Bigger & Better

John Burns, a 21-year industry veteran, started out the way a lot of advisers do: working in the insurance business for a large brokerage — in his case, John Hancock Distributors Inc.

When he founded Burns Advisory Group 10 years into his career, Mr. Burns had no clients and no assets under management. He just hoped to use the knowledge he had gained from the insurance business to help clients with financial planning.

“I never thought I’d have $50 million, much less $100 million,” he said. “Some place along the way, it dawned on us, ‘We have a real business here. This isn’t just a financial planning practice.’ ”

As the firm approached $200 million in assets under management, Mr. Burns said, he began believing in it enough to make some serious bets on new technology.

For example, the business was still doing much of its portfolio management and reporting by hand. It would take an hour to prepare for a client meeting and understand grasp the portfolio positioning, so Mr. Burns invested $70,000 (a lot of money at the time) into a new portfolio management and performance reporting tool and had everyone working overtime to integrate everything.

“That’s probably the first big one, where I got out over my skis a bit,” he acknowledged. “But I believed in it, and the clients were going to have a better experience. You have to get out of your comfort zone.”

The next move was to start looking for a partner. Through a recruiting firm, he found Jerry Georgopoulos, an adviser based in Dallas. His firm, Executive Financial Group Corp., was similar to Mr. Burns,’ with assets of about $225 million.

“It was getting clear we needed each other to hit our goals,” Mr. Burns said.

They combined in September 2011, split ownership 50-50 and rebranded as Exencial Wealth Advisors. They have grown organically to about $1.3 billion, partly because they operate in multiple locations. They also have an office in Old Lyme, Conn., run by a former adviser at Ameriprise Financial Services Inc.

— Mason Braswell

One would think that once your firm hit $1 billion in assets under management, you’d take a break. But for Gerry Klingman, the bar just keeps moving higher.

Mr. Klingman, who had been in the industry for 25 years by the time Klingman & Associates hit the milestone two years ago, realized he didn’t want it to stop there. Why not $3 billion to $5 billion in the next five to 10 years, he thought?

To start, he needed some outside help. Mr. Klingman had a large business that was still managed like a small one. A consultant had described it as “the largest lifestyle practice in the country,” referring to the boss’ heavy involvement in all aspects of the operation.

“You can no longer be the typical entrepreneur adviser who’s advising a client, handling investments, but also doing technology and compliance,” Mr. Klingman said.

After being approached several times by Focus Financial Partners with offers to buy a stake in his firm, Mr. Klingman turned the tables: Last year, he asked Michael Paley, a former managing director at Focus Financial, to be chief operating officer.

Mr. Paley accepted, looking to take a more involved role in one business rather than advising 20 firms, as he had done at Focus.

“The kernel that we have here is extraordinary,” Mr. Paley said. “And it’s about leveraging that and thinking through how we use technology more efficiently.”

His job is to create work flows, repeatable client processes and other systems to make possible larger-scale operations. As it looks toward the $5 billion mark, the firm also may begin making outside hires or tapping into Mr. Klingman’s roster of contacts of wirehouse advisers.

“You have to remove your ego from the place,” Mr. Klingman said. “I’m going to die some day or retire or become disabled, and this is a place that’s going to exist after that.”

— Mason Braswell

If there were just one way to build a successful practice, Scott Hanson likely wouldn’t be in the financial advice business.

The maverick financial adviser eschews traditional methods of marketing. You won’t find him networking at the country club. And he’s not a fan of growing a business through mergers.

So how did he become a billion-dollar baby?

“The cool thing about this industry is there’s so many ways someone [can] go,” said Mr. Hanson.

In his case, he made himself a fixture in the Sacramento, Calif., community where he is based. He advertises online. He and business partner Pat McClain broadcast their own radio show. He’s co-written books for advisers and average investors. He’s a regular speaker at conferences and seminars, and he’s frequently quoted by journalists.

Those factors helped Hanson McClain Investment Advisors pass $1 billion in assets under management — a title it first earned before the 2008 stock market rout and now hope to retain permanently.

“For advisers that are good at marketing, [financial advice] provides a real sustainable business,” said Mr. Hanson. “I spend more time on marketing and business growth than I do with clients.”

Using marketing — rather than relying on referrals or cold-calling, the old fallbacks for advisers — has been key to forming lasting relationships with clients. He’s happy to invest 18 months of the revenue he expects to earn from a new client to win the client’s business in the first place.

“The interesting thing about financial services is [that] a consumer can’t go out and test drive us,” said Mr. Hanson. “It’s quite a challenge for someone to say, ‘I’m going to trust this firm or this individual with my life savings,’ so it’s important for advisers to create the perception that this is a firm to work with — this is a trustworthy firm and a competent adviser.”

— Trevor Hunnicutt

A common refrain of founders of $1 billion firms is that they often must give up one of the attractions of the business: working with clients.

For Neal Simon, the move felt natural. By the time he founded Highline Wealth Management in 2002, he already was running three other businesses. Then 34, he was the chief operating officer at an insurance firm, COO at a management consulting firm, and chairman and founder of USLaw Network Inc., a website and membership organization for lawyers that he helped establish during the Internet boom in the late 1990s.

“I’m wired in a way where I jump out of bed with more energy if I’m trying to grow the business instead of just trying to stay at steady,” Mr. Simon said.

He started the firm from scratch. At the end of the first year, he had $70 million in assets, but only 10 clients — and that included family and friends.

Over time, Highline Wealth grew organically, via referrals among wealthy clients in the region. Just short of a decade after starting the business, Mr. Simon reached the $1 billion mark.

He invested in the firm by bringing on advisers who could handle the growing client base. That allowed him to step back and focus on the business plan and big-picture growth strategy.

“I’ve always tried to build a business that could provide great services without great involvement from me necessarily and that would become an institution with recurring revenues and cash flows, regardless of whether I showed up,” Mr. Simon said. “I’ve always tried to build a business as opposed to an advisory practice, and I think some people in our industry don’t understand the difference.”

As they aim for $5 billion, he and the co-owner Bill Schwartz, who joined in 2006 from Merrill Lynch & Co., are looking for veteran advisers whose firms would make good acquisitions.

— Mason Braswell

It’s said you can’t build a large financial advisory practice without focusing your efforts on the über-wealthy. Advisers with clients who are merely “mass affluent” are often told that they should trade up as soon as they can, firing or meeting less regularly with the plebeians.

Abacus Wealth Partners has become a $1 billion-plus firm without making those tradeoffs. For more than a decade it has worked to develop a small-accounts division, as well as retainer-based and one-time planning alongside more rarefied services — such as estate planning — for the “one percenters.” Eighty percent of its 1,025 clients keep less than $1 million with the firm. The wealth adviser eliminated asset minimums last year.

In 2009, Abacus found that smaller clients were easier to retain — a pleasant surprise during a financial crisis. And ancillary services generate fees, along with a consistent stream of referrals that turn into enduring client relationships.

“It will really help us cross the $2 billion mark,” said J.D. Bruce, Abacus’ president.

Mr. Bruce sees the $1 billion threshold, which the firm crossed last spring, as symbolic. Nothing beats profit as the most important business metric, he said, adding that he has learned that having healthy profit margins is essential for a business subject to the twists and turns of the stock market.

“We’re a business that relies on an outside force controlling our revenue, as the market goes up and down; we have zero control,” Mr. Bruce said.

At the same time, revenue and earnings can vary widely among firms with the same assets under management: Wealthier clients benefit from larger discounts, for instance, so they tend to pay a smaller percentage in fees. And employees, compensated in part on revenue growth, can’t get the raises they seek if client assets fail to translate into revenue.

“All my young people would leave if we’re not growing,” Mr. Bruce said. “I’ll train them, and then they’ll leave.”

But he concedes being in the billion-dollar club does carry some appeal.

“There’s a cool factor to it and a cachet that’s helpful,” he said. “There’s something nice about that.”

— Trevor Hunnicutt

Some of the early pioneers of the fee-only, independent financial advice movement have started to join the billion-dollar club for the first time.

A prime example is Altfest Personal Wealth Management.

When Lewis J. Altfest founded the firm in 1983, fee-only financial advisers were few and far between.

“We weren’t following anyone else’s road map,” said his wife, Karen C. Altfest, now a principal adviser at the firm. “Figuring out how you get from there to here [has been] fun.”

It’s been about two years since the firm crossed the $1 billion mark. And even though the firm has been in business for 32 years, Mrs. Altfest said, “it came sooner than we thought. We knew we were taking in a lot more clients.” All of a sudden she woke up and saw a number she wouldn’t forget — $1 billion.

Revenue growth has been the key to upgrading their firm for both clients and employees. Today, for example, Altfest can afford to send an adviser to a conference on fund management or college-saving plans. The firm also has a planner on staff with expertise in employee stock options.

And it’s hired younger staff to help lighten the load of experienced employees. “If we want our leaders to take on more tasks,” she said, “you have to help them free up other time.”

Across almost every aspect of client interaction, Ms. Altfest says growth has helped improve services. She said the firm is able to better deliver specialized guidance on charitable giving and Social Security — factors that enhance the experience of clients. The

firm’s client roster includes many single women, including widows, a niche she has developed.

Ms. Altfest believes there’s always more the firm could be doing. Some clients may want more service — at night, at a branch closer to home, maybe in a different city.

“You don’t want to be stagnant, and personally I don’t feel like there’s an in-between,” she said. “If you’re not gaining, you’re losing.”

— Trevor Hunnicutt