How Loss, Luck, and Salesmanship Helped Build a $5 Billion RIA

Rick Kent, founder and CEO of Merit Financial Advisors, explains how he built a large company and the new strategies required to maintain its momentum.

Rick Kent (Courtesy photo)

Rick Kent

(Courtesy photo)

While handling bookkeeping for his church two decades ago, Rick L. Kent asked a generous tither what he did for a living. His response: financial services. This serendipitous conversation led to Kent’s first break in wealth management while in his mid-40s.

Prior to this, Kent was a scrappy entrepreneur who relied heavily on his sales skills. “I think sales came easy for me because I’ve always been big on relationship building, getting to know people, and then listening to people and building trust,” said the CEO and founder of Alpharetta, Ga.-based Merit Financial Advisors.

Today, Merit oversees 85 employees and $5.2 billion for clients who often worked or work for telecommunications companies, utilities, and logistics firms. Merit also serves niche markets for divorcees and widows through two firms it recently acquired.

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A big believer in empowering teams and knowing when it’s time to delegate, Kent expects continued aggressive growth.

“Because of the team, investment, and direction we’re heading, I know we’re going to be at $10 billion, $15 billion, three, four, years from now,” said Kent who plans to make five or six new acquisitions this year.

Below are excerpts from our discussion last month, edited for length and clarity.

The first chapter in your career was as an entrepreneur. How did you end up in wealth management?

I was in my mid-40s when I chose to enter the financial industry. I’ve always been big on relationships. Building trust with people works very well in this industry. That’s why clients want to work with you. They trust you. I just found that this industry was the right fit for me. I didn’t know this was the perfect fit for me until I started working in the financial services industry. While Merit has grown tremendously there’s much more ahead. Early on I realized I didn’t have all the answers. My expertise was laying out a vision that other people could follow. I decided to empower people to be their best and help them get better at what they do.

What kind of growth are you experiencing?

We’ve had tremendous growth — 25% plus per year for the past three or four years. Many people would be satisfied with that amount of growth you would think; However, I have an insatiable hunger for growth. My experience is that growth enables you to overcome the obstacles you face in growing a business.

What’s driving that? Referrals, marketing, etc.?

Because we’re growing, we can invest more in technology and marketing. In the past, we’ve had a lot of niche markets that gave us referrals. The great thing about niche markets is that the deeper you go vertically, the more referrals you get. We’ve been focused on the telecommunications market for 20 years. There are so many people that have already retired with us, and they refer other people to us. That’s the beauty of a niche market. The more well-known you become in a vertical, the more referrals you get.

Tell me about your marketing efforts.

Because we’re investing more, we’re really beginning to figure out how to have more success in digital marketing. We build various funnels to improve inbound traffic. We build out specific personas of our target market and build content around those personas to attract people. Then when they come to the website, and initially respond to some of our content, we provide them more information based on their interest. By utilizing artificial intelligence, our systems are communicating with each other and providing more communication to our prospects. This has been a great way to reach more people.

Is this now much more of a focus?

Yes. Before, if you asked most financial practices ‘Where does your business come from?’ 90% of the time they would say referrals. We did the same thing. Almost all of our business came from referrals. The good news is we still have those today. But now, we’re tapping into new markets we’ve never tapped into before through digital marketing.

Did the pandemic and fact that people were home and online more than ever play a role in turbocharging this?

It definitely did. There’s always the bright side of any tragedy, or calamity. I can remember, it was a little bit over a year ago, when most people were afraid to go outside of their house. And so, I’m sitting there thinking, ‘What are we going to do?’ In the past, we’ve been very successful with “lunch and learn” workshop-type marketing. But we couldn’t do that anymore. There was a big question of ‘how are we going to solve this?” After some brainstorming and whiteboarding sessions one of our offices led by example in reaching their clients. Previously this office had not done much in the area of virtual marketing. All marketing was in person at physical locations. In one quarter, early on during the pandemic, they were able to reach over 700 people through their virtual-only efforts. And so, it really did help us get better at that. It turned the focus on. If you can’t do it in physical, your only choice is digital. You have to become better at that.

For digital marketing, where are you spending?

We did make an investment in pay per click. We mostly used Facebook and Google. We also incorporated a LinkedIn digital marketing campaign.

The downside of online conferences is well known, but many people have been pleasantly surprised with recent experiences. Theoretically, you can attract far more attendees in a virtual event as seating is a non-issue. Moreover, attendees can save time and money by not traveling.

I agree. You definitely can reach a larger number of people through virtual meetings. The virtual meeting must be sharp, crisp, and interactive to hold people’s attention online. I think it’s important in keeping it short and to the point. Keeping people’s attention span is tough in a live crowd. In a virtual crowd, I think it’s even more difficult, because people have multiple distractions.

True. I want to step back and better understand your career arc. You said you previously were an entrepreneur. What kind of work were you doing?

I started off in various sales positions. Sales positions became easy for me because I’ve always been big on relationship building, getting to know people, listening to what’s important to them, and building trust. One of the first businesses I started was an electrical wholesale business. After that I opened a residential lighting store.

My interest in being an entrepreneur was that I always wanted to be paid for the value that I created. When I got into this industry just over 20 years ago, I saw a tremendous opportunity to create value for a large number of people.

And how did the transition to wealth management happen?

I became acquainted with an associate who was working for primarily an insurance sales organization who was transitioning into offering financial services. After starting to work for the firm where there were three partners, the main stockholder decided he wanted to sell his interest in the company, so I purchased his stock. From there we put a much higher focus on fee-based planning as opposed to insurance sales. I began building from there. I took my series 7 in 1998 and my CFP in 2002.

I was starting from scratch and had no clients or connections going into this industry. I ended up deciding to focus on the second largest employer in the state of Georgia. The telecommunication company that I decided to focus on was in Atlanta. I knew they employed tens of thousands of people and they were unique because they had a pension in addition to a 401(k) when they retired. Two years after focusing on this niche market, the company I was focusing on had a massive layoff and I was able to pick up over $41 million is retirement assets.

As a new advisor I really didn’t know how to get started in the industry. I guess you can say I was lucky because the company I chose had a large number of people working for them with regular attrition that created a lot of opportunity for retirement planning. I built a large number of relationships with employees prior to them retiring. I had a strategy of building a pipeline of potential prospects that ended up working very well. I found that building relationships and building pipelines was easier because you have less competition from other advisors who are only interested in money in motion.

Your sales skills were of paramount importance early in your career but with Merit’s current size, growth, and momentum, it seems you don’t need to wear your sales hat so often.

You’re right. My sales ability was really important in the beginning. It had to be good to get things going. In the beginning, just like any other advisor getting started, I was running everything. As my business grew, I realized it’s all about hiring the right people and building out a strong team. So, I focused on building out a team and delegating as many responsibilities as I could to other people so I could focus on what I do best. As the firm began to grow, I no longer met with clients personally and focused all my time on growing the business.

When did this happen?

About 10 years into my financial career, around 2011, I began thinking that there was a bigger vision. I began hiring advisors to plug them into the marketing process that we had created over the years. I expanded to Birmingham, AL, about three to four hours away from the original office. I began laying out a business plan for a much larger firm. In 2012 we made our first merger. Since that time, we completed eight additional transactions to get where we are today. We have implemented a three-prong approach for business development that includes organic growth, mergers and acquisitions, and RIA independent advisors.

The vision expanded to build out a large multi-generational enterprise. Today, we’re at about $5.2 billion. 85 employees, six states, and 12 offices across the country. At the end of last year, I saw a bigger future. I knew it was going to take more than a traditional banking relationship. And so, I went to an investment banker to seek out a minority partner that could help us with this vision and help us with this growth. So, at the end of last year, took on that minority capital partner. We’ve only been working with him for 90 days, but already it’s had a huge impact on accelerating the vision that I had for our three-pronged approach. This year, I think we’ll do five or six new acquisitions, adding $1.5 billion in AUM. We are looking for strategic partners to join us as we begin expanding to other geographical locations.

In terms of the planned acquisitions, is there anything they share in common be it amount of assets managed, expertise, or geography? Or will each be judged on their own merits?

Our acquisitions in the past have been opportunistic. Meaning, they were based on relationships we have built over time and people we knew through relationships. conversations started. Today, what’s changed is that we’re looking to expand strategically. Meaning, we’re ahead of time picking regions that we want to be in. When you look at where advisors are concentrated, there are certain areas across the country that are more opportunistic than others. Florida, for an example, is a great area. Some of the areas we’re interested in expanding are Charlotte, Connecticut, Denver, Philadelphia, Dallas, Atlanta, the Bay Area, and other strategic locations.

Once we pick a geographical location, we look for like-minded partners to expand with. There are certain criteria that we’re looking for. You asked about size. When we go into a region, we look for what we call a regional director to run the hub in that region. What we look for in a regional director is someone who has been successful in building a business. Often times these hubs range from $400 million to a little over $1 billion. These businesses have demonstrated that they are very successful and have a proven track record. Usually what they need now is management and financial resources to continue to grow.

Once we find these individuals that have demonstrated strong leadership, we plan to add to their growth by helping them with other acquisitions in the area. We call these other acquisitions spokes that plug into the hub. With the team that we have today, we have the capital, management and resources to help firms grow more exponentially. In addition, we also are able to turn on our marketing support to help the region grow organically in addition to the acquisitions. Ultimately, we are looking for strong leaders that share our core values and want to be a part of our growth strategy.

Are there any key lessons you’ve learned along the way that stand out most?

I can’t do it on my own. It’s important to attract highest quality people to our team. Connecting with like-minded advisors who share our vision will be the main driver of our growth going forward. I’m confident we’re going to be at $15 or $20 billion three or four years from now.

I want to double back to your acquisition strategy. You mentioned Florida, the Bay Area, and Charlotte. What’s their appeal?

We use a heat map that shows which cities advisors are concentrated in. It just makes it easier to grow in those types of settings.

For organic growth, do you favor those areas or go to less populated areas where there are fewer prospects but also presumably less competition?

For location, the big help is with acquisitions, because there are so many advisors there. We are sometimes opportunistic with our niche market. Some of the companies we’re working with are in those geographic locations.

You markets are you focused on?

In addition to telecom, utility companies, and logistics firms, one of our niche markets is divorcees. One of the acquisitions we made has spent 30 years focused on helping, particularly women, as they go through divorce. Another one of our niche markets is widows. Again, one of the acquisitions we made, a woman when she was 30 years old lost her husband and decided to dedicate the rest of her career towards helping particularly women who, also men but more so women, who have lost their spouses and built a practice around that.

Given that women live longer than men and are increasing their income and wealth, you have real tailwinds that should help.

Yep. We also have a very diverse team. It’s exciting and unusual. Here we are in this male dominated industry and Merit is about 64% female.

That’s significant, particularly for an 85-person firm.

That’s exactly right.

How long have you had the businesses that cater to divorcees and widowers?

We’ve owned both for about a year and a half. We loved the concepts, because it goes back to what I was saying earlier. When I started off as an advisor, I had to handle all the business coming in. Both of these people built their businesses that way. They about reached their ceiling of complexity. What we wanted to do is say, ‘We think this could be a solution nationwide if we could scale this business.’ And that’s what we’re working on for both right now.

You emphasize the importance of teams. Discuss your philosophy regarding them.

I’ve learned a lot over the past four or five years about team building and how important it is. I think the most successful RIA firms are going to figure out that you can’t have leadership from the top down to run the business. I think over the past 10, 15, years, a lot of successful businesses have figured how to tap resources and build out teams as opposed to it being the CEO that tries to drive growth from the top down. I think it works much better to build out strong teams and almost build from the bottom up. The stronger you build the team, the faster you’re going to grow, and it’s much more scalable that way. I’ve learned a lot about building teams, but I think I want to get better at that. That’s where the power is.

Also, since I got in the business, I’ve always had this desire to work with advisors. I can’t tell you why. I looked at the industry, and I said, ‘I think advisors need community.’ They’re out on their own. They figure out how to bring in business. Then they start building out their little practice. Then, they figure out, gosh, I got to do something with this practice. I got to either go the next level or just become a lifestyle advisor. They’re on their own. I thought it’d be more powerful if I could bring advisors together.

That’s why I started that coaching group back in 2009 and 2010. I started bringing advisors together. I didn’t charge them anything, except for the cost of the material. I saw a lot of power in that group and people coming together. My vision going forward is to continue to work with like-minded advisors. There’s a lot of opportunity in this industry. A lot of things need to be changed for the better. I see it in RIAs bringing advisors together and creating opportunity for advisors in drawing people to them. I think that’s the next step for Merit.

Out of the nine deals I’ve done, that’s been the case. If you went back and talked to anybody on those nine deals, the ones that stayed grew faster than on their own. Now, some of them just wanted to cash out and go off into the sunset. I’m really looking forward to connecting with other regional directors in different regions in the country. Let’s figure out how we can work together. If they’ve already built a successful practice, what can we do if we overlay our resources on their ability to build and their ability to grow? I think if I put those resources there, they’re going to grow faster and we’re going to grow together.

What do you see ahead for the wealth management industry?

I believe there’s going to be massive consolidation. The average advisor is probably around 58, 59, years old. Advisors haven’t been really good about developing their own succession plan. All advisors have made strong promises to their clients. ‘I’ll be here for you. You can always count on me.’ How are they going to do that if they don’t have the right strong succession plan? A lot of them don’t have it. They’re not going to live forever.

More advisors today are realizing that they need to team up. For the benefit of their clients, they need to think beyond their own lifetime. They need to think about building something bigger. Make the commitment to current clients and the generations beyond them. There’s going to be bigger visions that are going to be placed out there and advisors can become part of a bigger picture. Advisors are much more open today than they were even three, four, five years ago to this whole concept.

And what about the competitive landscape?

RIAs are going to become really large. They’re going to change the landscape out there. They’re going to be offering services way beyond where they are today because of the technology capabilities. I think it’s challenging times for broker dealers, and I think it’s exciting times for RIAs. You’re going to see some very large, very powerful RIAs. They will be very focused on clients, and client service, and have better technology, and better ways of doing business, lower fees. So, I’m pretty excited about that.

Is there anything else you’d like to discuss?

On the personal side, this is always tough for me to talk about. I lost my son five and a half years ago.

I’m so sorry.

My positive takeaway is in how this has impacted my life for the better. Relationships are more important to me than ever. How I spend my time is extremely important to me. I want the time that I spend with others to be impactful and meaningful. I invest a lot more time in relationships. I’m looking to build stronger relationships with the people I work with. Definitely time is really important. It helped me understand that there’s only a finite amount of time. Investing in other people and helping other people is important.

Thank you, Rick.

Greg Bartalos (@gregorianchance) is editor of New York City-based RIA Intel.

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