David and Brenda Blisk always had big plans. That's why five years ago the couple decided to leave one of the nation's top brokerage firms to start Legacy Advisors in McLean, Va. While a big plan doesn't always translate into a big reality, the Blisks have managed to build a successful business with $450 million under management and more than 1,000 wealthy clients. Now, they are thinking even grander. The Blisks want to remake Legacy into an East Coast network of independent advisors to compete against the wirehouses.
David Blisk's strategy is straightforward: Give consultants everything they need to run their own financial planning business. Legacy will provide software, money managers, CPA services, mutual funds, hedge funds, aggregated data from most of the nation's investment firms, referrals from Charles Schwab & Co.'s new Advisor Network and the “Legacy Book,” a how-to manual on serving high-net-worth investors. “I've always considered us a quasi-independent solution for advisors who don't want to be the CEO, CFO and COO,” he says, “but just want to be consultants.”
Blisk also plans to buy existing companies from older advisors who want to retire as well as brokers who want out of the business. In fact, he's already in talks to buy a firm near Washington, D.C. (Blisk says he'll pay the industry standard — about 1 percent to 1.25 percent of trailing revenue.) Within five years, Blisk predicts Legacy, with 30 employees (including eight consultants), will generate about $12 million in revenue, up from $3.5 million at the end of 2001, and have $2 billion under management.
“My vision is to have 150 advisors in an eight-state region from Delaware to South Carolina,” says the 46-year-old lawyer who works two days a month as an Air Force reservist at the Pentagon. “Before, I said I wanted to have the whole football stadium; now I want the whole bloomin' county.”
Of course, it's no layup. The RIA world is a fragmented one. And, now that the wirehouses are focusing on wealth management, they will be formidable competitors. It will be harder for Legacy to differentiate itself.
But, sophisticated, affordable technology and a more open financial system makes it easier for Blisk and other entrepreneurs to form networks that offer services and products once only found at big brokerage houses. Highland Capital Holding Corp., GE Private Asset Management (formerly Centurion Financial Advisers), Clark/Bardes Consulting and other firms have tried forming umbrella groups. The most successful has been National Financial Partners with more than 100 firms. Unlike Legacy and the other companies, NFP prides itself on not being an exit vehicle for retiring consultants. It buys all the stock in small, growing businesses and a portion of their future cash flow, but the executives stay on.
Blisk's pitch is that he knows what consultants need, because he's done it the hard way — alone. When he and Brenda, who celebrate their 19th anniversary in May, left Salomon Smith Barney in February 1997, they took two other employees, most of their clients and about $90 million in assets under management. They also took on a number of added responsibilities, including finding the right personnel, insurance, vendors, software, Internet access and office space.
It was worth the trouble. “The bottom line at a wirehouse is that you do what's in the best interest of your client as long as it is on their sheet of paper,” Blisk says. “I wanted the freedom to be independent and grow as big as we wanted and offer total financial planning. And the entrepreneur in me wanted to build an office of my own.” Indeed, the Blisks' group offers everything from what it calls divorce planning to estate planning.
One thing that made it easier for the Blisks to strike out on their own was Lockwood Advisors in Malvern, Pa. A year and a half earlier, Jim Seuffert and Len Reinhart left Salomon Smith Barney to found the independent managed account platform. Lockwood provides Legacy with research, access to money managers and broker/dealer services. The Blisks wanted to handle all their clients' financial needs: retirement, estate planning and trusts, divorce planning, separate account management and alternative investments.
“They made a decision to bring most, if not all, of the services in-house so everyone shares the same objectives in meeting the goals of the client,” says Seuffert. “It would have been very easy to start small and over the years build from there. They said, ‘let's take the risk now’.”
In the beginning, Brenda's Blisk team accounted for the bulk of Legacy's business. It now has $150 million under management and more than 350 high-net-worth clients who have between $1 million and $40 million in total assets. Brenda, who won't reveal her age, says her trademark is personal service. Even so, her niche is working with women.
Deborah McCray, who lives in Beavercreek, Ohio, decided to move all her money over to Brenda after interviewing her. “She never talked down to me like the men, who acted as though I didn't have any brains in my head,” says the 61-year-old retired nurse. “I could ask her questions and I got good answers.”
Brenda helps clients budget weddings, tuition payments and new cars and form succession plans for their businesses. She'll arrange meetings with the client's lawyers or accountants at her office. And she'll refer them to doctors and interior decorators other clients recommend. In short, she says: “We're life advisors.”
Business was good for the Blisks. By 2000, Legacy had seven other consultants. But to the Blisks that wasn't enough. Then last year, Schwab decided to revamp its referral service, Advisor Source. Instead of counselors giving clients names of three pre-screened financial planners, they would recommend one. If the client decides to work with that firm, Schwab collects 15 percent of the investable assets. (The fee is 18 percent if the firm works with other financial companies.) On April 1, the discount broker launched Schwab Advisor Network with 300 firms at its more than 400 branches. One week after the program started, Legacy received two referrals with combined investable assets over $1 million.
To work with Schwab, Legacy had to switch broker/dealers. One of the companies Schwab recommended was Cambridge Investment Research in Fairfield, Iowa. With Cambridge, Legacy can work with Lockwood as well as Schwab, TD Waterhouse, Fidelity Investments' National Financial Services and Pershing, a division of Donaldson, Lufkin & Jenrette Securities Corp. Cambridge's software, CIR Statements, also gives advisors an edge: It gathers information — managed accounts, mutual funds, variable annuities — from about 500 different sources.
As part of Blisk's plan to be a full-service firm, in October Legacy merged with the CPA firm of Murphy, Deane & Gaffey. Legacy now has three principals: David, Larry Gaffey and Jon Deane. (The Blisks had been working closely with Gaffey before.) And since Legacy wasn't using Lockwood as its broker/dealer anymore, it registered with the Securities and Exchange Commission to become a registered investment advisor. Now Legacy can work with clients around the country.
Though Cambridge works with 500 registered reps — who control $6 billion in assets — Eric Schwartz, Cambridge's president, says he expects Legacy will attract more advisors. “It will help us compete for people from the wirehouses who are heavily oriented toward individual managed accounts,” he says. “If we can satisfy David, then we can satisfy anybody.”