Turning advice on its head

It’s a Friday afternoon at the end of August, and Joe Duran is directing a working lunch with his top executives at United Capital’s headquarters in Newport Beach, Calif.

It’s “college color war” day at the firm. Financial advisers and staff from around the country sport their college colors and engage in some good-natured trash talk as football season opens.

Mr. Duran is in a blue University of California, Berkeley, Bears sport shirt. Messy chicken wings are served buffet-style.

It all seems a bit out of place for a firm vying to be a nationally branded registered investment adviser.

But that’s the way the energetic Mr. Duran likes to do things at United Capital Financial Advisers LLC, the company he founded in 2005. If something reeks of a stuffy Wall Street tradition, Mr. Duran wants no part of it.

“We’re trying to change completely the way the industry works,” he said.

Check out why Mr. Duran says financial plans are obsolete the moment they’re drawn up.

That may sound like puffery from an overly ambitious entrepreneur, but Mr. Duran is genuine in his beliefs, said Kelly Trevethan, a financial adviser at United Capital in San Francisco, and Mr. Duran’s own adviser since 1985.

The two men brainstormed ideas for a new firm after Mr. Duran sold an earlier company he founded, Centurion Capital Group Inc., to General Electric Co. in 2001.

“We both agreed — Wall Street was broken,” said Mr. Trevethan, who joined United Capital in 2008. “It was too much about selling products, with high fees.”

Mr. Duran settled on the idea of building a nationally branded advisory firm with a repeatable process for helping clients make good financial decisions.

In the past eight years, the firm has been on an acquisition binge, growing to 359 employees, including 100 advisers in 47 offices. United Capital Financial Advisers and its pension consulting affiliate advice on approximately $17 billion in assets.

Private-equity firms Bessemer Venture Partners and Grail Partners LLC own about 40% of United Capital. Employees and managers own the rest.

Corporate ADV

Financial advisers at the firm are all employees operating under the corporate ADV.

That is critical because the firm couldn’t scale its advice process among a group of independent firms, Mr. Duran said.

More importantly, recruits have to fit the United Capital culture, which doesn’t tolerate big egos.

“Every single adviser here, every employee, thinks of the bigger picture. They don’t put their interests ahead of the clients or the firm,” Mr. Duran said.

“That is unusual in our industry,” he said. “It’s why, frankly, we don’t do very well with full-service- broker types.”

Adviser Will Kelly joined the firm in January 2012 with two partners after their former firm closed up shop.

They saw United Capital’s emphasis on getting the right cultural fit.

“That really impressed us,” Mr. Kelly said.

United Capital is one of about a half dozen firms that are growing rapidly by consolidating advisers under a single brand. Unlike Dynasty Financial, Focus Financial Partners, HighTower, National Financial Partners and Securities America, United Capital is targeting small independent advisers instead of breakaway brokers.

For new offices, United Capital targets advisers at independent broker-dealers who have $200 million to $500 million in assets and want A-to-Z support. Only those seeking significant growth need apply.

Teams opening up new “anchor offices,” as United Capital calls its branches, get about five times operating cash flow, paid in a combination of cash, notes and stock.

The firm also takes on smaller practices as tuck-ins, but doesn’t pay them to join.

United Capital is the first firm to implement behavioral finance as the centerpiece of its planning services, Mr. Duran said.

After all, emotional issues are the biggest hurdle preventing investors from meeting their goals.

Mr. Duran is ready to spread his message further. The firm is close to launching a new branding campaign built around the tag line, “Finally feel good about money.”

United Capital clients seeking financial nirvana start with a concept featured in Mr. Duran’s book, “The Money Code: Improve Your Entire Financial Life Right Now” (Greenleaf Book Group Press, 2013), a parable that helps readers decide what kind of “money mind” they have: a giver (worried about others), a protector (risk-averse and cheap) or a pleasure seeker (a fun-loving spendthrift).

The premise is that by identifying your money personality, you can better understand conflicts with a spouse, for example, or head off mistakes.

(The book includes an afterward in which Mr. Duran reveals the physical abuse and financial hardship he endured as a child growing up in his native Zimbabwe, leading to his own “protector” money style that keeps him from feeling financially secure.)

United Capital clients then rank a series of color-coded cards with goals such as “spend guilt-free” or “support other family members.”

The process, called Honest Conversations, is followed by a score card showing the probability of accomplishing objectives. It then incorporates a financial plan that is constructed from a set menu of asset management strategies.

But will wealthy clients really sift through a deck of cards to uncover deep emotional needs?

“It won’t be a solution that works for everyone,” Mr. Trevethan said. “But for the right person, it’s absolutely the right tool to use.”

Almost all new clients go through the exercise, and more than half of existing clients have done so, Mr. Duran said.

Can United Capital succeed in creating a national RIA brand?

“It’s ambitious, but I think achievable, particularly for the mass-affluent market,” said Mark Tibergien, chief executive of Pershing Advisor Solutions LLC. “It depends on if they can deliver consistency from office to office.”

But building a national brand is “foolish” for most firms, Rudy Adolf, founder and chief executive of aggregator Focus Financial Partners LLC, said in a recent interview with Financial Planning magazine.

Mr. Adolf, who declined to comment for this article, told Financial Planning that following a “Starbucks” approach results in a cookie-cutter service that most advisers want to avoid. That reference was a thinly veiled criticism of Mr. Duran, who frequently cites the coffee franchise as a model.

Adviser Dan Dubay of Atlanta decided not to join United Capital after it bought his old firm, PPA Advisory Services Inc. He and three other partners went to SignatureFD LLC.

United Capital had “some appealing features,” Mr. Dubay said, but it is “a bit more mass market” than Signature. “We wanted alternatives for high-net-worth clients [and] family office services.”

Ric Edelman, chief executive of Edelman Financial Services Inc., who is also building a national RIA, thinks that it is too early to tell if United Capital will be successful.

“The real question [is whether] “same-store sales’ stand on their own, or will [Mr. Duran] always be obligated to be in an acquisition mode” to keep growing, said Mr. Edelman, whose firm has about $10.5 billion in assets.

Finding acquisition targets is challenging, so “a shift to organic growth is inevitable,” Mr. Edelman said.

Mr. Duran plans to do just that.

Over the past few years, the firm has invested more in improved services and marketing. Training and marketing campaigns are run out of a recently developed Dallas hub.

Management hires

A year ago, Mr. Duran also made two key management hires to bolster strategy, marketing and training.

Gail Graham, senior vice president of strategy and execution, was nabbed from Fidelity Institutional Wealth Services. Stephanie Bogan, who founded Quantuvis Consulting in 1996, which later was acquired by Genworth Financial Wealth Management Inc., was brought in as senior vice president of client experience and training.

“It’s not a coincidence that Stephanie and Gail came from … much larger institutions,” Mr. Duran said.

As a result, he expects that by the end of next year, just a third of new assets will come through acquisition, down from about half now.

With United Capital on a growth track, the next question for the firm is whether it will tap into public markets with an initial public offering.

“Sure. But we wouldn’t have to,” Mr. Duran said.

He figures that the firm would need $200 million to $250 million in revenue to go public, a threshold that is three to five years off.

Professional-services firms don’t always make good public entities, “because you get shareholders saying you need to sell proprietary products or you need to have your own bank,” Mr. Duran said.

He is thinking about bigger issues.

Mr. Duran is a devotee of the idea of “conscious capitalism,” which holds that businesses should focus on having a positive impact on society, in addition to profits.

For United Capital, that means changing the way that investors think about money.

“If we don’t actually help people feel good about money, we haven’t earned our fees,” Mr. Duran said.