Integrating a swashbuckling, entrepreneurial wealth management firm into a staid, buttoned-down private banking culture isn't easy: just ask Boston Private Bank & Trust.
A year ago Boston Private announced it was buying Banyan Partners, a fast-growing RIA with $3.7 billion in assets under management headed by Peter Raimondi, a highly regarded, razzle-dazzle dealmaker, for $60 million.
The acquisition was consummated in October; Raimondi was named chief executive and president of the newly created Boston Private Wealth, now boasting combined assets of around $9 billion, and suddenly there was a formidable new player in the highly competitive wealth management market.
Or was there?
Eight months later, Raimondi is no longer CEO, a number of key advisors have defected, asset growth has stalled and industry rivals are describing the Banyan-Boston Private marriage as dysfunctional.
WITHER BOSTON PRIVATE?
While applauding Boston Private for putting together a considerable firm in a short period of time, Matt Cooper, President of Beacon Pointe Wealth Advisors, says that It appears that they are having a relatively tumultuous time with key advisors leaving, and are straining to blend their disparate cultures. Financially-driven models, he adds, lend themselves to these problems. When its about the numbers first . . . people tend to struggle.
Boston Private, not surprisingly, portrays its decision to put Boston Private Bank & Trust chief executive Mark Thompson in charge of the private wealth division last month quite differently.
The "new leadership structure" of Thompson as CEO of Boston Private Wealth and Raimondi as president allows both men to do what they do best, declared Clayton Deutsch, chief executive of Boston Private Financial Holdings when making the announcement: Thompson will use his skills as a "proven executive" to run the division on a day-to-day basis, Deutsch says, while Raimondi is now free to draw on his experience as a "builder of businesses" to focus on growth initiatives and acquisitions.
Overseeing the operations of a large division "is not where I am happiest or most effective," agrees Raimondi, who says he didnt need to keep the CEO title for ego purposes."
In his new role, as detailed in the "amended and restated employment agreement" that he signed last month, Raimondi will focus on investment strategy; mergers and acquisitions; business and client development; expanding "the referral networks of Fidelity, Ameritirade and other custodian partners;" serving as a "personal wealth advisor to the company's most important clients," and creating and managing an Executive Services Group, "which will provide services to high end corporate or private company executive clients."
The agreement runs for five years through October 2019 and sets a base salary of $600,000 in addition to a number of bonuses and additional equity incentive compensation. Based out of Palm Beach Gardens, Fla., Raimondi reports to both Thompson and Deutsch and is "also subject to the authority and direction" of the company's board of directors.
'VERTICAL' Vs. 'HORIZONTAL' MODELS
Integration issues are clearly at the heart of the organizational shake-up.
Further aligning Boston Private Bank with Boston Private Wealth is seen as "the best growth opportunity for the overall company," according to Thompson. The new Boston Private Wealth CEO added that he would work closely with Raimondi to "continue to evolve the organizational structure as necessary."
A major sticking point, according to Raimondi, has been reshaping Boston Private's banking-centric "vertical model" of wealth management, based on a portfolio manager who also acts as a relationship manager, to fit Banyan's team-oriented "horizontal model" of wealth management featuring "multiple interactions" with the client.
The challenge, Raimondi says, has been to "create a new culture for a new firm embracing the horizontal service model. It's a big job to win the hearts and minds of people to create a workable solution."
Because it's critical for the parent firms private bankers to feel totally engaged with its wealth management team and for the newly aligned firm to have an identity "fully in place," Raimondi says, "it seemed more logical" for Thompson, as CEO of the bank, to also oversee the wealth management groups day-to-day operations.
SPOTLIGHT ON RAIMONDI
Thompson's managerial skills notwithstanding, the organizational shake-up at Boston Private has put the spotlight squarely on Raimondi.
His considerable successes as an entrepreneur, investor and advisor are widely acknowledged, but his forceful personality and blunt, freewheeling executive style are also well known and less well received.
A case in point: Banyan's absorption of Silver Bridge following its acquisition of the Boston-based family office in 2013 was followed by several key executive defections and what insiders describe as a rocky transition.
Talent departures have also plagued Boston Private Wealth since the Banyan acquisition. Mark Mather, a managing director and principal, left the firm in January. Then in May senior client advisor Alicia Andre jumped ship for Morgan Stanley, and Barbara Cummings, Robert Kjellman and C.J. Young decamped to William Blair.
To be sure, executive reshuffling is hardly unusual following an ownership change and the departures at Boston Private "were not anything I didn't expect to happen," Raimondi says. "A new [business] model is not for everyone."
Nor can everything can be laid at Raimondis doorstep. Before the Banyan acquisition, Boston Private had other wealth management setbacks, most strikingly in 2009, when Sand Hill Global Advisors of Silicon Valley and three other RIAs it had acquired over the past decade engineered buybacks.
(At present, Boston Private owns four other RIAs -- Anchor Capital Advisors in Boston; Bingham, Osborn & Scarborough in San Francisco and Silicon Valley; Dalton, Greiner, Hartman, Maher in New York, and KLS Professional Advisors Group in New York and Los Angeles -- which will not be merged into Boston Private Wealth.)
As the reorganized division goes forward, its success, according to Thompson, will depend on leveraging the strong client relationships already in place to support organic growth."
Raimondi says his priorities are strategic acquisitions, adding personnel and building out a new Executive Services Group.
When evaluating potential acquisitions, a firms location and service model will be key considerations. Raimondi is shopping for advisories based in California, Florida and the Northeast and seeking advisors with "very strong people skills," as well as investment specialists and sales people.
Account managers, financial planners, attorneys and accountants will be targeted for the new Executive Services Group, which Raimondi sees as the ideal blending of wealth advisors and private bankers to serve an elite client segment - and a project ideally suited to his skill set.
Since the Banyan deal closed last October, Boston Private Wealth has brought on about 20 new hires and has opened a new headquarters building in Boston, as well as a new office in Beverly Hills, where bankers and wealth managers will work side by side.
The objective, Raimondi says, is " to create a vibe throughout the firm as close to the home office vibe as possible."
ODDS OF SUCCESS?
Easier said than done say industry observers.
A post-merger integration is like the aftermath of a honeymoon, adds investment banker and M&A specialist, Liz Nesvold, a managing partner of Silver Lane Advisors. "You have to deal with the day-to-day realities, she notes. You learn about each other's habits, and you're going to have arguments about who takes out the garbage."
"The challenge, as always, is executing," observes Jamie McLaughlin, an industry consultant specializing in private wealth. If you have deep cultural chasms, they can be really difficult to overcome, he says. You have to be able to put very different groups of people and business practices onto a common chassis, and that can be wicked hard."
But McLaughlin also sees points of similarity between Boston Private and the highly successful First Republic Bank, which three years ago acquired and then successfully integrated California-based wealth management firm Luminous.
"First Republic is the gold standard," McLaughlin says. "It is culturally differentiated, seamlessly integrated between bankers and wealth managers and known for offering a great client experience."
Boston Private may still put together a similar story.
"They can provide an uncommon trifecta of private banking with lending capabilities, an investment solution and wealth transfer expertise with a fiduciary obligation," McLaughlin says. "That's a big positive, but making it work may prove to be harder than perhaps they estimated."
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