Scott Hanson wants to take the hybrid RIA he co-founded from its current $3.8 billion in assets to $10 billion within four years. His strategy to get there? Acquisitions.
“Organic growth is just too slow. It takes a long time,” says Hanson, who serves as co-CEO of Hanson McClain Advisors along with his partner, Pat McClain.
The Sacramento-based firm, which is backed by private equity firm Parthenon Capital Partners, is growing quickly, completing three acquisitions in a little over a year, according to the firm. Its latest deal, which closed on Feb. 1, was the purchase of the $235 million practice HGP Retirement Group.
Hanson wants to develop a national RIA where clients see one brand and have the same client experience across every office, he says. New advisors become employees of the firm and fully integrate into the organization, according to Hanson.
What’s in it for the advisors? Primarily growth.
“A lot of advisors get stuck at a certain point, and it’s hard for them to grow beyond that,” Hanson says.
The firm takes care of daily administrative tasks for advisors, and it has a 16-person marketing department to help them promote their practices and land new clients, he says.
The Hanson McClain business model resonated with Hugh Phillips of HGP Advisors. Phillips, who left the Ladenburg Thalmann subsidiary independent broker-dealer Securities America with advisor Cheyenne Walker, wants to double his AUM at his new firm where he says he’ll be able to spend more time with clients.
“Once you start approaching that $300 million dollar range, that’s when it’s really hard,” the Napa, California-based advisor says. “Your existing clients start losing the message. You’re not branding yourself as well.”
He points to what he says is a growing list of operational responsibilities and the need to make significant investments in the practice, such as by adding a full-time marketing employee and office manager.
“It definitely reaches a point of diminishing returns. You have to make such a substantial investment that your net really gets squeezed,” Phillips says.
Rather than go about it on his own, Phillips opted to sign on with Hanson McClain even though it entailed a pay cut.
“It’s close to half of where I was [at Securities America],” Phillips says.
Hanson McClain pays its employees a salary with a bonus based on AUM, according to the firm. Phillips says that equity and growth opportunities made the pay cut worth it.
“I know I took a step back. But sometimes you have to do that to take a couple steps forward. There’s no doubt about it,” Phillips says.
Another motivation to make the move was assurance that Hanson McClain would continue to grow in size and value, he adds.
“Sometimes we ask clients to make decisions based on trust, and that’s a huge part of why I made this decision,” Phillips says.
He’s had a a 30-year relationship with Hanson and McClain, having been a part of a marketing network offered through the broker-dealer Hanson McClain Securities (Hanson McClain no longer accepts partners for this network). Phillips had joined the program a few years after joining Securities America in 1995. At the time, Phillips managed $29 million in assets, he says.
“Every time I see [Hanson] I tell him I would never be in this position if it weren’t for our marketing partnership. Never ever would I be in this position,” Phillips says.
Still, it will take time to adapt to the new business model, he says. “I’m used to being in control of the environment, being the one in charge, being the one that has to handle everything that goes into running the business.”
As the hybrid RIA acquires new practices, Hanson McClain is developing a new brand for itself. It will adopt a new name — Allworth Financial — in late April.
“We wanted a name that resonated more with a national brand and consumer,” Hanson says.
A spokesman at Securities America did not respond to a request for comment on the departure of HGP Retirement Group from its network.