WealthSource Targets Tenfold Rise in Client Assets
WealthSource Partners is aiming to grow its client assets tenfold to $5 billion in 2021 from $540 million at the end of 2016, says Bryan Sullivan, the firm’s San Luis Obispo, Calif.-based CEO and co-founder.
The company’s growth plan hinges on both organic growth and on new client assets coming in from new advisors joining the company with their books of business. Sullivan expects WealthSource to end this year with at least $1 billion in client assets.
Formally launched in January 2016, WealthSource is the result of a merger between Vellum Financial and Avant-Garde Advisors, RIAs founded separately in 2009. The new company is among the youngest RIAs to make it to this year’s elite pool of the Financial Times 300 Top Financial Advisors.
Sullivan says the company is working to improve its value proposition for advisors by collaborating with custodians and technology providers to ensure its platform “answers the concerns” of advisors.
“One of the biggest incentives” the company offers advisors is the ability to continue owning their practice while having a succession plan, he says. When an advisor wants to exit the business, WealthSource provides an option for the advisor to sell the practice to WealthSource at a market-determined rate, he adds.
Succession planning has long been a concern among advisors and their clients, who want the assurance that the next advisor to handle their assets will be up to their standards. Clients may be wary of keeping their money in an advisory firm because they don’t know who’s going to take over when the senior advisor retires, Sullivan says. Advisors who don’t have a succession plan in place reach a point when they’re ready to retire but aren’t certain how to sell or unwind their business, he adds.
Sullivan spent 17 years working as an advisor at large financial institutions -- namely UBS, Merrill Lynch, and Edward Jones -- before breaking away from the broker-dealer advisor model to establish Vellum. He says he wanted to veer away from the complexity and opacity of large broker-dealers. His goal was to establish an RIA that is simple, transparent and client-centric, characteristics that he says also describe WealthSource.
The co-founders of WealthSource are Kelly Smith from Vellum and John Dubravac and Eric Patton from Avant-Garde. Sullivan says they all share a common belief that large insurance companies, banks and brokerages often put their own needs ahead of what is best for their clients.
“Culturally, those Wall Street firms are run from the top down. They focus on the needs of the institutions first and the retail client last,” he says.
Sullivan says the mergers and sales of Wall Street banks due to the global financial crisis of 2008 led to long periods where management seemed focused mainly on their own job security while public distrust of Wall Street brands intensified.
“It became more evident to me that the retail advisor relationship was about the client/advisor connection and not about the name on the tower down on Wall Street,” he says. “I felt that as an advisor, I had a front-line view of what clients wanted and needed, and that I could build a company where the wants and needs of the clients came first.”
Vellum’s merger with Avant-Garde was part of Sullivan’s goal of growing his business through consolidation. He says his goal was to grow by leveraging the scalability of additional advisors, adding a more robust compliance department and improving technology. WealthSource now has 24 investment advisor representatives in 10 cities, with California and Colorado being its strongest markets in terms of client assets.
Like most RIAs, WealthSource emphasizes that it abides by the fiduciary standard, as opposed to broker-dealers who are required only to ensure the suitability of their investment recommendations to clients. The Department of Labor’s fiduciary rule, which became applicable on June 9, requires all retirement-account advisors – including broker-dealers – to act in the best interest of their clients.
“We are bound by the rule of law to put our clients’ interest first. However, I look at that not only as a legal obligation, but a moral imperative if we are going to earn our clients’ trust,” Sullivan says. “We take the approach at our firm that any technology, paperwork, operational procedure or corporate-issued communication must be looked at from a client’s perspective first. If it doesn’t benefit or serve the client’s interest, then we ask ourselves, 'Why are we considering this?'”
Sullivan points to the 11 years of experience of WealthSource’s chief compliance officer, David Ito, as an examiner at the SEC to show how committed the company is to fulfilling its role as a fiduciary. Prior to WealthSource, Ito was also the chief compliance officer of Vellum. While he was at the SEC, Ito served in many roles from a securities compliance examiner to an assistant regional director of the investment advisor examination group at the regulator’s Los Angeles regional office.
The biggest challenge for Sullivan when embarking on his own business was realizing what he didn’t know about the business. “The wirehouse firms coddle their advisors. I was coddled,” he says. “But they do it in such way that we don’t know we’re being coddled. They throw a lot of resources at us.”
He says he had to take a step back figure out how to simplify wealth management. “More is not always better. Sometimes it’s just more,” he says, referring to products and services. “I had to learn how to offer what our clients need in a clear, concise way, in the most simple, straightforward manner possible.”