FT SPECIAL REPORT

Thursday June 18 2015 www.ft.com/reports | @ftreports

Robos change the rulesInsideClientsmay benefit as RIAs face disruption from automated rivals, Page 2

Inside

Upstarts appeal tothe middle classAutomatedplatforms are cheapand easy to usePage 3

Tighter standardswill aid retireesBut negotiatingthese could betricky for advisersPage 4

Actively managedfunds are on a rollThe first months of2015 have buckedrecent trendsPage 6

Legacy issues arepriority for the richThe very wealthyare planning forgenerations to comePage 8

Sustainability is agrowth industryMore Americans arealigninginvestmentwith theirvaluesPage 8

FT 300Top Registered Investment Advisers

The FT 300 listOur state-by-stateguide to RIAcompanies withat least $300m ofassets undermanagementPages 10-13

Illustrations:IanDodds

2 | FTReports FINANCIAL TIMES Thursday 18 June 2015 FINANCIAL TIMES Thursday 18 June 2015 FTReports | 3

I nvestment advice in the US hasevolved since the financial crisis,becoming more sophisticatedand accessible. Leading thecharge were the registered

investment advisers, or RIAs, whopioneered the selling of advice in the1940sandhavebeengainingmomen-tum since the 1990s. Along the way, itwas the RIAs who helped populariselow-cost investments such as index-tracking exchange traded funds(ETFs).

Now, as the financial crisis recedesand wealthy investors stand on thebrink of another leap forward ininvestment advice (one that couldrepresent a potential crossroads forRIAs), we unveil the second annuallisting of Financial Times 300 TopRegisteredInvestmentAdvisers.

On one hand, the RIA approachseems poised to overtake the olderworld of investment advice. Underthat model, advisers received com-missions for brokering transactionson behalf of investors and had to rec-ommend “suitable” investments. TheRIAs pioneered the business of beingpaid directly for advice rather thanfor transactions, and adhered to the“fiduciary standard”, under whichadvisers are legally obliged to putinvestors’ interests first.

The fiduciary standard has gainedsome momentum. Most Wall Streetcompanies offer this brand of advicealongside their traditional, commis-sion-based, business. Mary Jo White,chair of the Securities and ExchangeCommission, recently called for alladvisers and brokers to be held to thefiduciary standard of care (althoughthere are currently no concrete plansto make this mandatory). And the USDepartment of Labor has proposedstrict rules to apply the standard tothe business of advising defined con-tributionretirementplans.

On the other hand, RIAs face apotential threat in robo advisers.Thesecompanies, suchasBettermentin the US and Nutmeg in the UK, usecomputerised interfaces andalgorithms to create portfolios forinvestors.

Many observers are excited by thepotential of robo advisers to spreadinvestment advice to thewidest possible audience. Indeed, therobos, some launched by industrystalwarts such as Charles Schwab andVanguard, have already attractedbillions of dollars in assets. And thisyear, Betterment became the firstpure robo adviser to earn a spot in theFT300(see story,Page3).

Some robo advisers say they are

platforms that RIAs can use to betterserve ordinary investors. Industryobservers wonder, however, whetherrobo advisers will instead put manyRIAsoutofbusiness.

It is not clear if RIA companies willbeable toadaptsoeasily.Yearsof suc-cess have turned them into anotherpart of the establishment, with inde-pendent boutiques maturing intosmall institutions. One can see it inthis year’s list, in which the averageRIA company had 20 employees, upfrom an average of 14 in last year’s FT300.

Will RIAs, which once served as thedisrupters of the brokerages’ transac-tion-based business model, becomethe disrupted? The question of how broadly investment advice can beoffered becomes more critical as thefiduciary approach and its founda-tion of advice increasingly becomesthe industry standard. Either way,the twin forces of fiduciary-led adviceand “robo” investing will bring bene-fits to investors.

That is why this is such an oppor-tunetimeto lookagainatwhatmakesa top independent RIA. This editionof the FT 300 Top Registered Invest-ment Advisers, like last year’s, pro-vides a snapshot of the very bestacross theUS.

Robo consultantsand fiduciary ruleswill benefit clients

The second annual listing of FT 300TopRegistered InvestmentAdvisers is revealed as the industry faces changes. Loren Fox explains

Fuelled in part by a retirement sys-tem that increasingly puts the onuson individuals to safeguard theirfinancial future, a growing number ofUS citizens are looking for profes-sionalhelpwiththeir investments.

But many traditional financialadvisers will not bother with clientswho are not wealthy. Seizing uponthis dearth of services for the middleclass and mass affluent, dozens ofstart-ups in recent years havelaunched online, automated invest-ment platforms, known as roboadvisers.

While their models vary, roboadvisers generally gauge an investor’srisk tolerance from an online ques-tionnaire and then use algorithms torecommend an investment portfolio,often made up of low-cost exchangetraded funds from giant asset manag-ers such as Vanguard, Schwab andBlackRock’s iShares.

Robo advisers cost a fraction of theaverage 1 per cent fee of managedassets charged by flesh-and-bloodfinancialadvisers.

And, while financial advisers oftenrequire high minimum investments,robo advisers have a low, or no,required balance. Investors generallyalso pay the costs of the underlyingexchange traded funds, whichWealthfront, the robo adviser, says is0.12percentofassetsonaverage.

The low prices and sleek, user-friendly websites, such as that ofBetterment (the first pure roboadviser to earn a spot in the FT 300),which has been called the Apple offinance, have attracted thousands ofinvestors.

Since launching in 2010, Better-ment has grown to have $2.2bn undermanagement, while Wealthfront,another US automated investmentservice, has gathered $2.4bn since itslaunchin2011.

Eleven robo adviser start-upspolled last December by CorporateInsight, the researcher, were advising$19bn in assets, up 65 per cent from$11.5bn last April. Traditional assetmanagers have taken notice. “The bigincumbents are playing catch-up,”says Bill Doyle, principal analyst atForrester Research, who tracks roboadvisers. “But the incumbents havethe thing that everybody needs, andthat iscustomers.”

Charles Schwab, the discount bro-ker with more than $2.5tn in assets,launched its own robo adviser,Schwab Intelligent Portfolios, inMarch. The company has undercutits start-up competitors by not charg-ing any advisory fees, commissions oraccount services fees. As with severalother robo advisers, the minimuminvestment is$5,000.

Schwab can afford to give up these

fees because it makes money from itsown ETFs that constitute investors’portfolios and from other ETF pro-viders paying to gain access to theplatform, as well as from investmentreturns fromclients’ cashallocations.

The offering has grown to morethan $2.2bn in assets and 30,000accounts. More than 70 per cent ofthe clients are existing Schwab cus-tomers, saysNaureenHassan,headofSchwab’sroboadviserservice.

Vanguard entered the fray in May,although the $3.1tn investment giantdoes not call its Personal AdvisorServices a robo adviser, but rather a“hybrid” advice model. There is a bigonline component of the service, but300 financial advisers are also onhand to help clients create a financialplan. The minimum investment is$50,000 and the fee is 0.3 per cent ofmanagedassets.

Rather than build their own auto-mated systems, some of the biggestcustodians to registered investmentadvisers have partnered with start-upsduringthepastyear.

Beginning in October, the 3,000RIAs that hold their assets with Fidel-ity, for example, could use Better-mentasanoptionalplatform.

Jon Stein, head of Betterment, saysthe “slower moving, big companies”entering the space are bringing agreater awareness to the public thatbenefitshis firm.

“If anything, it’s really acceleratedour growth to have these other com-panies out there making noise aboutthe importance of good advice,” hesays.

But the incumbents do not have thesame capital constraints as the start-ups, notes Matthew Fronczke, direc-tor of product consulting andresearchatKasina.

“It’s not like Wealthfront and Bet-terment are going to be perpetuallyahead of the game, it’s just that theyare right now,” says Mr Fronczke.“Anytime there’s competition, it’s agoodthing.”

Digital upstarts drawmiddleclass investors with meansRobo advisers

Online automatedplatforms offer low pricesand easy-to-use websites,writes Beagan Wilcox Volz

The FT 300 is a collaborationbetween the Financial Times andIgnites Research, a subsidiary of theFT that provides business intelli-gence on the investment manage-ment industry.

We set a minimum standard forRIA companies of $300m in assetsunder management (AUM), theninvited more than 2,000 qualifiedfirms to apply for consideration. Thejudging team used a combination ofthe RIA companies’ self-reporteddata, regulatory disclosures and theirown research to score the candidateson attributes such as AUM, AUMgrowthrateandcompliance.

The methodology is explained fullyin a separate article published withthis list (seePage8).

The competition, as always, wasfierce. Dozens of high-quality advis-ers justmissedthe list thisyear,edgedout by peers with slightly better pro-files — sometimes the difference wasa few more years of experience, or aslightlymore impressivegrowthrate.

The FT 300 is listed state by state,34 plus Washington DC; those withhigher populations and higher con-centrations of wealth have moreadvisersonthe list.

As we found last year, New YorkCity, as an international wealth and

financial centre,has thesinglebiggestconcentration of FT 300 membercompanies, with 22. That was morethan double the number in any othercity.

Worth special mention, however,are the 22 RIAs from the greater SanFrancisco Bay and Silicon Valleyareas combined — a reflection of howmuch the current tech boom isspurring demand for wealthmanagementservices.

T he average company onthe list has been in exist-ence for 23 years andmanages $2.6bn. Simi-larly, the average FT 300

practice saw its assets under manage-ment rise by a solid 18 per cent in2014. One out of five practices hasbeen advising clients for more than30 years and can draw on its partners’experience in managing moneythroughmultiplemarketcycles.

In keeping with the trend towardslarger and more corporate RIA com-panies, some 94 per cent of the FT300 work in teams, and only 6 percent are solo practitioners. Thatmarks an increase from last year,when 89 per cent of the FT 300 had ateamstructure.

As we would expect, the FT 300

The robos have alreadyattracted billions ofdollars in assets

ContributorsLoren FoxDirector of research, Ignites Research

Beagan Wilcox VolzAssociate editor, Ignites

Emile HallezReporter, Ignites

Danielle VerbriggheReporter, FundFire

Tom Stabile Associate managingeditor, FundFire Alts

Clare TrapassoReporter, Ignites

Matthew BeatonReporter, Ignites

Peter OrtizReporter, Ignites

Greg ShulasInteractive editor, Money-Media

Ruth Lewis-CosteCommissioning editor

Steven BirdDesignerAndy MearsPicture editor

To advertise, contact: Rob Wilson,+44 (0)20 7775 6578,rob.wilson@ft.com, or Dennis Asselta,+1 917 551 5157, dennis.asselta@ft.comAll FT reports at ft.com/reportsFollow us on Twitter at: @ftreportsEditorial content is produced by theFT. Our advertisers have no influenceover or prior sight of the articles.

FT 300TopRegistered InvestmentAdvisers FT 300TopRegistered InvestmentAdvisers

represents many wealth managers.On average, high-net-worth individu-als(thosewith$1mto$10mtoinvest)account for 36 per cent of the assetsmanaged by the FT 300. And ultra-high-net-worth clients (those withmore than $10m) account foranother27percent,onaverage.

Among these advisers’ institution-centred businesses, a little more than5 per cent of their client assets, onaverage, are in endowments andfoundations. Also, some 5 per cent ofadvised assets are in employers’defined contribution retirementplans.

The fact that the FT 300 leanstowards larger firms means that thegroups on show can offer a diversearrayofspecialisedservices.

For example, 65 per cent of thecompanies specialise in serving babyboomers, while 24 per cent cater tomillennials. About 12 per cent ofpractices provide estate planning,while 5 per cent specialise in helpingentrepreneurs, and 3 per cent of com-panies offer specialised expertise inphilanthropy.

No matter what the future mayhold for RIAs, the FT 300 list of com-panies represents a range broadenough to meet the advice needs ofthereadersof theFinancialTimes.

User friendly: sites have won fans

4 | FTReports FINANCIAL TIMES Thursday 18 June 2015

A recent proposal by theUS Department of Labor(DOL) would bestowfiduciary status on mostfinancial advisers. That

could make the individual retirementaccount (IRA) rollover business (thetransfer of savings at or near retire-ment) a difficult proposition forindependent advisers who serve401(k)plans.

US President Barack Obama hasdescribed a forthcoming “standard ofcare” for advisers as similar to thatapplied to doctors and lawyers. In allinstances, advisers would be requiredto put first the best interests of indi-vidual retirement account clients,rather than simply recommending“suitable” investments, which maypay the adviser a higher commissionthan similar investments that wouldbeabetter fit foraclient.

It is a more stringent standard thanone being considered by the Securi-ties and Exchange Commission,which could centre more on disclos-ing potential conflicts of interest toclients, rather than avoiding themaltogether, according to people famil-iar with the matter. The SEC, whichhas reportedly been in co-ordinationtalks with the DOL about a forthcom-ing rule, has not yet come forwardwith itsproposal.

But the DOL rule would havethe heaviest impact on commission-based advisers, observers say.While advisers would still be able toreceive variable payments from their401(k)andIRAclients, theywouldberequired to sign “best-interest” con-tracts with those clients, agreeing toplace their own financial interestsbehindthoseofcustomers.

Independent advisers, who are typ-ically fiduciaries for their retirementplan clients and do not often receivecommissions, would be affected littlebytheproposedrule, saysFredReish,an employee-benefits lawyer andpartner at Drinker Biddle. But forthose who solicit IRA rollover busi-ness from the 401(k) plan

participants they serve, the proposalstandstobearudeawakening.

The problem would arise for advis-ers who charge higher fees for theirservices to IRA customers — a com-monpractice,assmalleraccountscanrequire a relatively higher amount ofwork. Large registered investmentadviser companies gravitate towardshigh net-worth clients, such as chiefexecutives with at least $500,000 intheiraccounts,MrReishsays.

“If you charge more in the IRA thanin the plan, then the recommenda-tionthat[participants] takearoll-over with you could be a prohibitedtransaction,” he says. “With theirbusiness model and overheads theycan’taffordtodothesmallaccounts.”

Rather than advising 401(k) cli-ents to roll their savings into an IRAmanaged by the adviser at retire-ment, those adviser companies willprobably provide education to clientsabout their distribution options,including leaving money in an exist-ingplan,hesays.

When it comes to winning rolloverbusiness, the proposed rule could putRIAs serving retirement plans at adisadvantage, compared with thosewho do not have 401(k) clients, saysNevin Adams, a spokesman for theAmerican Retirement Association,an industry trade group. “The regula-tion would define a distribution rec-ommendation as fiduciary advice,”he says. “It’s pretty easy to imaginethat therewillbe fewerof those[inde-pendent advisers] that work withretirement plans offering rolloveradvice.”

But even with the potential that theDOL’sproposalcouldhaveonrollover

business for independent advisers,the rule would have a much largerimpact on commission-based advis-ers and broker-dealer companies,which would have to invest resourcesin educating their networks of advis-ers on how to comply with the regula-tions,MrReishsays.

“The people who will be most hurtby this are the small broker-dealers,”hesays.“This thing isabear.”

Broker-dealers would generally notbe allowed to give their advisersincentivepayments forsellingcertaininvestmentproducts,hesays.

“Effectively, the rule would almostmake the adviser fee-for-service,rather than commission [-based],which ishuge,”hesays.

The DOL put forward its conflictsof interest rule in April and is collect-ingpubliccomments thatcouldaffecthow the regulator revises the rulebefore finalising it. The proposal is anew incarnation of a similar fiduciaryrule the DOL floated in 2010, whichthe agency withdrew because ofopposition fromthefinancial servicesindustryandmembersofCongress.

Much of that criticism has returnedover the latest proposal. Some con-tend that charging advisers with fidu-ciary status would discourage themfrom accepting small accounts,

potentially depriving lower-incomeworkers from having access to profes-sional investmentadvice.

“Certainly it’s a good thing foradvisers to put their clients’ bestinterests first,” Mr Adams says. “Butby eliminating [commission struc-tures] directly, or via conditions soonerous that they constitute a prohi-bition, there would seem to be a highlikelihood that fewer individuals willhave access to advice than previouslyand that those who do have accesswillbeaskedtopaymorefor it.”

But the proposal has support fromsome advisers who already functionas fiduciaries.

“It’s easy for an advisory firm tomake an honest living, by actingunconflicted, in our client’s bestinterest,” says Gregory Fulk, chiefoperating officer at RIA companyValeoFinancialAdvisors.

Mr Fulk, whose company has 34advisers and about $1.8bn in assetsunder management among 900clients, says the proposed rule wouldhave no effect on his company’sbusinessmodel.

“There is a dramatic lack of trans-parency in our industry . . . Half of allclients that hire financial advisersthink they’re getting their services forfree,”hesays.

When Peter Mallouk took overCreative Planning in 2004, theadvisory company managed$30m. The company now runsabout $15bn with 260employees, but Mr Mallouk mostenjoys spending time workingdirectly with clients as theirwealth manager. “Just as I wantmy employees [to be excited], Iwant to be excited, too,” he says.Creative Planning’s staff have

ample chance to grow, with thefreedom to specialise in onearea or take on new challenges.This type of culture is awelcome relief compared withlarger companies, whereemployees are stuck in limitedroles or expected to tacklemultiple responsibilities acrossvarious disciplines, leavingmany feeling frustrated.“Here, we give wealth

managers lots of control,” MrMallouk says. “They have theability to really run a businessrather than being pigeonholedinto one role.”The Kansas-based company

provides portfolio managementand financial planning to abouthalf its clients. But Mr Mallouksays it “shines” with itsapproach to wealthmanagement that touches oneverything from providinginvestment advice and taxguidance to legal services andestate planning.The 90 per cent retail client

base ranges from those with anet worth of less than $1m tothose with more than $10m.There were 8,500 clients withan average account size ofabout $1.6m by 31 December2014, all fee-based.Staff are encouraged to take

on new challenges. In one case,an employee on the company’strading team moved to the taxteam, while several staffmembers on the estate planningteam have shifted to wealthmanagement. “The great thingabout a company our size is thatit is small enough to be nimble,but big enough to haveopportunities,” says Mr Mallouk.Peter Ortiz

Case studyCreative PlanningProposed

rule couldput an end tocommissionRolloverFiduciary statusmay be a trickyproposition for advisers, writes Emile Hallez

‘It’s a good thing . . . toput their clients’ bestinterests first’Nevin Adams, AmericanRetirement Association

Retirement: 401(k) clients may receive education instead of advice—Alamy

Peter Mallouk

FT 300TopRegistered InvestmentAdvisers

6 | FTReports FINANCIAL TIMES Thursday 18 June 2015

FT 300TopRegistered InvestmentAdvisers

F or registered investmentadvisers with an activemanagement bias, the pastdecade has been tough. Aslow interest rates and a Fed-

eral Reserve stimulus buoyed equitymarkets, cost-efficient passive fundsthrived, raising doubts about pricieractivestrategies.

Only 45 per cent of active portfoliosbeat their benchmark during the 10years up to January 1 2014, with amajority of those outperformers fail-ing to generate a return greater than 1per cent, according to financial maga-zine Barron’s analysis of stockpickingfundsthatmonth.Thelastyearactivelarge-cap stock managers outper-formed their benchmark was 2009,dataproviderLippersays.

But recent Morningstar researchsuggests the tide may be turning infavour of active investors and RIAswho kept faith are expecting a resur-gence. To highlight opportunities,they are publishing economic out-looks explaining why active investingis the most effective way to generatereturnsandhedgerisktoday.

“Active management is alive,” saysElliott Elbaz, founder of GordianWealth Advisors. Indeed, Mr Elbaz’slatest outlook emphasises threethemes active investors should

exploit: a stronger dollar, weaker oilprices and low interest rates. “Welooked for active managers in regionsabroad that would benefit most froma more muscular greenback,” MrElbaz says. “The best opportunitieshave been managers with exposure toEurope,AsiaandIndia.”

RIA company executives agree thatactive managers are poised to benefitfrom the widening performancespreads between the different assetclasses. “Markets are rewarding com-panies that are performing well earn-

ings wise . . . And they are punishingcompanies that are not performing,”says Kevin Guth, partner and manag-ing director at Snowden Lane Part-ners, an FT 300 company that over-sees $1.7bn in assets. “Markets werelargely correlated after the financialcrisis,but thathaschanged.”

Morningstar data show activelymanaged US equity funds have out-performed their benchmarks duringthe first four months of 2015. Suchstrategies returned 2.25 per centcompared with 1.9 per cent and 2.20

per cent for the S&P 500 and indexfunds, respectively.

In a sign of confidence, large activeequity managers are stepping uptheir advertising. For example, Fidel-ity Investments launched a “power ofactive management” advertisingcampaign this year touting two vet-eranportfoliomanagers.

Active-oriented RIAs contend thatretail investors will have no choicebut to break the long trend of favour-ing passive funds over active funds, especially given pending market

volatility. Net flow assets to passive-oriented exchange traded funds andindex funds stood at $239.88bn and$182.7bn, respectively, in 2014,Morningstar data show. Yet activefunds attracted only $43.3bn duringthatperiod.

“Active management will abso-lutely make a comeback,” says RIADon Garman, founder of MiradorCapital Partners, which oversees$300m in assets. “If you think aboutthe math, when passive managementbecomes so widely adopted that peo-ple are blindly buying more of thehighest market cap securities, activemanagementwillonceagainmatter.”

To warn of a passive-fuelledequities bubble, Wintergreen Advis-ers published an outlook last monthsaying the rush into index funds hascaused market capitalisations ofmega-cap companies to balloon whilesmaller, strong-performing compa-nieswereoverlooked.

The trend has caused risky capitalmisallocations that will harm inves-tors, thereportsaid.

Meanwhile, RIAs who base theiractive strategy too closely on theirfuture macroeconomic outlook maybe making a mistake, warns ScottMacKillop, former president of Fron-tierAssetManagement.

“On close examination, I wouldexpect that RIAs who based theirinvestment processes on their abilityto make accurate economic forecastsprobably have pretty unimpressivetrack records,” he says. “There arefew instances of asset managers whoproduce consistently good results fortheir clients by trying to invest basedontheireconomicforecasts.”

Active investing is still aliveOn a roll: actively managed US equity funds have outperformed their benchmarks during the first four months of 2015— Reuters/Lucas Jackson

At times, managing others’ wealthrequires Art Doglione to dig deepinto sensitive family situations.Sometimes, parents who want to

pass on big inheritances to theirchildren may have finances thatlook great on paper, but theirportfolios offer no clues to theextent of personal problems thatcan destroy wealth that tookdecades to build up.“We’ve had situations where the

children of successful families havehad substance abuse issues andhave been through a number ofdifferent programmes,” Mr Doglionesays. “The last thing [we] want todo is dump $10m into their lap,because you know where that’sgoing to go.”Mr Doglione is president of Alpha

Fiduciary and manages $740m for230 clients from his Arizona-basedadvisory company. After nearly two

decades of working for a leadingwirehouse, he started his ownwealth management business in2006. By the end of December 2014,the average size of his clients’accounts was $1.6m.“I wanted to be able to focus on

achieving or attaining my clients’most important goals without theconflicts of interest woven into themajor wirehouses,” he says.Those conflicts were

embedded in a culturethat limited Mr Doglioneto offering products toclients based onagreements thewirehouse had withvarious providers.By branching out

on his own, he and

his team of 10 built clientrelationships that were not limitedby sales agreements and where “wehave no alliance to anyone otherthan our clients”.The company specialises in

preparing generations on how tohandle and manage wealth, he says.Accomplishing this requiresknowing who the key decision

makers are in a family, andencouraging clients toconfront tough questionsabout how best to passtheir wealth down tochildren and grandchildren.The company’s staff

include counselling experts,so Alpha Fiduciary canrecommend the right help

to resolve conflictsamong familymembers.Peter Ortiz

Case study Lessons in inheritance

Stock pickingThe tide againstpassive strategiesmay finally be aboutto turn, writesGreg Shulas

Family values:Art Doglione

8 | FTReports FINANCIAL TIMES Thursday 18 June 2015 FINANCIAL TIMES Thursday 18 June 2015 FTReports | 9

FT 300TopRegistered InvestmentAdvisers FT 300TopRegistered InvestmentAdvisers

U ltra-wealthy investors —thosewith$20mormorein investible assets — canbe lucrative clients forwealth managers. But

conversely, these clients often havemore complex planning and invest-ment needs than some financialadvisersarepreparedtohandle.

The ultra-high-net-worth marketin the US includes about 94,161households with an average of $38min assets, according to a 2014 reportfrom asset manager Cerulli Associ-ates. It is easy to see why such inves-tors present an attractive market forwealth managers who win their busi-ness, but the competition for theseclients is intense. Independent regis-tered investment advisers (RIAs)contend with banks, wirehouses,multifamily offices and many othercompanies hoping to manage thiswealth. Advisers who do not alreadyhave a foothold in the market mayhaveadifficult timebreaking in.

“Advisers are attracted to [this]space because of the size of thepotential assets. They view it as arelatively easy way to scale up theirbusiness,” says Michael Zeuner, amanaging partner of WE FamilyOffices.

But that approach is likelyto fail, he says. To serve such clients

successfully, advisers must be able tohelp them plan for multi-genera-tional wealth, which is a more com-plexandlessscalableendeavour.

While many affluent or even high-net-worth clients may burn throughtheir assets within their lifetime,ultra-wealthy investors often intendto leave their money to their childrenor grandchildren, raising the level ofcomplexity forwealthmanagers, saysMaria Elena Lagomasino, chief exec-utive and managing partner of WEFamilyOffices.

Serving this market requires moreresources and time, says Ms Lagoma-sino. For example, her company hasabout 50 personnel serving about 70families.

A typical adviser at the companywill work with five families or fewer.The investment process is also morecomplex, shesays.

“[These clients] see the world asopportunity and most of them havemade money in real estate or operat-ing businesses,” Ms Lagomasino says.“They don’t just like to invest instocks and bonds. It becomes a verydiverse set of investments, all ofwhich have to be knitted together to[meet] a specific investmentobjectiveof thefamily.”

Ultra-wealthy clients have lessneed for short-term liquidity and can

invest more in long-term illiquidpropositions, says Jack Markwalter,chief executive and chairman ofAtlantic Trust. That means theirportfolios may include private equity,hedge funds, emerging marketsinvestmentsandproperty.

“Once you reach the level of ultra-high-net-worth, from an investmentpoint of view, you are able to lean intorisk toagreaterextent,”MrMarkwal-ter adds. “You can absorb morevolatility ifnecessary.”

Greater levels of wealth also allowultra-wealthy families to have aheightened focus on using theirwealth to create a family legacy or tomake a positive impact, he says. “Asclients move up the wealth curve,there’s more of an opportunity andpropensity to have wealth withpurpose.”

Advisers of ultra-wealthy clientsshould also be able to assist familieswith talking about money in the fam-ily, raising children who are finan-cially aware, dealing with securityissues, creating a trust or foundationand making decisions around philan-thropy,MrMarkwalteradds.

Very wealthy families often askadvisers for help with everythingfrom walking their dogs to structur-ingtheownershipof theirprivate jets,says Andy Hart, managing partner at

Delegate Advisors. But that does notmean that RIAs serving ultra-high-net-worthclientshavetodoitall.Partof what makes the top companiessuccessful is knowing when tooutsource,MrHartsays.

RIAs serving such clients do notneed to walk the dog themselves, butthey do need to know the best third-party experts to whom to delegatesuchatask,headds.

Delegate Advisors does not sharerevenue with providers, but thoseproviders will sometimes offer

Heightened focus onbuilding a legacy forultra-wealthy investorsFamily affairsAdvisers to the extremely richwill probably besupporting their clients’ children, too, writesDanielle Verbrigghe Along with the startling financial

headlines in the closing months of2008 came news that big adviserteams were leaving the US wirehousebrokerages — footsteps that threat-enedto leadtoastampede.

The high-profile exits of a $5bngroup led by Lori Van Dusen fromSmithBarney,andanearly$1bnteamof four Merrill Lynch veterans (whoformed LLBH Private Wealth Man-agement) were most notable forwhere they went: to the independentchannel. And they led a flurry in theyears since, not only of wirehouseadvisers going independent but alsoof platforms launching to supportthesebreakaways.

Today, however, the breakawaymovement isno longerbignews,eventhough the wirehouse share of assetsin the US adviser market has shrunkfrom more than 50 per cent before2008 to less than 40 per cent today.By 2017 it may fall to 37 per cent,behindthe independentsector forthefirst time, according to Cerulli Associ-ates. Has breakaway growth levelledoff, or moved into the deceptivelycalmeyeof thestorm?

It may be just that the market isnow used to advisers going their ownway, says Bill Willis, president ofWillis Consulting, an adviser recruit-ing company. “It’s not quite as shock-ing as it was three or four or five yearsago,”hesays.

Indeed, the phenomenon that once

made headlines has become “an oldstory”, says Shirl Penney, presidentand chief executive of Dynasty Finan-cial Partners, a platform that pro-videswirehouse-calibreproductsandservices to independent advisersincluding Dynasty Private WealthManagement,anFT300company.

“It’s now accepted as the norm,”says Mr Penney. He was a Smith Bar-ney executive before he helped formDynasty Financial in 2010; it now hasnearly$30bninassets.

Some of the original buzz stemmedfrom turmoil at the big companiesafter 2008, with Smith Barney beingsold to Morgan Stanley and MerrillLynchtoBankofAmerica.Thatmadebreaking away more compelling, saysJeff Fuhrman, chief operating officerat LLBH, which is now affiliated withFocus Financial Partners, an “aggre-gator”of independentadvisers.

“Arguably [LLBH was] leaving abig, stable firm. But soon, independ-ence lookedfarmorestable,”hesays.

Today, the breakaway movementmay also seem less exotic becausemany advisers have at least enquiredabout the basics, says Mr Willis. “Wewere getting a lot more calls a fewyears ago from people who wanted tolearn what going independentmeant,”hesays.

The breakaway movement maynot be retreating, but rather settlingintoaregular flow,saysMrPenney.

“But it has kept pace because thenumber of advisers moving hasslowed, but the teams moving toindependence now are larger andmoresophisticated,”hesays.

Other factors may also have tem-pered the growth rate, including anequity bull market since 2009 andwirehouse efforts to lock in adviserswith retention bonus packages of

nine-year “forgivable loans”, saysTim Welsh, president of Nexus Strat-egy,astrategicconsultant.

Advisers jumping ship today areresponding to the main argument forindependence — giving clients advicewithout ties to investment productsales and offering independent cus-tody, trading and service plans, MrPenney says. “Clients respond to thatmodel where the adviser gives youchoice,”headds.

The pitch to wirehouse advisersand their clients is that independenceis “the same religion, differentchurch”, saysMrFuhrman.

Independence is also attractive towirehouse advisers in their 50s and60s who aim to “monetise” theirpractices by gaining ownership andselling them in the future, says MrWillis.

However, a big change since 2008 isthat the market now has a large net-work of providers which can smooththe path for wirehouse advisers tobecome independent, helping withtransitions and operations, says MrWelsh. “The fact that many of themwon’t have to do it from scratch butcan go to a platform that supportsthem, or join an existing firm, issignificant,”hesays.

Today’s independent channeloptions, from product platforms tocustody, are much more “credible”and similar to what wirehouse advis-ers might leave behind, says Mr Wil-lis. In that light, with a ramp of viableindependent platforms already built,any tipping point could lead to a dra-matic breakaway movement revivaland “exponential growth” for theindependentchannel, saysMrWelsh.

“We will see Breakaway 2.0,” headds. “There is really nothing holdingthemback.”

Wirehouses in decline asadvisers seek independenceBreakaways

The movement may notbe retreating, but rathersettling into a regular flow,writes Tom Stabile

Sustainable investing has beenslow to catch on amongindividual investors in the UScompared with Europe. Butfinancial advisers and moneymanagers say interest andassets are growing rapidly asAmericans increasingly seekto align their investments withtheirvalues.

From the beginning of 2012to the start of 2014, US assetsin sustainable, responsible andimpact strategies jumped 76per cent, from $3.74tn to$6.57tn, according to a 2014

report on sustainable invest-ment trends from the Forumfor Sustainable and Responsi-ble Investment,a tradebody.

“Consumers care about sus-tainability more than theyused to,” says Stephen Freed-man, head of thematic andsustainable investing strategyat UBS Wealth ManagementAmericas.

The main drivers in the USare institutional investors,who include large pensionsschemes and endowments, hesays. Millennials and women

also tend to be more drawn tosuch investments. Interestamong ultra-high-net-worthinvestors ispickingup, too.

As environmental problemssuch as pollution becomemore apparent, Mr Freemansays he expects sociallyresponsible investments (SRI)and impact investments inindustries suchascleanenergyto catch on even further. Healsosaysenvironmental, socialand governance (ESG), a set ofstandards used to evaluatecorporate behaviour, will also

drive investment demand.Impact is typically privatemarket investmentsseeking tosolve social or environmentalproblems. “We’re only seeingthe beginning of this trend,”MrFreedmansays.

The increased availability ofSRI and ESG company data aremaking it easier for managersto incorporate the informationinto their investment proc-esses, says Amy O’Brien, headof responsible investment atretirement fundTIAA-CREF.

From early 2012 to early

2014, the US has been thefastest-growing country forsustainable investments,according to the Global Sus-tainable Investment Alliance’s2014review.

However, nearly 59 per centof European assets were insustainable investments in2014, a trend driven by institu-tional demand, the reportsays. This compared withalmost18percentofUSassets.

That is because of Europeanregulations, such as a lawpassed last year that will

Americans seek to align investments with valuesSustainable investing

Interest is growing,especially fromwomen and youngerclients, asenvironmentalproblems increase,writes Clare Trapasso

require large, publicly tradedcompanies, as well as certainbanks and insurance compa-nies, to disclose ESG factors intheirannualreportsby2017.

In the US, just 3 per cent ofthe financial advisers who

made the FT 300 listed SRIsasaspeciality.

Galvin Gaustad &Stein, a registeredinvestment adviser,has attracted newclients interested insustainable invest-ments over the pasttwo to three yearsthrough its custom-

ised portfolios, saysRobert Krenn, the

firm’s director ofportfolio man-

agement. The company, whichhad $402m in assets undermanagement by the end of2014, isontheFT300list.

Most clients interested insustainable investing screenout certain industries, such astobacco, pharmaceuticals andfossil fuels. They also tend tobe inspired by seeing institu-tions make similar investmentmoves,MrKrennsays.

Dixon Financial Services, anRIA that has also entered theFT 300 list, made responsibleinvesting a focus after severalhigh-net-worth individuals,mostly women and youngerclients, expressed interest insuchinvestments.

About 5 per cent of thecompany’s more than 200

clients have now invested insocial and sustainable mutualfunds, says Michelle Dixon, cli-ent services manager at the FT300 firm. It had $465.8m inassetssincetheendof2014.

She hopes to find other pas-sive, responsible funds withlow fees that the company canturnintocoreclientofferings.

About 42 per cent of finan-cial advisers agreed that cli-ents are requesting productswith SRI and ESG attributes, asurvey from Boston-basedasset manager Cerulli Associ-ates said. Yet 58 per cent saidsuch features are a bonus, butnot necessary when choosinginvestments.

Those considering thesestrategies should research the

product provider, says PamelaDeBolt, associate director ofCerulli’s asset managementpractice. “There’s a wholeother layer of analysis thatgoes with SRI and ESG invest-ing,” she says. “You have tounderstand their process and theirreputation inthespace.”

The investments must alsocontend with the “myth thatresponsible investing requiresyou to give up returns”, saysAlex Bernhardt, head ofresponsible investment atMercer Investments.

Sustainable investmentshavetypicallymetorexceededthe performance of traditionalinvestments, according toMorgan Stanley’s SustainableRealityreport inMarch.

For example, sustainableequity mutual funds saw equalor higher median returns andthe same or lower median vol-atility for 64 per cent of theperiods examined over thepast seven years, comparedwith traditional investments,accordingtothereport.

Meanwhile, sustainable sep-arately managed accounts hadequal or higher medianreturns for 36 per cent of theperiods and the same or lowermedian volatility for 72 percentof theperiods.

“Sustainable investment isvery much consistent withhigh-quality investing,” saysAudrey Choi, chief executiveof Morgan Stanley’s InstituteforSustainable Investing.

referrals of prospective new clients.Intermediaries such as trust and

estate lawyers, accountants, andother investment companies, can begood sources of referrals, says EricPropper, president of Atlantic Trust.“Client satisfaction goes a long way inhelpingusattractnewbusiness.”

But for advisers who do not alreadyserve the ultra-wealthy, breaking intothe market can be tough, says MrHart.

“The most profitable RIAs are theones that scale into the ultra-high-

High ambitions: the ultra-richare likely to have ‘wealthwith purpose’ —Alamy

Wealthy families oftenask advisers for helpwithwalking their dogs andowning private jets

Audrey Choi, chief ofMorgan Stanley’s Institutefor Sustainable Investing

net-worth business and have fewer,larger clients,” he says. “It’s just hardtoget intothatbusiness.”

And even if a RIA is able to lureaway an ultra-wealthy client, theresources required to serve themeffectively may be tough for somecompanies toprovide.

“It’s a relatively non-scalable busi-ness,” Mr Hart says. “Everybody saysthey want to serve $500m dollar fam-ilies, but when you realise what youneed to do to serve them effectively,it’shardtoscaleabusiness.”

10 | FTReports FINANCIAL TIMES Thursday 18 June 2015 FINANCIAL TIMES Thursday 18 June 2015 FTReports | 11

FT 300TopRegistered InvestmentAdvisers FT 300TopRegistered InvestmentAdvisers

Client segments served

Firm

nam

e

City

Reta

il (in

divi

dual

s w

ith <

$1m

)

HN

W (i

ndiv

idua

ls

with

$1m

– $

10m

)

Ultr

a H

NW

(ind

ivid

uals

w

ith $

10m

+)

Inst

itutio

nal

Kayne Anderson Rudnick Investment Management Los Angeles � � � �

KCM Investment Advisors LLC San Rafael � � � �

Litman Gregory Asset Management Larkspur � � � �

Loring Ward San Jose � � � �

LourdMurray Beverly Hills � � � �

Mission Wealth Management, LLC Santa Barbara � � � �

Morton Capital Management Calabasas � � � �

Osborne Partners Capital Management, LLC San Francisco � � �

Pence Wealth Management Newport Beach � � �

Pillar Pacifi c Capital Management, LLC Daly City � � � �

PlanMember Securities Corporation Carpinteria � �

Pure Financial Advisors, Inc. San Diego � � �

Quantum Capital Management San Francisco � � � �

Rand & Associates San Francisco � � � �

Sand Hill Global Advisors Palo Alto � � � �

Saratoga Research & Investment Management Saratoga � � � �

Scharf Investments LLC Scotts Valley � � � �

Signature Estate & Investment Advisors (SEIA) Los Angeles � � � �

The Advisory Group of San Francisco, LLC San Francisco � � � �

The Presidio Group San Francisco � �

The Sierra Group Santa Monica � � � �

Thomas Wirig Doll Walnut Creek � � � �

United Capital Financial Advisers, LLC Newport Beach � � � �

Vista Wealth Management, LLC Palo Alto � � �

Washington Wealth Management San Diego � � �

WESCAP Group Burbank � � � �

Westmount Asset Management, LLC Los Angeles � � � �

Wetherby Asset Management San Francisco � � � �

Willow Creek Wealth Management Inc. Sebastopol � � � �

Colorado

BRC Investment Management LLC Greenwood Village � � �

BSW Wealth Partners Boulder � � �

Capital Investment Counsel Denver � � � �

Crestone Capital Advisors LLC Boulder � �

Sargent Bickham Lagudis, LLC Boulder � � � �

Connecticut

Beirne Wealth Consulting Services, LLC Milford � � � �

Bradley, Foster & Sargent, Inc. Hartford � � � �

Essex Financial Services Essex � � � �

Fieldpoint Private Greenwich � � �

Greenwich Wealth Management Greenwich � � � �

NorthCoast Asset Management Greenwich � � � �

Resnick Investment Advisors, LLC Westport � � � �

Delaware

Capital Markets IQ Wilmington � � � �

District of Columbia

Avenir Corporation Washington � � � �

Farr, Miller & Washington, LLC Washington � � �

Marshfi eld Associates Washington � � � �

Florida

Banyan Partners LLC Palm Beach Gardens � � � �

Bott-Anderson Partners, Inc. Jacksonville � � �

Cumberland Advisors Sarasota � � � �

Evensky & Katz LLC Coral Gables � � � �

Foldes Financial Management Miami � � �

GenSpring Family Offi ces Jupiter � � �

Global Financial Private Capital, LLC Sarasota � � �

Investacorp Advisory Services, Inc. Miami � � � �

Investor Solutions, Inc. Coconut Grove � � �

Palisades Hudson Asset Management, L.P. Fort Lauderdale � � �

ProVise Management Group, LLC Clearwater � � � �

Client segments served

Firm

nam

e

City

Reta

il (in

divi

dual

s w

ith <

$1m

)

HN

W (i

ndiv

idua

ls

with

$1m

– $

10m

)

Ultr

a H

NW

(ind

ivid

uals

w

ith $

10m

+)

Inst

itutio

nal

Singer Xenos Wealth Management Coral Gables � � � �

Wasmer, Schroeder & Company Naples � � � �

WaterOak Advisors Winter Park � � � �

WE Family Offi ces Miami �

Georgia

Arcus Capital Partners LLC Atlanta � � � �

Asset Preservation Advisors Atlanta �

Balentine Atlanta � � � �

Brightworth Atlanta � � � �

CornerCap Investment Counsel Atlanta � � � �

Crawford Investment Counsel, Inc. Atlanta � � � �

GV Financial Advisors Atlanta � � �

Henssler Financial Kennesaw � � � �

Homrich Berg Atlanta � � �

SignatureFD, LLC Atlanta � � � �

Hawaii

CKW Financial Group Honolulu � � � �

Idaho

Yellowstone Partners Idaho Falls � � � �

Illinois

Altair Advisers, LLC Chicago � � �

Balasa Dinverno Foltz LLC Itasca � � � �

Brookstone Capital Management, LLC Wheaton � � �

Cedar Hill Associates, LLC Chicago � � � �

Chesley, Taft & Associates, LLC Chicago � � �

Chicago Partners Wealth Advisors Chicago � � � �

Cozad Asset Management, Inc. Champaign � � � �

Embree Financial Group Chicago � � �

Geneva Advisors Chicago � � � �

Great Lakes Advisors Chicago � � � �

HighPoint Planning Partners Downers Grove � � � �

HighTower’s The Lerner Group Deerfi eld � � � �

IPI Wealth Management, Inc. Decatur � � � �

JMG Financial Group, Ltd. Oak Brook � � �

Kovitz Investment Group, LLC Chicago � � � �

Leonetti & Associates, LLC Buff alo Grove � � � �

Mid-Continent Capital, LLC Chicago � � �

Pekin Singer Strauss Asset Management Chicago � � �

Relative Value Partners LLC Northbrook � � � �

RMB Capital Chicago � � � �

Savant Capital Management Rockford � � � �

Strategic Wealth Partners LLC Deerfi eld � � � �

Whitnell & Co. Oak Brook � � �

Indiana

Bedel Financial Consulting, Inc. Indianapolis � � �

Column Capital Indianapolis � � �

Donaldson Capital Management, LLC Evansville � � � �

Oxford Financial Group, Ltd. Indianapolis � � � �

Phillips Financial Management, LLC Fort Wayne � � � �

Valeo Financial Advisors, LLC Indianapolis � � � �

Iowa

Honkamp Krueger Financial Services, Inc. Dubuque � � � �

Steele Capital Management, Inc. Dubuque � � � �

Kansas

Creative Planning, Inc. Leawood � � � �

Vantage Investment Partners, LLC Merriam � � � �

Kentucky

ARGI Investment Services Louisville

Client segments served

Firm

nam

e

City

Reta

il (in

divi

dual

s w

ith <

$1m

)

HN

W (i

ndiv

idua

ls

with

$1m

– $

10m

)

Ultr

a H

NW

(ind

ivid

uals

w

ith $

10m

+)

Inst

itutio

nal

Alaska

Alaska Permanent Capital Management Anchorage � �

Arizona

Miller Russell Associates Phoenix � � � �

TCI Wealth Advisors, Inc. Tucson � � � �

TFO Phoenix Phoenix � � � �

United Planners Financial Services of America Scottsdale � � � �

California

AMI Asset Management Corporation Los Angeles � � �

Aspiriant Los Angeles � � �

Atherton Lane Advisers LLC Menlo Park � � � �

Baker Street Advisors, LLC San Francisco � � �

Client segments served

Firm

nam

e

City

Reta

il (in

divi

dual

s w

ith <

$1m

)

HN

W (i

ndiv

idua

ls

with

$1m

– $

10m

)

Ultr

a H

NW

(ind

ivid

uals

w

ith $

10m

+)

Inst

itutio

nal

Beacon Pointe Advisors Newport Beach � � � �

Brouwer & Janachowski LLC Tiburon � � � �

California Financial Advisors San Ramon � �

Cardiff Park Advisors Carlsbad � � � �

Churchill Management Group Los Angeles � � � �

Cliff ord Swan Investment Counsel Pasadena � � � �

Destination Wealth Management Walnut Creek � � � �

Dowling & Yahnke, LLC San Diego � � � �

First Republic Investment Management, Inc. San Francisco � � � �

Gemmer Asset Management LLC Walnut Creek � � � �

Genovese Burford & Brothers Sacramento � � � �

Golub Group, LLC San Mateo � � � �

Halbert Hargrove Long Beach � � � �

Hanson McClain Advisors Sacramento � � �

FT 300The FT 300 top registered investment advisers in the US listed alphabetically by state

RIAs of the yearListing Our snapshot of the best Registered InvestmentAdvisers in theUS

12 | FTReports FINANCIAL TIMES Thursday 18 June 2015 FINANCIAL TIMES Thursday 18 June 2015 FTReports | 13

Client segments served

Firm

nam

e

City

Reta

il (in

divi

dual

s w

ith <

$1m

)

HN

W (i

ndiv

idua

ls

with

$1m

– $

10m

)

Ultr

a H

NW

(ind

ivid

uals

w

ith $

10m

+)

Inst

itutio

nal

MCF Advisors Covington � � � �

Louisiana

Resource Management, LLC Metairie � � � �

St. Denis J. Villere & Co. LLC New Orleans � � � �

Maryland

Baltimore Washington Financial Advisors Columbia � � � �

Chevy Chase Trust Bethesda � � �

Convergent Wealth Advisors Potomac � � �

FBB Capital Partners Bethesda � � �

Heritage Investors Management Corp. Bethesda � � � �

Highline Wealth Management, LLC Rockville � � �

HighTower Bethesda Bethesda � � � �

HighTower’s Kelly Wealth Management Hunt Valley � � � �

Maryland Capital Management Baltimore � � � �

Pinnacle Advisory Group, Inc. Columbia � � � �

Retirement Management Systems Annapolis � �

WMS Partners, LLC Towson � � �

Massachusetts

Adviser Investments Newton � � � �

Athena Capital Advisors LLC Lincoln � �

Baldwin Brothers, Inc. Marion � � �

Ballentine Partners, LLC Waltham � � � �

Breckinridge Capital Advisors Boston � � � �

Choate Investment Advisors LLC Boston � � � �

Federal Street Advisors, Inc. Boston � � � �

Grimes & Company, Inc. Westborough � � �

Kaplan Financial Services, Inc. Newton � � �

Reynders, McVeigh Capital Management, LLC Boston � � � �

SCS Financial Boston � �

The Colony Group, LLC Boston � � �

Welch & Forbes LLC Boston � � � �

Wellesley Investment Advisors Wellesley � � � �

Michigan

Flexible Plan Investments, Ltd. Bloomfi eld Hills � � �

LJPR, LLC Troy � � �

Mainstay Capital Management, LLC Grand Blanc � � �

Rehmann Financial Lansing � � � �

Retirement Income Solutions, Inc. Ann Arbor � � �

Telemus Capital, LLC Southfi eld � � �

Minnesota

JNBA Financial Advisors Minneapolis � � � �

Minneapolis Portfolio Management Group LLC Minneapolis � � �

Riverbridge Partners, LLC Minneapolis � � � �

Windsor Financial Group, LLC Minneapolis � � � �

Mississippi

Medley & Brown Jackson � � � �

Missouri

Acropolis Investment Management, LLC Chesterfi eld � � � �

BKD Wealth Advisors, LLC Springfi eld � � � �

Matter Family Offi ce St. Louis � �

Moneta Group Investment Advisors, LLC Clayton � � �

Plancorp, LLC St. Louis � � � �

Zemenick & Walker, Inc. Clayton � � � �

Montana

Stack Financial Management Whitefi sh � � � �

Nebraska

Carson Wealth Management Group Omaha � � �

Client segments served

Firm

nam

e

City

Reta

il (in

divi

dual

s w

ith <

$1m

)

HN

W (i

ndiv

idua

ls

with

$1m

– $

10m

)

Ultr

a H

NW

(ind

ivid

uals

w

ith $

10m

+)

Inst

itutio

nal

Lawson Kroeker Investment Management Omaha � � � �

New Jersey

Condor Capital Management Martinsville � � � �

Massey, Quick & Co. LLC Morristown � � � �

Meyer Capital Group Marlton � � � �

Modera Wealth Management Westwood � � � �

Pathstone Family Offi ce Fort Lee � � � �

Private Advisor Group Morristown � � � �

RegentAtlantic Morristown � � � �

The MDE Group Morristown � � �

New York

Alesco Advisors LLC Pittsford � � � �

Altfest Personal Wealth Management New York � � �

Barrett Asset Management LLC New York � � �

Bridgewater Advisors Inc. New York � � � �

Capital Counsel LLC New York � �

Clarfeld Tarrytown � � �

Constellation Wealth Advisors LLC New York � � �

Courier Capital Corporation Buff alo � � � �

Douglas C. Lane & Associates, Inc. New York � � � �

Douglass Winthrop Advisors LLC New York � � �

Dynasty Wealth Management, LLC New York � �

Edge Wealth Management LLC New York � � � �

Evercore Wealth Management New York � � �

Geller Family Offi ce Services, LLC New York � �

Gerstein Fisher New York � � � �

HighTower’s HSW Advisors New York � � �

Highmount Capital New York � �

HighTower’s Morse, Towey & White Group New York � � �

Ingalls & Snyder LLC New York � � � �

Joel Isaacson & Co., LLC New York � �

Klingman & Associates, LLC New York � � � �

Linden Global Strategies LLC New York � � �

LVW Advisors, LLC Pittsford � � �

M. Griffi th Investment Services, Inc. New Hartford � � � �

Matrix Asset Advisors, Inc. New York � � � �

Nottingham Advisors Buff alo � � � �

Offi t Capital New York � � �

Schafer Cullen Capital Management, Inc. New York � � � �

Silvercrest Asset Management New York � � � �

Sontag Advisory New York � � � �

TAG Associates, LLC New York � �

The Portfolio Strategy Group, LLC White Plains � � � �

Tiedemann Wealth Management New York � � �

Tirschwell & Loewy, Inc. New York � �

North Carolina

Carroll Financial Associates, Inc. Charlotte � � � �

Horizon Investments Charlotte � �

Novare Capital Management Charlotte � � �

Parsec Financial Asheville � � �

Stearns Financial Group Greensboro � � � �

Ohio

Bahl & Gaynor Investment Counsel Cincinnati � � � �

Bartlett & Co., LLC Cincinnati � � � �

Budros, Ruhlin & Roe, Inc. Columbus � � � �

Carnegie Investment Counsel Beachwood � � � �

Foster & Motley, Inc. Cincinnati � � � �

Hamilton Capital Management, Inc. Columbus � � � �

Johnson Investment Counsel Cincinnati � � � �

McDonald Partners, LLC Cleveland � � � �

OBS Financial Advisors, Inc. Whitehouse � � �

RiverPoint Capital Management Cincinnati � � � �

Client segments served

Firm

nam

e

City

Reta

il (in

divi

dual

s w

ith <

$1m

)

HN

W (i

ndiv

idua

ls

with

$1m

– $

10m

)

Ultr

a H

NW

(ind

ivid

uals

w

ith $

10m

+)

Inst

itutio

nal

Spero-Smith Investment Advisers, Inc. Cleveland � � � �

Summit Financial Strategies, Inc. Columbus � � � �

Truepoint Wealth Counsel Cincinnati � � � �

Oklahoma

Capital Advisors, Inc. Tulsa � � � �

Exencial Wealth Advisors Oklahoma City � � � �

Tom Johnson Investment Management, LLC Oklahoma City � � �

Oregon

Ferguson Wellman Capital Management Portland � � � �

Northside Capital Management, LLC Hood River � �

Vision Capital Management, Inc. Portland � � �

Pennsylvania

Cornerstone Advisors Asset Management, Inc. Bethlehem � � �

Fort Pitt Capital Group Pittsburgh � � � �

Fragasso Financial Advisors Pittsburgh � � � �

HBKS Wealth Advisors Erie � � � �

Logan Capital Management, Inc. Ardmore � � � �

Mill Creek Capital Advisors, LLC Conshohocken � � � �

myCIO Wealth Partners, LLC Philadelphia � � � �

Palladiem, LLC Malvern � �

Prudent Management Associates Philadelphia � � �

Sage Financial Group Conshohocken � � �

Schneider Downs Wealth Management Advisors, LP Pittsburgh � � � �

Tower Bridge Advisors Conshohocken � � � �

Veritable, L.P. Newtown Square � �

Wescott Financial Advisory Group LLC Philadelphia � � � �

XPYRIA Investment Advisors Pittsburgh � � � �

Rhode Island

Endurance Wealth Management Providence � � �

Professional Planning Group Westerly � � � �

Tennessee

CapWealth Advisors Franklin � � � �

Highland Capital Management, LLC Memphis � � � �

Legacy Wealth Management Memphis � � � �

TrustCore Brentwood � � � �

Texas

Covenant Multifamily Offi ce LLC San Antonio � � � �

Money Matters with Ken Moraif Plano � �

Client segments served

Firm

nam

e

City

Reta

il (in

divi

dual

s w

ith <

$1m

)

HN

W (i

ndiv

idua

ls

with

$1m

– $

10m

)

Ultr

a H

NW

(ind

ivid

uals

w

ith $

10m

+)

Inst

itutio

nal

Retirement Advisors of America Addison � �

Sendero Wealth Management San Antonio � � � �

SFMG Wealth Advisors Plano � � �

South Tex as Money Management San Antonio � � � �

Tanglewood Wealth Management, Inc. Houston � � � �

True North Advisors Dallas � � � �

Vermont

Manchester Capital Management LLC Manchester � � � �

Virginia

Burney Company Falls Church � � � �

Cassaday & Company, Inc. McLean � � �

Catawba Capital Management Roanoke � � �

Edelman Financial Services LLC Fairfax � � � �

Glassman Wealth Services McLean � � � �

Mason Investment Advisory Services, Inc. Reston � � � �

SIGNATURE. Norfolk � � �

The London Company of Virginia, LLC Richmond � � � �

West Financial Services, Inc. McLean � � � �

Wilbanks Smith & Thomas Asset Management, LLC Norfolk � � � �

Washington

Badgley Phelps Investment Managers Seattle � � � �

Brighton Jones Seattle � � � �

Bristlecone Advisors, LLC Seattle � � �

Empirical Wealth Management Seattle � � �

Evergreen Capital Bellevue � � �

Fisher Investments Camas � � � �

Freestone Capital Management Seattle � � � �

Laird Norton Wealth Management Seattle � � �

Merriman Wealth Management, LLC Seattle � � �

SNW Asset Management Seattle � �

Threshold Group Gig Harbor � � �

Wisconsin

Annex Wealth Management, LLC Elm Grove � � �

Cleary Gull Milwaukee � � � �

Diversifi ed Management, Inc. Milwaukee � � �

Orgel Wealth Management Altoona � � � �

Sadoff Investment Management Milwaukee � � �

FT 300TopRegistered InvestmentAdvisers FT 300TopRegistered InvestmentAdvisers

In assembling the FT 300 list,we assessed registeredinvestment adviser (RIA)practices from the perspectiveof current and prospectiveinvestors.The FT’s methodology

examines the database of RIAsthat are registered with the USSecurities and ExchangeCommission and selects thosepractices reporting to the SECthat have $300m or more inassets under management(AUM). This assures a list of

companies with established andinstitutionalised investmentprocesses. The RIA companieshave no subjective input.The FT then invites those

qualifying RIA groups, whichamount to more than 2,000, toprovide further informationabout their practices.That is augmented with our

research, including data fromregulatory filings. Some 650RIA companies qualified,meaning 48 per cent of themmade the list.

The formula the FT uses tograde advisers is based on sixbroad factors and calculates anumeric score for eachcompany. Areas ofconsideration include AUM,asset growth, the company’syears in existence, industrycertifications of key employees,SEC compliance record andonline accessibility:• AUM: signals experience inmanaging money and clienttrust• AUM growth rate: growing

assets is a proxy forperformance, asset retentionand ability to generate business• Company’s years in existence:indicates reliability andexperience in managing assets• Compliance record: providesevidence of past client disputes— a string of complaints cansignal potential problems• Industry certifications (suchas CFA and CFP): showtechnical and industryknowledge and a commitmentto investment skills

• Online accessibility: thisillustrates commitment a toproviding investors with easyaccess and transparent contactinformationAUM and asset growth

comprised roughly 80 to 85 percent of each adviser’s score.We present the FT 300 as an

elite group, not a competitiveranking from 1 to 300. Thisidentifies the industry’s bestadvisers while accounting forthe firms’ different approachesand varied specialisations.

Methodology Selection criteria

FINANCIAL TIMES Thursday 18 June 2015 FTReports | 15

FT 300TopRegistered InvestmentAdvisers

I ncreasingly complex investmentvehicles such as liquid alterna-tives and more highly correlatedequities markets have pushedfinancial advisers away from

Morningstar style boxes, industryexpertssay.

The three-by-three style box gridsfirst came out in 1992. They segmentequity investments by market capi-talisations and value-versus-growthcharacteristics, and split up fixed-in-come strategies by credit quality andinterest-rate sensitivity. Thoughmethods vary, advisers who seekmarket-neutral portfolios weighteach style box to correspond with itscapitalisation in the market, saysBrad Stark, co-founder and chiefoperating officer of California-basedMissionWealthManagement.

For example, if 70 per cent of theworld’s equity capitalisation is inlarge-cap stocks and 30 per cent is insmall-caps, then the adviser wouldallocate 70 per cent of the portfolio’sequity assets across the large-capstyle boxes (growth, value and blend)and 30 per cent across the small-capboxes,hesays.

“[This is] so that you’re not takingmore or less risk than the world hasvoted on . . . as far as what the capi-talisation is in the world,” Mr Starksays.

But now advisers “are being muchmore thoughtful about the risk-re-turn characteristics of asset classes,as opposed to just filling in the box”,

says Lawrence Petrone, director ofresearch at Kasina, a New York-basedconsulting firm.

A Kasina survey of 2,000 financialadvisers in 2014 showed just 14 percent use style box asset allocation; 32per cent use strategic allocation, thatis assigning portfolio percentageweights to various asset classes; and23 per cent rely on core-satellite —putting most of their holdings inindex strategies and a small portionintoactivelymanagedvehicles.

Ten years ago, 40 per cent to 50 percent of advisers probably used styleboxes, but they have defected to stra-tegic and core-satellite allocations,according to Mr Petrone. The 2008financial crisis drove advisers awayfrom style boxes because all equitycorrelations went to one, meaningstocks across the board dropped pre-cipitously regardless of how diversi-fied the portfolio was within the vari-ous equity categories, Mr Petroneadds. A portfolio’s losses from therapid decline in large-cap equitieswere not mitigated by its small andmid-capstockholdings.

After that, advisers began assessingportfolios’ risk-return characteristicsmore closely, not just assuming thatticking all the boxes would providegreater protection and diversity, hesays. For those still using Morningstarstyle boxes, “the 1990s called, andthey want your portfolio back”, saysBarry Glassman, founder and presi-dentofGlassmanWealthServices.

The North Virginia firm managed$735.5m in assets at the end of 2014.“When you think of some of the bestinvestors over decades, they didn’tstick with just one part of the tic-tac-toebox,”hesays.

Style box diversification will notlower equity correlations, they willremain just as likely to plummet inunison during a down market, butplenty of advisers still fill out thematrices because they do not havetime to research mutual funds andexchange traded funds and discussthem with the product manufactur-ers,MrGlassmanadds.

Jeff Ptak, Morningstar’s global headof manager research, acknowledgesthat the “style box was never meantto be a single, all-encompassing solu-tion to an adviser, an institution [or]individual investor”.

But he receives feedback fromadvisers that they are “still a verypowerful tool for sorting through auniverse of different mutual funds orother types of vehicles and makingapples-to-applescomparisons”.

Some investments, such as liquidalternatives, which can offer hedgefund investment tactics in mutual

fund form, do not fit easily into thestyleboxes.That isbecausemanagershave considerable leeway in the tac-tics they use, which can shift across arange of styles. But Morningstar isworking to “continuously improve”howtheyareclassified,MrPtaksays.

Mission Wealth Management usesa core-satellite asset allocation, butthe company employs style boxes to“audit” its portfolios, ensuring theunderlying investment products arenot succumbing to style drift, says thecompany’sMrStark.

The wealth manager oversaw$1.1bn in assets at the end of 2014. “Ifyou’re a diversified asset allocationfirm, then style boxes are important,”MrStarksays.

“If you are a money manager thatwants to be ‘tactical’, which is the newword for ‘market timer’, then youdon’t want to be associated with astylebox.”

“In the institutional world and forwealthmanagement firmsthat followdisciplined academic approaches,[style boxes are] going to stay,” headds. However, some advisers are inessence trying to time the market,shifting quickly in and out of posi-tions, despite the imperfect record ofthisportfoliomanagementstyle.

This is because investors wantadvisers who, they believe, knowwhen to get in and out of the marketand what areas to stay away from, MrStarksays.

“When has that been successful?

Honestly, I’ve been in the industry for23 years; I’ve never seen it be success-ful,”headds.

A survey earlier this year of theFinancial Times Top 400 Advisers atbroker-dealers found that 27 per centuse tactical allocation, while 32 percent rely on core-satellite and 19 percent cling to style boxes. However, inthe Kasina survey, 19 per cent weretactical.

Style boxes are inappropriate forthis tactical style, Mr Stark says. Withtactical advisers, it is difficult tomeasure and understand risk-returnfactors and portfolio expectationsbased on their investing style becausethey do not take a clear disciplinedapproach,hesays.

In the future, style boxes willremain a tool for attribution analysis,even as their popularity wanes, saysNathan Erickson, chief investmentofficer at Miller Russell Associates,which managed $2.3bn in assets atthe end of 2014. The Arizona-basedfirmdoesnotusethenine-boxgrids.

An adviser can review a fund andlook at its holdings to see where theyfit in the style box universe, to makesure a large-cap growth manager isnot actually a large-cap blendmanager,MrEricksonsays.

“I don’t know if the [style box] con-cept will ever go away,” he says. “Ithink it’s relevant to understand whatyou’re invested in, but I don’t see atargeted allocation to style boxescomingback.”

Managers avoid being boxed inRisk assessmentAdvisers have developed alternativeways of applyingweightings to assets, writesMatthew Beaton

‘Investors didn’t stickwith just one part of thetic-tac-toe box’

Boxing clever: advisers are paying more attention to the risk-return characteristics of asset classes— Dreamstime