Private-equity veterans build $2 billion advisory firm from scratch

Jun 26, 2018 @ 2:21 pm

By Jeff Benjamin

The wealth management space has become an attractive target of deep-pocketed private-equity investors, but rare is the private-equity investor launching a financial advisory firm from scratch.

Enter Cresset Capital Management, a 1-year-old Chicago-based holding company with a $2 billion in advisory assets, a new family office launching this week and a specialty investment division for direct investments in real estate and private equity.

Co-founders Eric Becker and Avy Stein, are former private-equity investors who came to the advisory business as consumers looking for a better way to serve other consumers.

While the San Francisco-based family office unit just launched this week, Mr. Becker said he and his partner spent a year and "several hundred thousand dollars" researching the wealth management space before launching Cresset in May 2017.

Even though Mr. Becker and Mr. Stein have solid backgrounds in the P-E space, they didn't want to jump into the advisory space without doing their homework.

Mr. Becker admits that many of the things that intrigued them through their research were things that have long been known across the wealth management business. Things like demographic trends leading to the generational transfer of wealth and an aging adviser population that needs succession-planning solutions.

Mr. Becker, 56, and Mr. Stein, 63, were both retired and investing through their respective family offices at the time they decided to join forces to build a new wealth management business.

"We started co-investing in direct private equity and real estate, and we were talking about our experiences as clients in wealth management," Mr. Becker said. "It seemed like a big opportunity in terms of trends toward advisers going independent and the tremendous wealth transfer going on."

David DeVoe, managing director of the investment bank DeVoe & Co., credited the two P-E pros with coming out of the gate with an aggressive growth strategy.

"They have entered the RIA market with conviction," he said. "And they aren't hesitating to make bold moves. This [family office] launch further accelerates the development of their vision."

However, another way of looking at the rapid growth of Cresset is to question whether they are setting the bar too high, too soon, said Mike Wunderli, managing director at Echelon Partners.

"My concern is that they are trying to do too much all at once as opposed to progressively layering on services and focusing on individually developing each one to make sure they do it right," he said. "With each service comes its own challenges and risks, and you can only put out so many fires at once."

So far, Cresset has hired six adviser teams, mostly from inside the ranks of private banking firms, where it is difficult and rare to take clients and assets when departing.

Mr. Becker said the growth has been mostly organic so far, but that the overall growth strategy also includes recruiting "culturally compatible" advisers, and becoming a succession plan solution for advisers looking to sell their businesses and retire.

"There have been so many advisory firms launched in the past 20 years, and most of them are still first generation," Mr. Becker said.

The family office, which will be up and running on June 29, is designed to be distinct from Cresset's existing financial advisory unit.

Mr. Becker said that the wealth advisory business is for clients with a business, "where we're helping them achieve their goals," while the the family office is for multi-generation families that have already exited their businesses.

The family office is being headed up by Michael Cole, who founded Ascent Private Capital Management inside U.S. Bank's high-net worth business.

Mr. Cole, is the chief executive of the family office, and will be working with senior managing director Kevin Long, a former senior managing director of western and midwestern U.S. markets with Wells Fargo's Abbot Downing high-net-worth business.

Mr. Wunderli gave Mr. Becker and Mr. Stein credit for their extensive due diligence into the advisory space before launching a firm, but still believes they might be expanding too quickly.

"While there are certainly overlaps, private equity, family office and wealth management are three very distinct businesses requiring different skills to be successful," he said. "Combining them successfully, especially so quickly, is a monumental task."

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