News, Vision & Voice for the Advisory Community
In hindsight, the $11-billion Denver TAMP had made some moves like removing key managers and installing interim ones in the wake of troubles its parent entity referred to US regulators
July 31, 2015 — 12:09 AM UTC by Brooke Southall
Brooke’s Note: The contempt expressed in this article by some parties for Curian Capital derives from bewilderment about why it couldn’t have been merged or sold — or even given — its TAMP business to a competent operator. Why that didn’t happen remains unclear but presumably a cost-benefit analysis indicated that it was going to cost more to sell the company than dissolve it. How could that be? One aspect of selling a company is the considerable due diligence by the buyer into the skeletons in your closet. We know that regulators were investigating Curian overcharges of customers based on disclosures by its British parent, Prudential plc. Maybe there was a Pandora’s Box factor at play here.
Curian Capital LLC will stop accepting new accounts, effective today, July 31. See: Curian Capital predators position to pounce — but a few copiously keep their distance to avoid quills.
The Denver-based TAMP, which manages nearly $11 billion and employs 304 staffers, its ADV says, issued a brief statement that included its plans to shut down entirely by March 31, 2016.
Mark Mandich, interim president and CEO of Curian, explained his company’s decision to fold as one guided by a self-assessment that concluded it can no longer keep up with changes in the business. See: How a formerly homeless Vietnam veteran became a big-time RIA.
“When Curian launched 12 years ago, the competitive landscape and market trends favorably supported the business,” Mandich wrote in a statement. “Given the industrywide changes in technology, product offerings and market size, Curian has determined that it is no longer commercially positioned to provide clients high value investment programs over the long term. This was a difficult decision. We appreciate the loyalty of our clients, business partners and staff and remain committed to assisting them throughout this transition.”
Curian posted a 2014 loss of about $27 million, the red ink spilled because of a “the refund of certain fees,” according to the statement. This allusion to fees corresponds with a an August 2014 disclosure by its UK-based parent company, Prudential PLC that reads: “Operating profit from non-life operations in the US decreased to a loss of £5 million (2013: profit of £31 million), due to a Curian year-to-date loss of £23 million after a £33 million provision related primarily to the potential refund of certain fees by Curian.” The 33 million pounds translates to about $55 million dollars of fees that needed to be disgorged by Curian.
Wishing my friends at Curian(wholesalers) who are putting out fires today, all the best as their world just changed https://t.co/KvB5OYLQh1— Ned Van Riper (@NedVanriper) July 31, 2015
“All Curian associates are directly impacted by this decision, and we remain committed to supporting them during this difficult transition,” the company said in an emailed statement to Bloomberg. “We are providing monetary, job-placement and counseling support to our associates during this transition.”
Observers roundly condemned the exit route chosen by Mandich and his company because of the widespread dislocation it will cause clients and advisors alike. They also wonder why a sale of the company wasn’t attempted.
“I think advisors were TOTALLY caught off guard,” writes Alex Potts, CEO of Loring Ward, a $13 billion DFA TAMP in San Jose, Calif. “Not knowing the details, I think it’s a horrid business decision that really hurts advisors (and inconveniences their clients) or, there’s another reason that we don’t see.”
A Curian spokeswoman said she would try to get a response Friday as to why Mandich is pulling the plug rather than salvaging the company in some way but then failed to respond to subsequent emails.
One paragraph in an Aug. 17, 2014 Financial Times article may have signaled this outcome. “Meanwhile, it has emerged that US regulators are investigating Prudential over alleged mis-charging of customers of Curian, its Colorado-based asset management business,” the FT article reads. “Prudential disclosed in results last week it had set aside £33m to refund customers. Mike Wells, who runs the Pru’s US arm, said the company discovered irregularities during an internal review and referred the matter to regulators.”
Charles Goldman, CEO of AssetMark, a TAMP with $27 billion of assets under management, said he is feeling shocked and disapproves of what is unfolding.
“I’m at a loss for words,” he says. “They signaled it would come inside Jackson National. It’s hard to see how they went from that to [closing] it.
Curian is a subsidiary of Lansing, Mich.-based Jackson National Life Insurance Company that was founded in 2003.
The Jackson National connection was a big difference for this TAMP, Potts says.
“We are definitely getting calls. It’s a big advantage for us having the business of helping advisors as our sole purpose. Jackson National owns them. “We definitely want to help those we can — however we can — assuming our long-term, core investment strategy resonates.”
Ned Van Riper, director of recruiting at Independent Financial Partners [formerly of FineTooth Consulting], the LPL rep with the largest number of advisors, says he only learned of the Curian plan on July 31 when he checked in with a Curian wholesaler about a planned luncheon and was told not to expect it to happen.
“I just about fell out of my chair,” he says. Van Riper says that in his experience Curian was most often “in the same conversation” as SEI Investments, the giant TAMP in Oaks, Pa. See: After a decade of unsteady results, SEI Investments is attracting financial advisors again.
Goldman adds: “We’re going to do everything we can to reach out to these folks. I mean that sincerely as a reality. This is crazy.”
He tempered that remark by saying that survival in the TAMP business has gotten more difficult for small players.
“This business is becoming a business,” Goldman says. “You not only have to do great asset management but also great technology, practice management and relationship management.” See: 'AssetMark’ rides again as a $20-billion TAMP with a receding Genworth hangover.
Goldman points out that temporary managers had replaced the heads of each of those managerial efforts at Curian making improvements difficult if not impossible.
Nice to know you
As CEO, Mandich also became responsible for the day-to-day operations of Prudential Portfolio Manager of America. He maintained his then current positions as deputy executive-in-charge of JAG, and interim chief executive officer and president of Curian Capital, LLC, according to a PPMA press release put out in May.
Mandich joined PPMA 22 years ago from Arthur Andersen & Co., where he spent nine years providing audit and financial consulting services exclusively to financial services industry clients. He began his career at the brokerage firm A.G. Becker. Mandich earned a bachelor’s degree in accounting from Valparaiso University and holds the Certified Public Accountant designation.
Mandich had a sunny message for press release readers in May.
“I’m incredibly proud of the great leadership team we’ve developed to meet the changing needs of our clients, while leveraging the scale and capabilities of our entire investment advisory business,” Mandich said. “PPMA is known for a distinct investment culture and vision and I look forward to building on its success.”
Money in motion
Van Riper says he called one heavy user of Curian Capital with very big IBD rep practice after hearing the news to see how he was doing. “He said: 'This is going to be an exciting opportunity for us. This will cause a lot of money in motion.’...Now that’s seeing the glass half full.”
Share your thoughts and opinions with the author or other readers.