A Morgan Stanley team strikes out on its own

Another team of Morgan Stanley Smith Barney brokers in California, who say they've recently managed about $500 million, has left to set up its own RIA. The advisers, Sean Lehmann and Kurt Halverstadt, confirmed last week they have created their own registered investment advisory firm, Capital Investment Management Group Inc. Based in Roseville, Calif., the firm will do business as the Sullivan Group, the name of the former MSSB unit. Their clients' “pervasive” discontent with Wall Street spurred the advisers to set up their own shop, said Mr. Lehmann, co-managing partner with the Sullivan Group. Clients have been particularly concerned about issues such as executive compensation and the Troubled Asset Relief Program, he said. “We're trying to distance ourselves from major Wall Street firms,” Mr. Lehmann said. Schwab Institutional has custody of the assets for the Sullivan Group, which will use Purshe Kaplan Sterling Investments of Albany, N.Y., as its broker-dealer. The new firm's name could cause confusion, and the issue of upfront money the advisers took to join MSSB in 2007 could lead to conflict between the firm and the brokerage giant. In a statement, an MSSB spokeswoman said that three other reps from the Sullivan Group will remain at the firm. Meanwhile, Mr. Lehmann said he expected a “fight to ensue” with MSSB over a forgivable loan the firm made to the advisers to entice them to join. He declined to stay how much money, only that it was a “significant amount” and that the advisers wanted no perception of a conflict of interest around their business. An MSSB spokeswoman would not reveal the assets under management of the Sullivan Group. She also declined to comment on the loan. Another team of northern California brokers took a similar path last month. The MSSB advisers, who managed $740 million in Menlo Park, left to form their own advisory firm, Three Bridge Wealth Advisors. E-mail Bruce Kelly at [email protected].