Boston Advisors, an RIA that managed institutional and private wealth totaling over $2.37 billion, has split in two and sold the halves.
Other RIAs managing money for both groups of investors should heed what happened to it.
It wasn’t an ownership hydra warring with itself or some grave management error that troubled the prominent New England firm. In a way, the cause of its demise was worse because it was external and unavoidable. Boston Advisors began succumbing to industry changes beyond its control.
“The dynamics in the institutional investment management business have changed unbelievably, even in just the last three or four years, from our perspective,” Michael Vogelzang, president and chief investment officer at Boston Advisors, told RIA Intel.
For a while, Boston Advisors was “punching above its weight” and growing its institutional and private wealth management businesses, Vogelzang said. It once had as many as 40 employees as it gathered new assets.
But the robust growth began to falter, especially on the institutional side. Rising data and compliance costs coupled with fee compression dimmed the once bright future of the business. “Trying to compete with some of the biggest people got really difficult,” Vogelzang said.
While watching other small institutional managers sell or close, Boston Advisors decided to be proactive and explore a sale.
The private wealth management group also faced a strengthening headwind of large, sophisticated RIAs winning new clients that Boston Advisors was once adding at a faster clip, Vogelzang said.
“I think everybody’s business model is changing. People are trying to adapt to the same forces I just talked about.”
And if they couldn’t beat them, why not join them?
Knights of Columbus Asset Advisors, the New Haven-based firm that manages $24 billion, purchased Boston Advisors’ institutional group that includes 19 employees that manage about $870 million. The faith-based asset manager already owned 18.8% of Boston Advisors, which managed equities strategies for the firm.
“It was a really natural place for us, thinking about allowing your employees to be in a really competing, growing business with real asset growth and really advance their careers,” Vogelzang said.
The private wealth management group consisting of 15 people and more than $1.5 billion was sold to Captrust, the Raleigh, NC-based RIA that manages $290 billion, much of it belonging to retirement plans and institutions. Boston Advisors’ private wealth group will be folded into Captrust’s group, which has more than $17 billion.
After meeting with Captrust, Vogelzang said he stopped all conversations with other parties. He said the RIA’s scale, centralized services to its advisors, and the business opportunities with existing Captrust clients were too tempting to turn down. He had the opportunity to move with either half of Boston Advisors.
“I really thought that the opportunity to take a leadership position with Captrust and help shepherd the New England area was something I just couldn’t pass up.”
Terms of the two deals were not disclosed. In addition to Knights of Columbus Asset Advisors, another private investor also owned 18.8% of Boston Advisors.
Boston Advisors started as a boutique investment manager in 1982 and had several names and owners until 2006, when its management bought the firm and created the RIA Boston Advisors. Vogelzang led the company from that day until the sales last week.