$650M broker team breaks away from Morgan Stanley

Ex-brokers will use services of new firm, Tru Independence, to set up shop

Jul 15, 2014 @ 3:58 pm

By Bloomberg News

Craig Stuvland, former president of Common Sense Investment Management LLC, lured four Morgan Stanley brokers with $650 million in client assets to a new firm that supports independent financial advisers.

The team left Morgan Stanley's Portland office today and immediately set up Encompass Wealth Advisors using trading systems, research, lawyers and office space arranged by Tru Independence LLC, also based in Portland.

Mr. Stuvland's is the latest in a growing number of firms that help wealth advisers leave large banks and go it alone. Dynasty Financial Partners LLC, founded in 2010, has 22 companies that manage $21 billion using its system. HighTower Advisors LLC in Chicago and Focus Financial Partners LLC in New York also work to pry brokers out of big firms.

Tru Independence will collect a percentage of Encompass's management fees as payment for its services.

“You're not going to go from being a wire-house money manager to an entrepreneur just by thinking about it at night,” Colin Williams, an Encompass partner and ordained Episcopal priest, said in an interview. It takes help, he said.

Mr. Stuvland is betting that the team's clients will follow it out of Morgan Stanley. The Protocol for Broker Recruiting, an agreement among securities firms, banks and asset managers, prohibits wealth advisers from telling clients about a move until after it is completed. Then, they are allowed to take with them only names, addresses, phone numbers and e-mail addresses, according to the protocol.

“Typically, 95%t of the assets follow the adviser,” Mr. Stuvland, 58, said in an interview.


Morgan Stanley increased its target for profit margins in the firm's wealth-management division after the unit's pretax profit jumped 62% last year. Greg Fleming, who oversees the brokerage, has said the attrition among financial advisers has fallen as the firm completed its technology integration following the purchase of Smith Barney from Citigroup Inc.

Until last year, Mr. Stuvland was a senior partner at Common Sense, a fund of hedge funds in Portland. He left after founder James Bisenius was arrested in a prostitution sting in nearby Tigard, Oregon, in August. The firm managed $3 billion before the arrest. At the time, Common Sense said Mr. Bisenius would remain at the company.

Before joining Common Sense, Mr. Stuvland spent 16 years at Crabbe Huson Group, a mutual fund company in Portland that managed $5 billion when he left in 1998. His co-founder in Tru is Eric Warlick, with whom he worked at Crabbe Huson. Before Tru, Mr. Warlick worked at Fidelity Investments, TD Ameritrade Holding Corp. and Charles Schwab Corp., selling their services to brokers going independent.

In addition to Williams, Encompass's other partners are advisers Derrick Clouser, 45, Matthew Presjak, 55, Walter Urban, 63, and administrator Mary Minshall, 46.

While at Morgan Stanley, Mr. Clouser's team called itself the Encompass Group at Morgan Stanley. His is the second broker departure in Portland this year. David Christian, Jeffrey Krum and Brian Hefele left Merrill Lynch, a unit of Bank of America Corp., with $700 million in March.

Mr. Clouser built his clientele in part by partnering with older brokers and then taking over their books of business and compensating them as they retire, he said. He intends to continue that strategy as part of Tru.

(Bloomberg News)


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