NFP's CEO Jessica Bibliowicz, with her father, Sandy Weill, who created Citigroup.
Fusion Advisor Network is a bit like a velvet-roped, members-only club for financial advisors. It's almost a society of sorts, where high-end FAs who might compete for the same type of clients in the real world get a chance to sit back, let their guards down and swap tips, war stories and advice. Fusion has made a name for itself with its high-end, hands-on approach to building out the marketing and growth plans of those advisors they bring into the fold. Since Stuart Silverman founded the firm in 2003, Fusion advisors' combined revenue has grown from about $5 million to nearly $60 million in 2010.
By all accounts a success story. So it's no wonder that National Financial Partners, who announced they were acquiring Fusion Thursday for an undisclosed sum, was interested. The average production of a Fusion advisor is currently $271,000, versus $219,000 at NFP. (Scott Smith, Cerulli analyst, said once you look at the top 10 IBDs, anything over $100,000 in average revenue is pretty rare.) True, NFP was already serving as Fusion’s broker/dealer and registered investment advisor, and NFP’s advisor headcount and revenue already included Fusion’s 240 advisors. But NFP lacked Fusion's exclusive club-like cache, its marketing expertise, strategic acumen and personalized approach to building an elite advisor's business.
The question is, can NFP apply the same approach across its rep base with equal success?
NFP’s history is somewhat of a mixed bag. The firm is led by Jessica Bibliowicz, the daughter of former Citigroup head Sandy Weill. Earnings have been up and down over the years as Bibliowicz was one of the first in the industry to experiment with roll-ups, acquiring several large practices, said Tim Welsh, president and CEO of consulting firm Nexus. Fusion president Philip Palaveev, who joined in 2008, will continue to lead practice management, and the rest of the Fusion leadership will remain intact, the company said. Bibliowicz announced in April she will step down from her position as CEO at the end of the first quarter in 2013. Douglas Hammond, chief operating officer, was named NFP’s president and will become CEO in April 2013
“I think was a smart move by NFP to bring them in because they have such a powerful legacy of practice management, consulting and marketing help, and all of the advisors affiliated with Fusion were really the top advisors at NFP to begin with,” said Welsh.
“I think what they found was that Fusion had solved the productivity and marketing problems that the independent broker/dealer rep has, so rather than just keeping it constrained to 200 other advisors, they can now take this to all of them,” Welsh said. “I think that’s the challenge for NFP: you just bought this shiny new jewel, now how are you going to make sure that it gets properly deployed across the organization.”
“This helps with retention,” said James Poer, president of NFP Advisor Services Group. “This helps competitively. It also empowers us to grow our business intentionally. What we mean by ‘intentionally’ is we’re not out looking to have the most amount of advisors in the community. What we’re looking for is we always want to be at the top in terms of average production per advisor and grow our business with the sorts of advisors that want to create shared success in a firm that will help them grow their business.”
“One of the things we see out there in the marketplace is most of the broker/dealers and RIAs are overusing the buzzwords of ‘practice management’ and ‘marketing consulting,’ those kinds of things,” said Fusion’s Silverman. “In most cases, it’s not a differentiator because it’s just one more department with one or two people sitting behind a desk.”
Fusion, however, does the hard work for the advisor. The firm has a marketing team that comes into an advisor’s practice and creates a customized marketing plan for member firms, Silverman said. The firm also has a business planning team that builds a business plan and puts it into action. The consulting work is done online, face-to-face or over the phone.
“The advisors aren’t going to have people invading their offices if they don’t want them there,” Smith said. “But if the home office can make a compelling case with, ‘Here’s how we can grow your business. Here’s how we want to help you, but we need you to do this, this, and this. Will you buy into doing it?’ I think that’s where they’re going to see growth in practices.”
Independence can be a lonely place, and the community and communication among member advisors is another thing that differentiates Fusion. The firm is famous for its yearly retreats, where advisors come together and share best practices.
Some Fusion advisors may fear their exclusive club will be watered down with the acquisition, Welsh said. But since they’re already users of the platform and have already adopted Fusion’s approach to doing their business, it probably won’t impact them on a day-to-day basis.
What’s in it for Fusion?
While Fusion was always sort of an amalgamation of small businesses, the deal allows the firm to scale its capabilities across a wider base of advisors, said Cerulli’s Smith.
“If they can add on the bulk of NFP and have them accepting the best practices that Fusion’s generated, it helps their story more,” Smith said. “It allows them to put the power of 2,000 advisors behind their initiatives rather than 300.”
Fusion’s Silverman said the deal will allow Fusion to combine its capabilities with NFP, get rid of any overlap, and create a more robust platform for advisors housed in one place. Where there was overlap in capabilities, the integration will free up those resources and manpower to do other things and build out other capabilities.
With deep-pocketed NFP behind them, the deal might also mean additional investments in Fusion’s business. Poer said NFP will be allocating capital and making investments towards integrating the two firms’ technology and services. But allocating captial alone won't guarantee the Fusion culture will survive.
“With any acquisition, there’s going to be a period of integration and how well they do that will ultimately show the success,” said Welsh.