His days of playing defense done, Jeff Concepcion pinches pennies then poaches a Fidelity and Schwab veteran to execute grab for next $6 billion of AUA at Stratos
Lou Camacho will pursue goal of $600 million a quarter in new assets on behalf of OSJ that wants much more inorganic growth
After growth stalled to a mere $1.5 billion annually for the past half decade, Stratos Wealth Network has hired ex-Fidelity exec Lou Camacho, handed him a bag of cash and told him to start buying, to triple the firm's AUM to $20 billion and put the old Lincoln rebel days in the distant past.
He joins the Beachwood, Ohio firm as president of its subsidiary Stratos Wealth Alliance, one of Stratos' two acquisition arms. At his disposal is Stratos' nine-year effort to bank a third of its earnings to build up an M&A fund to turn an abundance of leads into deals.
Camacho, a 15-year RIA custodial veteran, and Charles Shapiro, a Stratos founding partner and its national sales director, will turn an M&A trickle into a torrent, says founder and CEO Jeffrey Concepcion.
“[We've] created a war chest anticipating an increasing desire to become more active acquirers … to continue acquiring at an increasing cadence. We [now] plan to complete multiple transactions annually,” he adds.
Things couldn't have been more different ten years ago. Concepcion, then 43 was fighting for his professional life. See:How Jeffrey Concepcion manned up after FINRA and Lincoln Financial troubles to become an LPL giant.
Radnor, Pa.-based Lincoln Financial Advisors Corp. had jettisoned him after a 23-year career, and he was embroiled in a legal battle under the auspices of FINRA, the self-regulatory organization for broker-dealers.
At the same time, he was struggling to start over at Stratos, which he founded in 2009 under the Fort Mill, S.C.-based broker-dealer LPL Financial. See: LPL vacuums up yet another $1-billion cluster of mostly RIA assets Alabama-style.
Today, these problems are past. As for his FINRA problems, Concepcion was vindicated in 2012, winning a claim for defamation and breach of contract against Lincoln. He won $2 million.
By 2013, Stratos had grown like a weed, boasting 130 financial advisors, including poaches from Morgan Stanley, Wells Fargo Advisors and UBS. Now, this figure has more than doubled to 284.
The firm has stalled its growth -- adding an estimated $1.5 billion a year in combined AUA and AUM in the last five years. It's a rate in line with the previous four years when it brought in a cumulative $7.3 billion.
But with a new strategy, saved up capital and Camacho aboard, the plan is to break out of the relative slump.
The next target is $20 billion in client assets by 2021. To reach it, Stratos needs to bring in $600 million a quarter, or an extra $250 million more per quarter than it has averaged, thus far.
To stay on track, Concepcion added M&A to the equation two years ago. Since then, it has launched a roll-up, and a separate RIA that buys minority equity stakes to lure principals worried about succession.
Inside Stratos Wealth Network
Stratos Wealth Network is an umbrella company for two RIAs
It's also a small-scale outsourcer that tucks-in sub-$100 million AUM advisors and sells them back-office infrastructure that, like a micro HighTower, woos targets with outsourcing and then bids.
Camacho's appointment coincided with five Stratos RIA deals, adding $1.1 billion in client assets and doubling the number of acquisitions it's made since it started buying in 2016.
All in all, Stratos has just shy of $14 billion under its management and administration.
But it would be wrong to say M&A is the key to hitting growth targets; it's more of a guarantee, says Concepcion. "I think we’ll surpass the $20 billion target ahead of plan, without including acquisitions. By accelerating our involvement in the acquisition space, I believe we’ll move past that target even more quickly.”
Prior to joining Stratos, Camacho spent five and half years as vice president for relationship management at Boston, Mass.-based Fidelity Investments, nine years at San Francisco’s Schwab Advisor Services, most recently as a relationship manager, and three years as an advisor at Morgan Stanley.
According to both Concepcion and Camacho, Fidelity was aware of his potential departure throughout the recruitment process, and gave its blessing.
Since its inception Stratos has typically provided smaller payouts to reps at its LPL OSJ, under the premise that the services it offers make it more than worth an advisor’s while to hand-over a larger chunk of their bottom line.
Although payouts may be lower, unlike a number of firms, Stratos isn’t making idle boasts about support, says Concepcion. “[Many] talk about a robust support model, [but] operate on a shoe string," he says.
That said, payouts have risen on Concepcion's watch. In an RIABiz article five years ago, Stratos’ payout grid was described as averaging in the 60% range for those using a full-service model, and in the low 80% range for those going the do-it-yourself route.
Today, these figures stand at nearer to 70% and 90%, respectively, he says.
Although rising payouts might hit the bottom line on brokerage assets, the industry-wide shift to a fee-based business has off-set the impact of reduced commission sharing, says Concepcion. “Advisory [assets] are nearly 70% of 2018 revenue in the year-to-date."
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