The secrets behind the success of one of the industry’s fastest growing firms
Not a lot of people in the financial advisory industry saw the financial crisis as an opportunity to launch a new business. Then again, few start-ups in this industry have the ability to leverage a century-long legacy, while also establishing a business and service model that aims to satisfy the needs of advisers and clients, both today and tomorrow.
Now, after several years of rapid growth, Benjamin F. (Tad) Edwards IV, chairman, CEO, and president of the firm that he named for his father, is firmly focused on the future. In a candid conversation with the InvestmentNews Custom Content team, Mr. Edwards shared his vision and views for his firm’s development, impact on the industry, and several key reasons and relationships that have driven his firm’s recent success.
What made you want to start this firm?
Our family has been in this business for 127 years, over five generations. So after my former firm was purchased in 2007, it felt natural to keep our legacy going. I’ll never forget: Starting the night we found out we were being acquired and over the next year, my father and I had a number of people who contacted us to encourage us to keep the legacy going.
We agreed with them and started the firm with three people. Today, more than five years later, we’ve grown to almost 400. We took a risk in the midst of a very volatile industry at the time. But I see those times as opportunity. I see things differently.
Tell us more about where you saw opportunities, in particular in the changing landscape of the advice business, to launch your firm in the middle of the 2008 financial crisis.
Early on, we saw a gap in the industry. There has been a trend over the years of people migrating from larger full-service firms to independent firms. We felt like we could offer the best of both worlds. We saw an opportunity to start a firm with an independent feel, where our advisers have total freedom to make their own decisions for their clients – yet at the same time have all of the products, services and technology of a larger firm. There are not many firms in this space.
Today, we still know this is the kind of home many advisers are looking for. We looked at the whole landscape and asked, “Where is the need?” We know that a lot of advisers have something inside of them that makes them want to pursue another chapter in their careers. They don’t want to have to look back and say that they never capitalized on that desire. With us, they have a chance to be part of a culture that fosters entrepreneurialism, and to be someone who has influence over how this company is run. This is a special opportunity and one that is very important to advisers. At our firm, we control our destiny. We are owned by family, employees and friends of the firm. In addition, we have not accepted any private equity or venture capital money.
Tell us a bit about your recent – and rapid – growth.
We opened our first office in Springfield, Missouri, in 2009. Since then, we have grown to almost 50 offices in 24 states – we are in almost half the country already in less than five years.
I really believe we are in our first inning. Outside my office, we have a map of the country and we have marked the locations of our current offices. People come in here, look at the map and they notice where we have branches. I notice where we don’t have branches and where there are millions of people who are prospective clients that we can help with financial advice.
But the other side of the story, really, is that it’s not about how many pins we put on a map. It’s not about how fast we grow. It’s really about the quality and character of the people in the offices. It’s about the leadership of the offices. We have had many people come to us and ask if they can open an Edwards office. We have had to, on occasion, say no and turn people away because we don’t want to compromise what is really important to us. It’s the character, the integrity and the potential of that particular person who wants to join us. So while we have grown considerably, it’s not just only about that.
Given how your firm has grown over the last five years, where do you see the business heading over the next five years?
I get asked about our plan often. While we have a strategy that projects growth at about ten offices per year, we also watch the pace to make sure we aren’t compromising our differentiators. But our growth only tells part of our story.
Our industry is at a fascinating crossroads. We have a wealth transfer wave of trillions of dollars poised to move from one generation to the next. According to one statistic I’ve seen, $41 trillion in baby boomer wealth is likely to move to the Millennials and their slightly older Gen X demographic. This transfer will have a profound effect on how advisers work with their clients. We need to continue to embrace a progressive and mobile technology platform that enables our advisers to work with their clients on their clients’ terms. This includes a presence on mainstream communications platforms that attract our clients’ attention like social media.
From a product standpoint, we will need to keep in step with the next generation investor while keeping a watchful eye on regulation. It’s a careful balance and at the same time, stay a step ahead on all fronts and leverage our flexibility and non-proprietary product structure to stay in step with the next generation investor, while also keeping a watchful eye on regulation. We’ll need to continue helping Boomers with their move into retirement – even while the low interest rate environment remains a challenge.
Why did you elect to hire Pershing when you launched?
We were looking for a firm that would enable us to outsource some of our non-core capabilities. Clearing trades and serving as a custodian for assets is not a differentiator for us in today’s environment. We looked at what we thought were the best firms in the world and considered many options. All were very impressive. We did our due diligence, and worked extremely hard to discover a firm to support our business and our advisers. They had to have a history of excellence in doing that. More importantly, we needed a firm that could help us continue to transform our business after we launched into one that could manage the total wealth of our clients effectively.
From that, we chose Pershing. Our vote was unanimous. Pershing seemed more aligned with our values and our vision. We both recognized that the future of financial advice centers on building trust between advisers and their clients. Pershing's senior leadership had been there a long time with very little turnover – and at the end of the day, we trusted them. That’s the most important quality in the partners that we outsource to: We have to trust them. We trust everyone in our office here and we don’t ever want to look over our shoulders. And we trust Pershing.
And how has the relationship with Pershing enabled your growth?
The relationship with Pershing has been a positive factor in our growth. It enabled us to start running our business very quickly, and we continue to work together to stay ahead of the many challenging factors facing our clients today. The way we are setup is a bit unusual: We have subject matter experts in our home office who support our advisers and their staff. These experts work and liaise with Pershing to ensure that we take full advantage of everything Pershing has to offer and provide our advisers, staff, and clients with everything they need.
How has the need for financial advice changed?
It’s a serious decision a person has to make when they choose an adviser. In the end, people will do better if they have a plan and work with someone to create wealth, protect that wealth – and pass that wealth on. I have met few people in my lifetime who have the ability to do all of that on their own, especially in today’s environment.
In the past, the questions were simpler: “How is the market doing? What’s your favorite stock?” Today, the needs, demands and expectations have changed. The question now is “What’s the plan?” They want access to know how they are going to get from today to retirement; how they should approach asset allocation, weight different industries and gain global exposure -- and ultimately build a balanced portfolio. They want to work with a firm that is forward-looking, service-oriented, and has access to premiere money managers and progressive products and services. People have mortgages to pay, kids to put through college and one of the biggest fears people have is that they will run out of money, be too old, or not be healthy enough to create and sustain wealth.
Our advisers understand this and are prepared to help. We recognize our role here is to listen and design a plan that is common sense, where our clients are comfortable and confident and they trust their adviser. That’s really the core of our business. »
BY JIM CROWLEY, Chief Relationship Officer, Pershing
I glanced at my meeting notes and the one point I kept coming back to was the black ink I had scratched in the margin:
“This is an interesting time to be starting a new financial services company.”
It was June 2008. The markets were reeling. Financial services companies were closing their doors and investor panic was rampant. Our executive team at Pershing had been invited to St. Louis, Mo., to meet Tad Edwards and the executive team for a company that would become Benjamin F. Edwards & Co.
Tad did not want to meet with us to hear about products, core competencies, technology or investment services. He was looking for a partner that shared his vision of empowering advisers to help clients build secure, financial lives. Tad was more interested in understanding Pershing’s values of putting the needs of clients first. He wanted to hear about what we believed in and understand how we operated.
We listened to the executive team at Benjamin F. Edwards & Co. and offered our perspective on areas of opportunity to help them achieve their business strategy. More importantly, we gained their trust as they realized we wanted to support firms who were less interested in selling products but more interested in providing sound financial advice. This has been the cornerstone of a successful collaborative effort to help Benjamin F. Edwards & Co. grow their business over the past six years. And today I believe it is now one of the fastest growing firms in the industry.
Tad and his executive team have successfully navigated through our industry’s most challenging period in decades and emerged as a true success story. They have created a firm capable of evolving and pivoting quickly to meet the fast-changing needs of their advisers and clients. It is a great example of how we work with financial services companies across the industry to ensure that they are well positioned for future success. Armed with a comprehensive suite of solutions and services from Pershing, we are helping clients like Benjamin F. Edwards & Co. to think beyond just investment management, to transform their business and to provide a comprehensive offering that builds trust between their firm, advisers and clients.
I attribute the success with Benjamin F. Edwards to three things:
- First, the firm’s leadership has a clear vision to maintain its independence, removing any potential conflicts so that they maintain laser focus on investor needs.
- Second, advisers are drawn to the culture of the firm, specifically the support and service they receive from the home office to grow their business.
- And third, investors are drawn to Benjamin F. Edwards because they know that their advisers will help them comprehensively plan for the many complex life issues they face.
Together, we have come a long way since that first meeting in 2008. We have become trusted allies who have helped each other’s businesses grow responsibly. I don’t have a lot of keep-sakes in my office, but hanging over my desk is a picture from Benjamin F. Edwards’ first executive retreat with a nice personal message from Tad written on it.