How a Seventh Grade Friendship Endured and Created a $6.5 Billion RIA
EP Wealth Advisors has more than doubled assets under management in less than two years.
EP Wealth Advisors, a 21-year-old RIA headquartered in Torrance, Calif., is on a tear.
Over the past year and a half, it has acquired eight firms and more than doubled its assets under management to over $6.5 billion. Its management team is actively looking to acquire other firms and anticipates a plethora of M&A opportunities as the RIA model continues to gain popularity and as it gets more difficult for smaller RIAs to compete.
“We’re just at the starting line,” says Derek Holman, a co-founder and managing director of EP Wealth.
Strong personal bonds are one factor that makes EP Wealth stand out. Holman and Brian Parker, EP Wealth’s other co-founder and managing director, have been friends since the seventh grade. President and CEO Patrick Goshtigian, who previously headed global operations for Nuveen, has been Parker’s friend and neighbor since prior to joining EP Wealth in 2011.
It’s not just the C-suite that’s tight. “We spend a lot of time building relationships,” says Parker—from clients to new hires to teams being acquired. EP Wealth currently has approximately 140 employees, including roughly 45 advisors.
Instead of chasing assets, EP Wealth is striving to offer “the most trusted advisors” in the communities it serves, says Holman. If this is all done right, “we feel that the assets will follow.”
Parker and Holman’s mutual trust is what they say gave them the confidence to launch their firm, in 1999, as 25-year-olds. After college, they honed their skills at separate Wall Street firms but didn’t like the focus on commission-based selling.
They started their firm (originally named Premier Financial Management) to offer independent advice. They wanted to create an environment in which they felt comfortable onboarding friends and family. They didn’t anticipate then how popular the fee-only model would become. They brought a handful of clients from their respective firms and one remains with EP Wealth.
“We didn’t have a lot to lose,” says Holman, although the subsequent dot-com burst didn’t help. “We were young and we had a vision of how clients should be treated.”
Holman and Parker have always been competitive —a friendly rivalry that began on the basketball court as teenagers. Holman credits their drive to push each other and to hold each other accountable with accelerating their firm’s growth. It was hard for one of them to leave the office if the other was working, he says, so they’d both end up working harder and longer.
Not knowing fully what they were doing initially, and having a difficult time finding clients, kept them grounded, more disciplined, and moving at a more measured pace, says Holman, who adds that he’s now grateful for that experience. This venture has also far outlasted the six months they worked together in a yogurt shop while in high school.
However, things don’t always runs smoothly at EP Wealth. The middle school pals, who served as each other’s best man at their weddings, have “had too many disagreements to count,” Holman says. They’ve disagreed over leases, hires, and office equipment purchases. They’re now trying to decide, with Goshtigian, whether to expand the firm’s present headquarters or to move since it has outgrown its office space.
Parker says he’s been willing to take more risks over the years while Holman describes himself as more conservative. This “yin and yang,” says Holman, enables them to counterbalance each other. According to Holman, their friendship enables them to be more candid than they probably would be with a business partner they didn’t know as well.
“At the end of the day, all three of us own the decisions,” says Goshtigian. “Usually we’re able to see the world from each other’s shoes, and that’s helpful.” Parker adds, “We’re not going to get ourselves kind of down in the mud and worry about small decisions when we have something so big in front of us,” he says, referring to the tremendous opportunities in the RIA space.
They also make a point of getting together outside of the office, including family vacations and a casual weekly breakfast. “Some people get together over a beer,” says Holman. “We’re getting together over pancakes and eggs.”
“When our families travel together, there’s a lot of time that we’re just being friends,” says Parker. “I think that’s healthy and kind of diffuses any conflicts or disagreements that you had at work.”
Holman and Parker decided to expand their company not long after starting it. One of the first advisors they hired, Kevin Ashworth, is now EP Wealth’s director of investments. In 2004, they partnered with Stephanie Enright’s Enright Financial Consultants (eventually dropping “Enright” and “Premier” to become EP Wealth Advisors).
Then in 2011, after building their firm to approximately $1 billion in assets, they did something drastic.
“Brian and I fired ourselves from managing the company,’’ says Holman, and hired Goshtigian to run EP Wealth’s day-to-day operations.
It was a hard thing to do, says Holman, but he and Parker felt it was necessary to scale the firm for the future. “It just kind of clicked,” says Holman, about bringing in Goshtigian.
Coming from the corporate world, “It’s a change,” says Goshtigian, “but it’s the change I was looking for.” He wanted to work in a smaller environment, directly in his community, and with friends.
EP Wealth initially acquired four more firms, including a Denver-based practice run by John Moore, a friend of Goshtigian. In mid-2017, EP Wealth teamed up with Florida-based Wealth Partners Capital Group to turbocharge expansion efforts.
Wealth Partners, which took a minority non-voting interest in EP Wealth, helps EP Wealth identify and vet potential acquisitions. The relationship also provides EP Wealth with access to Wealth Partners’ banking relationships and capital, says Holman, although Wealth Partners isn’t financing EP Wealth’s acquisitions.
Since joining forces with Wealth Partners, EP Wealth has acquired eight firms and now has a dozen offices across four states. It welcomes advisors who are looking to grow, retire or simplify their practices, says Holman.
He is glad EP Wealth isn’t using private equity to finance its acquisitions. “Private equity is guilty of having a short-term focus in an industry that has a lot of potential longer term,” he says. At 45, he says he wants to stay in the industry for a long time.
EP Wealth places big emphasis on bringing in people and teams who it thinks are a good cultural and philosophical fit. It looks for people who have energy, a team mindset and an entrepreneurial spirit.
The first person Holman and Parker hired shortly after starting their firm was Sherryl Ray, who’s now a partner and the director of employee enrichment at EP Wealth.
Ray, a one-time stage actress who didn’t have prior financial experience, met Parker when she was interviewing for a server position at a restaurant. Parker, who was in the restaurant waiting to meet a client, observed her interview because the general manager conducted it right in front of him. After the interview, Parker approached Ray, who had her toddler in tow, and handed her his business card.
“I suppose I looked tenacious on some level and I probably looked a little desperate,” says Ray. “I think, probably more than anything, he just saw that I could deal with clients, could deal with customers, and could deal with people.”
Ray initially answered phones at EP Wealth and tried to help clients feel comfortable as they came in. “I’m from the Midwest and I kind of treated everybody as though I’m going to get to know them,” she says.
She didn’t have a title when she joined the firm—and neither did Parker and Holman. “I think that says something about how Brian and Derek manage,” she says. “They were very humble managers.” As the firm grew and titles evolved, she worked her way up from operations associate to operations manager and then director of operations before landing in her current role.
Her main functions are training and onboarding newly integrated teams and newly hired individuals. She begins educating advisors and their teams three weeks before firms are acquired and continues this training for several months. She helps get them acclimated to EP Wealth’s technology, customer relationship management and culture.
“Culture is what happens when nobody is looking,” says Ray. “I don’t think there’s a way to teach it, but we can make people feel part of something.” It involves listening, empathizing and also being open to adopting merging firms’ best practices, she says.
EP Wealth’s geographically scattered firm operates as one team, says Holman, although the industry’s more common structure is for smaller firms to working autonomously within a larger RIA entity. EP Wealth also has only one class of stock, instead of hierarchies and tiers, in order to provide equal footing and transparency.
“The philosophy is we’re all in this together,” he says, “and we want everyone to have the same goals.”
Lynn Ballou, a CFP, senior vice president and partner with EP Wealth, merged her financial planning firm, Ballou Plum Wealth Advisors, with EP Wealth in 2016. Before the merger, she and her business partner Marilyn Plum, who has since retired, “were still with LPL in a commissioned world,” says Ballou, “but we were doing 98% of our business as if we were an RIA firm.”
She and Plum interviewed 23 companies before deciding to join EP Wealth. This encounter was “a meeting of the minds, both personally as well as the vision of the business,” says Ballou. “That was about the time the DOL rules were threatening and looming over us, LPL was going through some of its own growth, and I had no time to take care of clients.”
“I was so frustrated between HR, the DOL,” she says. “I was at my wits end, and Marilyn wanted to retire.”
Her clients were excited about the merger since they knew it would offer them a long-term solution once Ballou and Plum retired. “It made us very referable,” says Ballou.
Bringing in a women-owned firm has also benefited EP Wealth, she says. Parker, Homan, and Goshtigian asked her to help launch its women-led initiative and the firm has adopted some of her best practices, including always having both spouses at client meetings.
“We’ve really brought the women’s initiative out from the closet and from underneath the carpet,” says Ballou. “You have to give a nod to the guys that you had three white men who absolutely championed and supported a multicultural change in their firm with a women-led initiative.”
The initiative performs community outreach through financial literacy campaigns and partnerships with charitable organizations. It’s helping EP Wealth attract more women to the firm while also promoting its female colleagues, says Ray.
EP Wealth’s advisors have developed client niches. One advisor has built up a practice, through word of mouth, with members of the Professional Golfers’ Association (PGA). Other advisors work often with retirement plans and retirees exiting the aerospace industry. The firm also has tax attorneys and CPAs on staff.
As for EP Wealth’s growth plans, “We’ve stopped putting an asset goal out there,” says Holman, and are instead focusing on trying “to build one of the predominant wealth management firms in the country.” Parker adds, “We want to be the best in every aspect, whether it’s for our employees, for our clients and for all of our shareholders.”