United Capital's recruitment of a $2 billion registered investment adviser out of a bank is not only the firm's biggest addition since its founding in 2005, it also marks a shift in how the firm plans to compete going forward.
With the hire of the 23-member team, which had formerly operated as Capital Investment Counsel Inc. under Compass Bank, United Capital is now focused on recruiting rather than making acquisitions, according to Matt Brinker, senior vice president of acquisitions at United Capital. The firm had previously only acquired independent RIAs, usually established offices with about
$500 million in assets under management.
Now United Capital is setting its sights on hiring advisers away from larger firms, Mr. Brinker said, even potentially at large wirehouse firms.
“It's a bit of a pivot,” Mr. Brinker said. “The platform has evolved to such a point that people are going to be joining us, much like CIC, to avail themselves of the platform, and that means folks that are doing $500,000 in revenue all the way to the size of CIC.”
United Capital will continue to do some acquisitions, but that will no longer be the key driver of growth, Mr. Brinker said.
“It's not sustainable for the shareholders with the cost of capital and all that,” he said.
United Capital also has
another channel focused on organic growth in which it adds newer or lower-producing advisers as independent contractors.
Members of the CIC team will receive cash, and in some cases, equity, as an incentive to join United Capital.
CIC's team, based in Denver, Scottsdale and Tucson, will bring the overall assets under management at United Capital to around $13 billion.
CIC was founded in 1990 by Chris Johnson and Clark Johnson (not related). It was bought in 2007 by Compass Bank, and, through another acquisition of Compass Bank's parent company, wound up under the umbrella of a Spanish banking organization, Banco Bilbao Vizcaya Argentaria S.A.
Jason Rosener, a principal at CIC, said he felt growth had stalled under that model.
“There was a point of diminishing returns,” he said. “We were only going to go so far.”
Mr. Rosener said he bought into the philosophy of United Capital's founder, Joe Duran, who thinks the registered investment advice industry will eventually be dominated by a few large national firms in much the same way as the accounting industry consolidated under a handful of well-known names.
“In time, I could see there being just a few national advisory footprints out there,” Mr. Rosener said. “It will be increasingly tough as a $100 or $250 [million firm]. At every point along the way there are different challenges, and here it's the scalability of a larger entity.”
Mr. Rosener said CIC also had looked at other models for independence, including joining Focus Financial Partners, an RIA acquirer that takes an ownership stake but allows RIAs to still file under their own ADV. Ultimately, the team decided it wanted to become part of a firm instead, and liked the client acquisition strategies and referral programs at United Capital, Mr. Rosener said.
“True independence is fine,” he said. “But we are very entrepreneurial-minded and want to continue to invest in our values and our people.”
The four principals of CIC, including Mr. Rosener, will now serve as managing directors at United Capital.
CIC's primary custodian was Charles Schwab & Co. United Capital will pay Compass Bank custodian fees for any former CIC clients that are keeping their money at Compass.
The transition was finalized at the end of last month.
