My Merrill Lynch “Grand Experiment:” Breakaway Advisor Reveals Reasons for Curious Move
Veteran advisor Paul Fegan had a relatively short stay at Merrill Lynch – which he characterizes as a “grand experiment” – before he returned to his independent advisory roots.
Fegan and David Price, who were previously advisors at Merrill Lynch for two years, co-founded Navis Wealth Management this month. They both started their careers at Clarfeld Financial Advisors, where Fegan worked for 18 years and Price for 14 years.
New-York based Navis aims to create “highly personalized” financial plans and strategies for high-net-worth individuals and their families.
The firm’s target clients are senior corporate executives, including those who have retired; small business owners; and because of Fegan’s experience, Americans living overseas and foreigners living in the U.S.
“We’re focused on those areas because that’s where our core competencies lie,” says Fegan, managing partner at Navis. “Obviously, we work with clients in different, often more straightforward situations, but we have deep experience working through some of the difficult, more complicated situations senior executives, small business owners and expats face.”
Fegan and Price are “fundamentally believers in the Modern Portfolio Theory,” which assumes investors are typically risk-averse. But they also believe in “being somewhat tactical” by going overweight on sectors that look undervalued and taking gains on investments that are rising too fast.
They typically invest using mutual funds, ETFs and separate account managers. They have recently started shifting their focus from passive ETFs and index funds to active managers, which they believe will add more value to portfolios in the coming years.
Navis is the fifth and latest firm to join the growing RIA network of Sanctuary Wealth Partners since the launch of the hybrid RIA and broker-dealer network in May.
Fegan shares with FA-IQ why his stay with Merrill Lynch was relatively short-lived, Navis’s family CFO approach, and his expectations and priorities.
FA-IQ: Prior to founding Navis, you were a financial advisor with Merrill Lynch for two years. Why did you decide to leave the wirehouse and set up your own independent practice?
Fegan: My partner David Price and I spent the bulk of our careers at an RIA firm so we’re very comfortable in this environment and felt it was the best scenario for us and our clients. After spending my whole career in a small company, I was interested to experience life in a larger organization. David and I met with all of the large wirehouses prior to deciding to join Merrill Lynch. While we felt Merrill Lynch was a fine place to hang our hat for a few years, it wasn’t for us long term.
We viewed [our time at Merrill Lynch] as sort of a grand experiment, where if we were pleasantly surprised by the larger firm environment and it was advantageous for our clients then we would stay a while. It became clear to us that our clients and our practice are better served in the independent model. It served as a great education to help us compete in our industry and reinforce our strengths as advisors. It also served as validation of under which model our clients are best served. As fiduciaries this is obviously very important to our practice.
FA-IQ: There are RIA networks that have been around longer than Sanctuary Wealth Partners. Why did you choose to partner with Sanctuary?
Fegan: The pedigree of their top management team – especially [president and founder] Jim Dickson and [wealth management president] Matt Reynolds – is certainly impressive and when evaluating a firm we always place a significant amount of weight on the tenure and experience of the people. The most important factor for David and me was maintaining our ownership of Navis Wealth Management. We’ve become partners in Sanctuary Wealth Management and will participate as we all grow in the future.
FA-IQ: How would you describe your transition out of Merrill Lynch and into Navis?
Fegan: The transition has been like drinking water from a fire hose. It’s been a week and a half of long hours [as of mid-November] and lots of travel but it’s been wonderful. The entrepreneurial spirit helps find another gear of energy, which we missed a lot. Plus all of our clients that we’ve spoken with were very excited for us and are happy to be part of our new venture.
FA-IQ: Do you think the transition was made better because Merrill Lynch remains a member of the Protocol for Broker recruiting?
Fegan: It afforded a much cleaner break, by providing guidelines of what information you can and cannot take with you. That helps to prevent the ugly back and forth lawsuits, which do nothing but enrich attorneys.
Advisors who want to leave the wirehouses are still going to leave, and their clients whom they’ve built relationships with over the years are going to follow them – not stay at the old firm with some stranger they’ve been assigned to.
FA-IQ: Are your clients at Merrill Lynch following you to Navis?
Fegan: Most of our clients have decided to follow us to Navis Wealth Management, because we built our practice on relationships, not just the numbers and technical ability. By creating deep relationships with our clients and getting to know about their entire life, and not just their portfolio, we become their partner, equally as passionate about achieving their financial aspirations. We have fostered deep relationships with our clients, which enable us to not only manage their portfolios but learn about their lifestyle. This has allowed us to create a more meaningful connection which they don’t want to lose – and you’re not just an advisor who is viewed as a commodity.
FA-IQ: Why did you choose to name your company Navis?
Fegan: Navis is the base of the word navigate in Latin, and we strive to help our clients navigate the intersection of their financial affairs and the rest of their life.
Navis Wealth Management
FA-IQ: What about your working relationship with David Price made you decide the two of you could start this new practice?
Fegan: David and I have worked together for the past 17 years at the prior RIA and Merrill Lynch, so we know each other quite well and have skills that complement each other nicely.
FA-IQ: Will you be hiring more advisors at Navis in the coming weeks or months?
Fegan: Over the coming months we do intend to hire more advisors as well as build out a tax practice to help round out our service offering for our clients. We don’t have a target size. We feel it’s more important to grow responsibly with the right people than try and scale up for the sake of building greater size.
FA-IQ: Will you prioritize hiring former Merrill Lynch advisors over others?
Fegan: Not particularly. We’re more focused on the quality of the individual than what firm they were at prior.
FA-IQ: Which firms do you consider to be your biggest competition – broker-dealers or other RIAs?
Fegan: We tend to find ourselves up against other RIAs more often than broker-dealers. The way the broker-dealer business model works, it’s difficult for advisors to get deeply engrained in their clients’ lives as they often can’t bill for financial and estate planning and consulting to family businesses.
FA-IQ: What would set your firm apart from your competition?
Fegan: Too many advisors these days call themselves holistic advisors while not truly taking a holistic view of their client’s lives. True integration and proactive thought leadership of a client’s cash flow, balance sheet, estate planning, risk management, tax planning and investment portfolio is our core value proposition.
We strive to integrate ourselves in our client’s world, often functioning as their family CFO. We often get involved with multigenerational wealth transfer planning, helping to incorporate the parent’s goals and desires with that of their children and their views regarding the future generations. Often their views can differ on the best use of the wealth the parents have accumulated through their life.
FA-IQ: What are your top expectations from your independent practice?
Fegan: Our goal is to build a practice that is both personally and professionally fulfilling. We anticipate growing our geographic footprint with strategic hires or acquisitions but the overriding key factor is not losing the laser-like focus on the client and always putting them first. We’re keen to build an in-house tax practice that can provide our clients with both a high-quality individual tax planning and compliance solution but can also help our small business clients with some of the complicated issues that arise as their business planning intersects with their personal financial and tax planning.
FA-IQ: What was the hardest part of your transition from Merrill Lynch to independence?
Fegan: The hardest part of a transition out of a wirehouse was setting up the new company, finding office space, etc. while still carrying on at Merrill as if nothing was happening. This is where Sanctuary took a lot of the work off of our shoulders. By coming under their SEC registration we didn’t need to go through the hassle of getting Navis registered with the SEC while not drawing any unwanted attention to ourselves.
FA-IQ: What was the part of your transition that was not as hard as you thought it would be?
Fegan: Before getting introduced to Matt Reynolds and Sanctuary Wealth Partners, I expected the most daunting task would be getting our SEC registrations submitted and approved as well as getting the back office ‘plumbing’ set up and ready to go Day 1. By partnering with Sanctuary they handled all of those chores, even helping to arrange temporary office space, and having computers, printers, scanners set up, networked and ready to go the day we resigned from Merrill Lynch. They also brought in a team over the weekend and part of the first week to help prepare the paperwork and then process it once it was returned from the clients, which allowed David and me to focus on getting in front of our clients.
FA-IQ: What will you be prioritizing in the next six months?
Fegan: Our initial focus will be making sure all of our transitioning clients settle into our new custodian – Charles Schwab – well and all of their needs are met. It’s very important to us that our clients have a smooth transition and seamless experience getting started with Navis Wealth Management. Along the way we will be spending a fair amount of time organizing ourselves and also running our practice now with autonomy and better tools.