Stanford Group Co., a Houston wealth manager, opened two offices this week as part of a growth plan to become a large boutique wealth firm in the Southeast.
The company, which has $20 billion of assets under management, opened offices on Monday in Dallas and in Boca Raton, Fla., and said it plans offices this quarter in Atlanta and Austin, Tex. The Atlanta office is to be opened this month and the Texas office by mid-May.
Danny Bogar, a managing director of the parent company, Stanford Group Holdings, said the unit would continue expanding into a series of Southeast markets in the next 12 to 24 months.
The strategy, he said, is to hire professionals with their books of business in markets that Stanford wants to enter. The private-client and institutional service businesses will lead the way for the company, he added.
W. Christopher Maxwell, a managing partner at Conestoga Capital Advisors, a Rock Hall, Md., wealth management firm, and a former fund executive at both KeyCorp and the former Citicorp, said competition is fierce among large banks and small wealth managers in the Southeast but that Stanford’s strategy could work.
A wealth management company’s strong geographic advantage is in building a good foundation within a short distance of the main office. “Once you get out of driving distance, you have to compete with everyone,” he said.
But Stanford Group’s strategy to build a “franchise” of locally based offices could succeed, Mr. Maxwell said. Having a strong local presence is crucial in any region but especially in the Southeast, he said.
“If you can bring consistent services and strong local delivery, then you can compete with larger firms in the region,” he said. “You have to have the depth of products and services and the right people delivering it.”
Mr. Bogar pointed to rapid revenue growth recently in the private-client group. For 2003, the group had $43 million of revenue, he said, but revenue nearly doubled last year, to $84 million, and he said he expects the unit to generate $150 million this year.
“We’ll probably slow down a bit at the end of 2005, but our only real obstacle to growth is the regulatory environment,” Mr. Bogar said. “We just want to make sure that we have the wheels on the bus. We are focused on that.”
Mr. Bogar said he perceives a niche for an independent wealth management company in the Southeast. Stanford sees its main competition on the private-client side in the Southeast as coming from bigger outside players such as Northern Trust and Bessemer Trust.
“We want to take a lead, not follow, philosophy,” he said. “Our firm believes that if it’s green it’s growing and if it’s ripe it’s rotten. Our philosophy is growth.”
Mr. Bogar said that, since the parent company got its start at the end of 2000, it has had an aggressive growth strategy. When the stock market bubble burst in 2001, the company began hiring executives laid off by bigger financial services companies and opening offices, he said.
Eddie Rollins, who was named the executive director of private-client services on Monday, said the company has nine offices, seven in the Southeast. The expansion in the region began last year when Stanford Group opened offices in Memphis and in Longboat Key, Fla.
Mr. Rollins said Stanford Group Co. plans to use the offices in Dallas and Boca Raton as growth models. In each city the company hired a team of people with a base of customers and assets.
In Dallas, Stanford hired Lori Bensing, Louis J. Schaufele, and Virgil Harris. Ms. Bensing, who will run the new office as a managing director, worked at Banc of America Securities. Mr. Schaufele and Mr. Harris both worked for Credit Suisse First Boston, Lehman Brothers, Banc of America, and Smith Barney. The team brings with it $5 million of revenue and $1 billion of assets.
Michael Ralby will lead the Boca Raton office after four years running his own investment advisory firm, Above the Line Consulting, which specialized in working with high-net-worth investors and small institutional clients. His team will open with $100 million of client assets.
The company is in conversations with advisers in Charlotte; Nashville; Richmond, Va.; and Tampa, Mr. Rollins said. “We want to be able to grow as opportunities present themselves in the Southeast,” he said. “We have had conversations with people that called us on the West Coast, but we have chosen not to expand that way.” The company already has offices in San Diego and Denver.
Growth in the private-client business is part of Stanford Group’s plan to create a full-service financial services company. Its advisers give high-net-worth clients wealth management services including financial planning and advice.
Mr. Bogar said the company is focused on expanding its private-client business and its institutional division.
“Our background is that of a private bank, and that is our forte, but we are growing our institutional services because we are discovering that our customers are like small institutions,” he said. “We have gotten into institutional services to serve our clients.”
Rocky Stein, the managing director of Stanford Group Co.’s institutional division, said that all the recent consolidation leaves a void for a strong institutional bank to serve middle-market clients.
To develop its research platform, Mr. Stein said, Stanford bought Washington Research Group in November. The company now has 50 analysts writing research.
Research “is going to be a driving force for our institutional sales and trading platform,” Mr. Stein said. The company has 30 sales and trading executives and plans to develop the platform. “Once you have a research platform in place, it is a growth engine,” he said. “I want to get more investment bankers.”
By yearend, Mr. Stein said, he expects to have eight to 12 more investment bankers. Mr. Bogar said he believes the institutional business will grow quickly.
“The institutional business will snowball quickly because it is already built out, but the private-client side will be tougher to grow because we have to do it one producer at a time and one set of assets at a time,” he said. “Unless we make an acquisition, which also isn’t out of the question, we will build this methodically.”
