s new position marks a return to his beginnings in the retail investor world after years of handling the back office for institutional wealth.

“Just the day-to-day hands-on value add was a huge attraction for me to come here,” he says.

Corner of institutional and seriously rich

His decision to return home couldn’t have come at a more fortuitous time. Expertise in compliance and operations are a hot commodity in today’s markets, especially in those coming from institutional backgrounds.

“I think the institutional business and the retail business are becoming more blurred and intersecting more,” says Sheppard. Wealthier clients are now starting to expect the same kind of services institutions receive and RIAs who cater to this crowd will increasingly need to expand their capabilities to keep up. See: An $18-billion RIA tacks on a $24-billion U.S. Trust cast-off as the grab for UHNW magnets continues.

Nick Giacoumakis: We’ve been very comfortable
running our business for the past
three years as an RIA.

Ties with custodians

Sheppard says there’s much his new firm can do provide such services to its ultra-rich clients.

“My immediate goal as COO is to ensure that we continually build our operational and compliance capabilities to meet the future needs of our current and future clients as well as our employees….Whether I’m talking to a client here with five million dollars or whether I’m talking to Ford Pension Plan, I want to make sure they have the same experience and same client service and same result that they’re looking for. In the past, that may not have been, from an industry perspective, what firms were lined up to do.”

Traditional RIAs don’t, for example, have experience with structured products or alternatives, two types of investments Sheppard says an increasing number high-net-worth clients are requesting. And such RIAs often lack what’s a given on the institutional level: close relationships with the largest vendors and custodians and a keen understanding all their different systems. See: Fidelity, Goldman Sachs and Morningstar call 16 top reporters to New York to define the RIA alts problem — and to explain how their Dream Team solves it.

The new deal: Deals

For years, NEIR was content to grow via client referrals. It left Commonwealth after achieving such economies of scale that the broker-dealer’s services, its leaders believed, were no longer economically sensible. Since then the RIA has appeared twice on Inc. Magazine’s list of the 500 fastest growing private companies in the U.S. See: Commonwealth raises payouts for big advisors and slashes trading commissions.

“We’ve been very comfortable running our business for the past three years as an RIA, we’re comfortable and acclimated to the craft and operational abilities that we have,” Giacoumakis says.

Making hires was the next logical step. Recent ones include: a business development/client service manager and an expert for its defined contribution business. NEIR now employs 13. The firm is now ready to make the roll-up leap. They are seeking out acquisition prospects in the region. See: Schwab 2013 RIA M&A data show hope but also futility.

Hybrid RIAs are welcome. In addition to TD Ameritrade, NEIR maintains a brokerage relationship with Purshe Kaplan Sterling (PKS) for transactional assets. It’s a small legacy from New England Investment and Retirement’s pre-RIA days, but Giacoumakis says they’re happy to keep it in order to ease transitions for potential broker-dealer representative acquisitions. See: Fidelity unveils latest effort to make its advisor-servicing silos work as a single unit for hybrids.
brids.