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RIA Leaders: 100 Top Fee-Only Firms

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There are a lot of different ways to get big. Just ask the companies on Financial Planning's 3rd annual list of RIA leaders.

Take Creative Planning of Leawood, Kan., which is one of the most intriguing stories on this year's list. President Peter Mallouk says he bought a practice with $30 million in assets under management in 2004. Its subsequent strong performance during the 2008-2009 recession propelled enough word-of-mouth referrals, he says, that the figure has grown to $7.8 billion this year - without acquisitions.

That's enough to put the young company at the No. 5 spot - up from No. 9 in 2013 and No. 27 in 2012.

In contrast, Banyan Partners CEO Peter Raimondi says he used strategic acquisitions (on top of organic growth, which he says totaled 48% from January through October 2013) to take a firm that he bought in 2009, with $220 million in AUM, and expand it to more than $3 billion in AUM. It debuts on the list this year at No. 25.
Strong runs by both firms have put them in the lofty company of established firms like returning No. 1 Oxford Financial of Carmel, Ind., and No. 2, the historic multifamily office Rockefeller & Co., founded in 1882. This old-timer also tops FP's Fastest-Growing list - not too shabby for a 132-year-old.

Rounding out the top five RIA Leaders are Boston's Shepherd Kaplan at No. 3, and New York City's Summit Rock Advisors at No. 4.

Collectively, these players occupy the upper echelon of a variegated field of more than 19,000 RIAs nationwide. Some experts predict that the largest of these will grow to anywhere between $50 billion to $100 billion in AUM in the next couple of decades, bringing independent planning not only to the 1%, but the wealthiest of the mass affluent and some middle-class investors, as well.

"There is solid evidence that what used to be a cottage industry is turning into a real profession, with large, professionally managed organizations," says industry expert Mark Tibergien, CEO of Pershing Advisor Solutions, which seeks to custody for as many of the top firms as possible. "The beauty of these larger firms is they can leverage more intellectual capital and more services that their clients need [to] build value for their clients - and for themselves."



The lure of the independent space continues to attract large breakaways, as formerly captive advisors tout their newfound independence. One such firm is Orgel Wealth, which left RBC Bank late last year; with about $4 billion in AUM, it will likely debut in the top half of next year's list.

Mark Orgel founded the practice 30 years ago, but made the leap in order to appeal to clients seeking unbiased advice, he says. By choosing to take only fees, he says, "our clients never have to question our motives."

In composing this year's list, we honed our criteria to capture the most independent firms in the RIA space. This means the composition of the list, which is based on advisory firms' Form ADV filings, has changed substantially the last two years.

We did our best to leave off not only firms with bank or broker-dealer affiliations, but also those owned by consolidators or roll-up companies. We did so to focus on independents - the firms that can best mitigate the influence of outside ownership. Even passive external ownership "counterbalances the argument that if you are a fiduciary advisor, your first and foremost responsibility is to your client," Tibergien says. "Any time you have more owners in the mix, you change the dynamic."

We also wanted to highlight planners who provide holistic planning directly to individuals. For this reason, only firms with at least 50% individual clients were eligible. Given that they don't work directly with investors, turnkey asset managers were excluded. And we left off firms that provide solely investment advice, like giant Financial Engines of Sunnyvale, Calif., with nearly $64 billion in AUM, and the Mutual Fund Store.

And notably, we expanded the ranking to 100 firms from 50.

That left Oxford in the top spot; this year, the firm has $10.8 billion under management (up from a bit more than $10 billion last year).

Is Oxford founder Jeffrey Thomasson concerned about the upstarts nipping at his heels? "Nope. Never," he says. "We need to simply stick to what we do best and to focus on quality client service, hiring talented managing directors to grow our business, staying focused on our profit margin, and staying as close to the technology needs of our firm as possible without being on the bleeding edge.

"Assuming the above," he concludes, "our growth will take care of itself."



Sticking to what works means something different for nearly every player in this space.

No. 14 Athena Capital has billed itself as the "investor's investor" ever since Lisette Cooper, a Harvard Ph.D. in geological sciences, founded the firm in 1993. The Boston-area firm got its start managing institutional money and gradually began to manage money for the executives who ran those institutions.

"We have quite a few clients who come from investment organizations themselves, like private equity firms and hedge funds and real estate companies," Cooper says. They feel comfortable with the kind of statistically driven management that is Athena's specialty, she says.

Over the years, Cooper says, Athena has added a greater focus on "impact investing," which aligns portfolios with clients' own values and belief systems. "That's been just a tremendous growth area for us," she says.

For No. 6 Ronald Blue, sticking to what works means continuing to offer biblically inspired planning to clients - as the firm has since it was founded 30 years ago. Its motto, explains CEO Russ Crosson, is "Wisdom for wealth. For life." And its philosophy is based in a biblical passage (I Timothy 6:17-19) that counsels the rich to be generous, share and build a strong foundation so that, as one translation puts it, "they may take hold of that which is life indeed."

That clear focus inspired Mallouk early in his career, when he heard firm founder Blue address an industry conference about 15 years ago. "I thought he was a great speaker," Mallouk recalls. "He had an approach - and I know that today, that approach is the same. That [consistency] is the common theme behind our two firms."

The growth at Mallouk's firm has been so explosive that several industry experts, all speaking on condition of anonymity, said they believed Mallouk achieved it by offering a year of free services to clients referred by custodians, primarily TD Ameritrade Institutional.

"I know that rumor has been spread," Mallouk says, "and I can say emphatically that it is not true." TDAI spokeswoman Kristin Petrick also asserted via email that Creative does not provide free services to clients.



Creative also ranks No. 2 on our list of fastest-growing firms, which tracks growth between 2011 and 2013. Raimondi's Banyan comes in at No. 3.

Creative was one of the 200 "evolving firms" cited in a report this year by the Fiduciary Network, which takes minority stakes in large RIAs. The researcher's argue that these firms will be the best positioned to cope with daunting market forces in years to come: lower investment returns, rising operating costs, aging clients who spend more in their dotage and greater competition for fewer nouveau riche millionaire households.

While reluctant to share his formula for success, Mallouk did say that in many years as an estate-planning attorney, before he launched Creative, he had the chance to work with financial planners of all stripes, from brokerage houses to independents. He used that vantage point, he says, to judge for himself what did and didn't work for clients.

"I saw the industry from the inside out as an attorney," he said. "I was able to build [Creative] the right way early on."

Yet it remains to be seen whether the firms that top our fastest-growing list have the staying power to become stalwarts of the future. "With rapid growth comes more risk," Tibergien says. "More companies fail in their growth phase than in any other phase."

The firm executives interviewed for this story all said they plan to be among the survivors.

"I really am building Athena to be a first-class wealth management firm of the 21st century," Cooper says, echoing a refrain common to her peers. "What I really want to do is to have the scale and the reach and stability - [so] that people feel comfortable bringing their money here and that we will be around for their spouses and their children and their grandchildren."



Ann Marsh is a senior editor and the West Coast bureau chief of Financial Planning.

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