How a CPA Partnership Helped Build a $3.5 Billion RIA | Lord Abbett
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Practice Management

Recognizing that clients want a more holistic approach to financial planning, Hewins Financial teamed up with Wipfli accounting to offer a full-service, one-stop shop. It has paid off.

This Practice Management article is intended for financial advisors only (registered representatives of broker/dealers or associated persons of Registered Investment Advisors).

Roger Hewins readily admits he lacks many of the credentials he looks for in his employees. The president of Hewins Financial got his start managing pension assets, but now runs a national financial planning firm that has 1,200 individual clients, $3.5 billion in assets under management, and 60 employees—including some three dozen planners bearing impressive professional designations.

“I am not a CPA; I’m not a CFP,” he says. “We have a lot of great planners in the firm, but I am not one of them.”

Where Hewins’s real skills—and his Harvard MBA—come into play is in firm leadership. “I only handle a handful of clients because I spend more than half of my time running the business,” says Hewins, whose rapidly growing firm has morphed multiple times since he launched it 15 years ago in a small office in San Mateo, California. “I try to be the best manager that I can.”

A former money manager with Wells Fargo Investment Advisors, Hewins abandoned institutional money management in the early 1990s for a boutique investment firm.

At the time, he believed that the average American was getting bad, and often conflicted, investment advice and was desperate for the kind of sophisticated investment management that was commonplace in the institutional world. He couldn’t have been more wrong.

“I’d battle with clients who didn’t understand me and didn’t want to,” he says. “I came to realize that people really were not looking to know that much about investing.”

What they really needed and cared about was financial planning, he says: “For John and Mary Smith, it’s all about their family; their tax status today, tomorrow, and in the future; their charitable interests; their jobs.”

Bang, Then Bust
Dissatisfied with the direction of the investment firm he was working for, Hewins decided to hang out his own shingle in 1999. Seven of his colleagues—none of them planners—came with him, as did all of the firm’s planning clients. That allowed Hewins Financial to open its doors with $800 million in assets under management.

That may sound great, but the business got off to a rocky start. First of all, the bulk of the assets were held by a handful of big clients, who paid razor-thin fees. And, not surprisingly, Hewins’s former employer was not happy to see either clients or former employees go, and sued. To add insult to injury, the tech boom of the 1990s turned into the bust of 2000 within months of the firm’s launch.

“We had two years of litigation and three years of a bear market,” says Hewins. “It was not fun.”

A big defection in those early years would have sunk the firm, Hewins now candidly admits. But in the end, both Hewins Financial and its clients survived the bear market in good shape, partly because he’d never allowed his clients to build tech-heavy portfolios.

“We have a very disciplined investment process. We don’t do market timing; we don’t try to appease people,” he says. “We try to do what we ought to do, not what people want us to do.”

Now the planning firm has roughly quadrupled in size and Hewins is convinced the growth is just getting started. “I fully expect that in five to 15 years, we will be part of something quite a bit bigger,” he says.

Accounting Ties
A key driver is the company’s longtime affiliation with Wipfli, a midsize accounting firm that operates mainly in the Midwest. The CPA firm called Hewins out of the blue, even before he’d launched the wealth management firm, because Wipfli’s partners determined they needed help providing advisory services to their high-end clients.

It was, it turns out, the beginning of a beautiful friendship.

Wipfli now owns half of Hewins Financial, and Hewins’s planners work in many of the accounting firm’s offices throughout the Midwest. And Hewins, who moved to Minneapolis to help manage the growing Midwestern practice, says he loves working with CPAs.

They tend to eschew the sales culture of his investment banking past, he points out, and focus on providing the sophisticated services that only those with a deep knowledge of the nation’s byzantine tax code can manage.

“The CPAs are helping business owners and executives set up companies and private foundations,” he says.

“They need investment planning, financial planning, estate planning, consulting. A big part of our secret sauce is that we can do that together—the client doesn’t have to quarterback it.”

Smart tax planning can boost investment returns by 1–2% per year, Hewins adds. That’s such a massive added value that Hewins can’t imagine creating an investment plan without managing the tax piece.

Outsourced Service
In fact, he thinks the CPA/planner connection is such a natural one that he started a secondary business a year ago to provide turnkey planning services to other midsize CPA firms. Two CPA firms now participate in Hewins’s so-called Cue program—one on the West Coast and one on the East Coast.

But as with many of the initiatives Hewins has launched over the years, this one has had its share of growing pains. Hewins says he’s had to boot several CPA firms out of the program because they proved to be disinterested or lacking in the firmwide entrepreneurial spirit that makes it work.

He’d like more CPA firms to join the program, he adds, but only if they’re the right fit. Otherwise, it’s like a bad hire, creating a huge waste of both time and money.

Hewins, who has learned many lessons the hard way, says he doesn’t mind pushing his company through trial and error processes. He thinks it’s necessary for the company’s survival. That’s simply because the planning business has been undergoing massive change since the invention of the discount broker, he says, and is likely to continue shifting at a rapid pace. To stay ahead of the curve, he argues, advisors have to emulate those who do it best and take some chances.

“I spend my time looking up, talking to firms that are larger than we are,” he says. “I am always looking to learn, be smarter and do things better.”

One thing that’s key to growing a multibillion-dollar RIA firm, Hewins says, is a sharp focus on talent. Know the types of people you want to hire, he advises. For him the list includes lawyers and estate planning specialists who handle inheritance and business succession issues; insurance experts focused on risk management; several certified financial analysts directing investment policy; and a plethora of CFPs and accountants with personal financial planning designations.

And recruit only A-list players, he adds, so you’re never wasting time and energy on people who don’t fit and don’t help grow the business.

“We find it hard to hire people with backgrounds in brokerage or banking,” he says. “They come from a sales culture. CPAs come from a service culture. It’s a cultural misfit that just doesn’t work.”

---Kathy Kristof

Kathy Kristof, a Financial Planning contributing writer in Los Angeles, contributes to Kiplinger’s and CBS MoneyWatch. Follow her on Twitter at @kathykristof.


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