As Rick Simonetti of Fidelis Capital saw
Fresh off its notorious account-opening scandal, Wells had started paring back or abandoning business lines
So after more than two decades at
"They essentially said, 'I'm going to accept the fact that clients are going to leave, but some will also stay," Simonetti said. "'There's a cost, but there's also a benefit. And I, as a big institution, am willing to accept that.'"
Simonetti said Fidelis Capital is "the exact antithesis of that." Perhaps the firm's main distinguishing feature is its low client-to-employee ratio.
"We have a portfolio manager here who today serves 50 families, at the most," Simonetti said. "At Wells, he had 200 families in his portfolio, some of which were in the nine figures and beyond."
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"What we had in common was a level of frustration around our ability to serve the families that we cared about and wanted to serve in a way that we knew they needed, and that they were telling us they needed," Simonetti said.
Simonetti recently sat down with Financial Planning to discuss how he and his partners have built Fidelis despite obstacles to recruiting private bankers and why he no longer feels the need to be "institutionalized" at a big firm.
This article has been lightly edited for clarity and length.
Financial Planning: What was the fundamental idea behind the founding of Fidelis Capital?
Rick Simonetti: I was at a big bank for 22 years. I would say I was institutionalized, but that would sound weird.
Clearly, I had a belief that you needed to have a huge institution behind you. Slowly but surely, all of the resources that we needed to serve them were going away. Big institutions were becoming risk-averse.
We looked around, but couldn't really find a company that was doing what we wanted to do.
FP: Private bankers are generally harder to recruit than other types of advisors. Their clients and assets they were managing tend to not be easy to move over to a new firm. How have you overcome these obstacles?
RS: I will say this: At the onset, we were working with some consultants that gave us guidance that a massive amount of our books would move, but we were not relying on that.
If you're at a firm that's not made up of private banking people, and you're trying to lure a private banking team, your experience isn't as relevant. Our experience, on the other hand, is that we know exactly what it looks like.
We know exactly how to maneuver the legal nuances of the transition. And we've moved a reasonable number of clients over.
But I will tell you that, even today, four years later, at just under $3 billion of assets moving over from zero approximately at the start, we are still moving clients we served while we were at the bank.
FP: Are most of your clients then people you and your team worked with at
RS: More than half of our business today is made up of people we didn't know when we were at the bank. They are coming because of what we have put together in terms of talent and the work that we're doing for them and their kids and their mom and their dad and their partners.
On top of that, we're getting accountants, attorneys we collaborate with, quarterly meetings with CPAs for clients to make sure we're managing their estates and estimated tax liability throughout the year. And the way we're collaborating is causing
We've got M&A firms that have watched us help families through the sale of their business and who've said, 'I got another one for you because the way you handled the last one was remarkable.'
FP: What has guided you as you've added services over time?
RS: You start with a vision, and you try to tick off the things that clients need. Our clients need to borrow money.
How are we going to do that? We're not a bank. But when a client comes to you with something you haven't built, you find a solution.
It's a different level of commitment. You have to be more patient, a little more confident. In some ways, I think it makes our firm that much more attractive to private bankers.
FP: When you said you talked to consultants about how much of their former books recruited private bankers could bring over, did you find their estimates tended to be high or low?
RS: Meaningfully higher than reality. But let me augment that with something.
The projection was that it would happen at a certain pace. But that doesn't mean it didn't ultimately get there. I'll use this example: There are two families in the last 15 months that we worked with at our legacy firms, both over $100 million, who just moved to us.
Most people would say that book move for a financial advisor, if it didn't happen in the first month, it's a failure — because they can send out paperwork the day they join the firm. They're sending out forms to sign and move the assets.
You don't do that in a private-bank environment.
FP: What are some of the biggest obstacles to persuading clients to move to Fidelis?
RS: The initial obstacle to overcome is: Wait a minute. I'm with — pick the firm —
and I'm going to move to little Fidelis Capital?
But we're a bit past that with $3 billion of client assets now.
Then you deal with the concern of safety of assets because people don't necessarily
I suppose — FDIC coverage. I imagine a lot of people say: I'm with this big safe bank. But then you remember 2008, and those balance sheets are not as fortress-like as you might think.
So you talk through why we've chosen the custodian we've chosen, and why we believe that the money is safe and secure there. And you overcome that.
FP: Is there anything you miss about being part of a large institution?
RS: What we've come to realize is that we can get any resource we want, and the resources that are available are vastly better than what might be housed inside an institution, which are very limiting when you think about it.
We can go buy research from anyone. We can go buy a software tool from anyone. We've actually switched our software tools multiple times, realizing that our clients needed something better.
And, again, the reality is we have access to way cooler — to use a very technical term — opportunities in private markets because we don't have to scale it across 12,000 or 15,000 advisors.
FP: What are you doing with private markets?
RS: We're getting access to some really interesting, more niche-y, $100 million dollar or $300 million kind of equity raises for companies that are at a much earlier stage than you might get through a financial advisor at a big firm because they're with KKR or Carlyle.
Especially since 80% to 85% of companies that make over $250 million a year in the U.S. are private, why would you allocate 100% of your investments to 15% of the businesses in the country?
FP: How do you go about basic investment management?
RS: We've built the ability to manage most of our clients' equity positions in-house. We do not have third-party managers for most of our clients' equity positions. We don't have an extra fee associated with that management.
We also manage our clients' fixed income in-house, therefore not adding a third-party fee. Both of those things are really unusual.
FP: We see a lot of advisors who work out of
RS: We did not face any legal challenge to our move, or any recruiting deals subsequent to leaving and setting up the firm.
We obeyed our nonsolicits. We obeyed rules. We were very careful to document all of that so if we should face a challenge, we were not concerned. You should look to the expertise and guidance of outside counsel to know exactly how to do that.
Everyone who leaves gets a letter. It says: Please be aware of your financial responsibility, your commitments.
Private bankers freak out when they get it. But that doesn't mean you've done anything wrong.
FP: Don't departing private bankers usually have to abide by some sort of garden-leave policy?
RS: So the way a garden leave typically works is that you stay employed by the institution you're leaving for 30, 60, 90 days. They have to keep paying you. But what they're paying you to do is nothing.
And then they'll have a shorter nonsolicit agreement. Or if a firm doesn't have a garden leave, they may have a longer nonsolicit agreement.
You can do a lot of things that do not rise to the level of solicitation. At a minimum, you can let clients know: This is where I landed, and this is how you need to reach me.
At that point, there is a bit of a waiting game as to whether they engage with you. And if they're asking questions, our legal counsel said you can answer them.
But the real question is: If you're going to leave, are you joining a group that understands how to make that happen, that has the right resources to do it well and that has the patience to allow for that to happen and then will they give power horsepower to grow in a meaningful way?
