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Welcome to the fifth episode of the Fiduciary U™ podcast. My guest today is Fielding Miller, who is cofounder and CEO of CAPTRUST, one of the nation's largest independent registered investment advisors with over $400 billion in assets under advisement, more than 700 employees, and over 40 offices around the US. On today's episode, Fielding and I discuss the origin story of CAPTRUST, how they got started in the wealth side in the business before transitioning into the corporate retirement space, and how they've been able to scale the business from 13 people to the size they are now. We talk about how technology like machine learning, blockchain, and AI will continue to make the participant experience more personalized over time and how advisors will need to evolve their value propositions as these things commoditize certain things advisors currently do.
We also discuss how COVID-19 has impacted plan sponsors and participants as well as our own businesses. And we discuss the M&A landscape and what CAPTRUST has learned by doing more than 40 acquisitions over the years, and their plans for using the recent investment from a private equity firm, which is the first time they've ever taken outside capital. And we cover how they think about developing talent and making people successful. And be sure to listen to the end where Fielding shares his single best piece of advice for making ERISA fiduciary smarter, which is to start with the participant in mind and work backwards. So with that introduction, I hope you enjoy this episode of the Fiduciary U™ podcast with Fielding Miller from CAPTRUST.
"It’s stimulating for me to take something that’s really complicated and hard to deal with and turn it into something positive." - Fielding Miller
"I would say that the societal issue is that we’ve clearly gone to a do it yourself approach." - Fielding Miller
"Our philosophy has always been as you're thinking through decisions as a plan sponsor, or strategies, you have to start with the participant and work backwards every single time." - Fielding Miller
"If you haven't evolved in offering more holistic services, you're dead!" - Fielding Miller
"Our success in retirement has mostly come from hiring and training new advisors and building an organic practice." - Fielding Miller
Josh Itzoe: Fielding Miller, welcome to the Fiduciary U™ podcast. I'm really excited you're a guest today.
Fielding Miller: Thank you, Josh. It's great to be here and great to see you.
Josh Itzoe: So, CAPTRUST is an absolute juggernaut. You guys have north of 700 employees, you advise on almost $400 billion in assets. You have 43 offices around the country. So could you maybe just take a minute or two, for anybody who perhaps hasn't heard of CAPTRUST, and just talk a little bit about the origin story as a founder of, or as the founder of, the firm?
Fielding Miller: So, I think everybody in our industry, there's a backstory, right? We all came from somewhere. And my start was actually in the … where I started out as a rookie stockbroker back in ... And was doing well there for a couple of years, then just got a little bit wary of the commission model. It just was not a great fit, frankly, especially … understand that 75% of a brokerage firm's revenue comes in the last week of the month. I'm sure that's not a coincidence. So I was kind of early on to the fee-based approach. And back then, the same thing we have today, SMAs, they had these wrap programs back then. And that was how I started the concepts that led to eventually CAPTRUST. I was there about 10 years, then spun out with a team of 13 people and started CAPTRUST 22 years ago.
And we started, and just were excited … starting your business and running it. And just one brick at a time, we've built it. One of the probably harder things that we did is we … business, retirement, and wealth. We actually started on the wealth side and migrated over to the other side. And as you know, that's not easy because you need a lot of services in the wealth management space that, frankly, you can get off the shelf, really good solutions, whether it be trading or reporting or CRM, or whatever.
On the institutional retirement side, there's nothing and you have to build it. I mean, there are a few things that are out there, but we were early such that those things weren't even available yet. So, that's complicated to be able to build both of those at the same time, and then you've got to integrate the two sides of the house through technology compliance and other things. So, we spent a lot of time and energy those first years just building out the platform. And today, it's getting a lot easier. It took a long time to get to scale, frankly, but we're there, and the flywheel's turning.
Josh Itzoe: That's awesome. Yeah, it's funny, I laugh, and I said this on a prior podcast as well with another guest, is on the wealth side, I'm jealous of all the tools and technologies that the wealth side has that the retirement side doesn't, in a lot of cases, and is really kind of behind the curve or behind the private client side, from a fintech perspective, which makes it challenging.
Fielding Miller: Yeah. When we started, and you can remember this, there really wasn't a retirement advisor industry. There was no such thing. I mean, our biggest … And you spent the first 30 minutes of the conversation explaining what an advisor did. But those were the days that we started. There were no magazines, there were no conferences. There was really no community ... retirement advisors. We were all pioneering. As the saying goes, the pioneers get the arrows in their back, right? You get too far out in front, it's dangerous. But we're very blessed in a lot of ways and we're able to develop this retirement business over the years. And now, actually, we've pivoted back towards wealth. So roughly half of our revenue comes from either side today.
Josh Itzoe: Okay. And how has that mix changed over all of the past five to 10 years, would you say?
Fielding Miller: Yes. So, as I mentioned, we started at wealth and then we had this pivot. And for the next many, many years, the retirement business ... 100% of our attention in terms of growing the business. That's where we put all our energy and a lot of energy and time was spent building out that infrastructure we just talked about. So for years and years, 70% of our revenue came from the retirement, 30% wealth. What was interesting is we were so focused on growing the retirement, the wealth remained 30%. So, the growth rates were keeping up.
Then as we rolled out our new 10-year plan in January of '07, our goal was to go out and find wealth firms in the same markets we had retirement coverage and put those together. So, since we started that with more of an emphasis on M&A and buying in those markets, it's evened up. And wealth will soon surpass retirement, for the main reason there's just a massive ocean of firms out there and there aren't that many—
Josh Itzoe: Right. It seems like you bought all the good retirement-focused firms. There's only a few of us left around anymore.
Fielding Miller: You will always be welcome at CAPTRUST. You would look really good in CAPTRUST blue.
Josh Itzoe: People tell me I have a great face for radio. I'm not sure I'd look good—
Fielding Miller: I get the same comments.
Josh Itzoe: But I think what you guys have built, it is incredible. And my cofounder, Pat Collins, and I, we had a chance to come down. You guys were really gracious and, I think in 2012, invited us down and we had a chance to meet with you. And one of the things I really appreciated about you and Rick Shoff and the entire team was just a real openness to share some of the learnings that you guys had had. And even back then, what we had seen, it was incredible what you guys had built just culture-wise and, like you said, with the systems and starting to achieve scale.
I guess one question I have ... So, thank you for that, with always being generous to us. But it's interesting, especially 20 years ago, you don't really see many wealth firms that ... You see them focusing on wealth. What was it that gave you the vision or pivoting into this market that didn't really exist at that point in time? What was the light bulb moment or the watershed moment where you said, "Hey, that's the direction we need to pursue"?
Fielding Miller: Yeah, so great question. I think about this quite a bit. I get the question quite often. So, I got really fired up on the fee-based approach and how that would be so much better for clients. So, this was the '90s, and the stock market was going 20% a year, year over year over year. So, wealth clients didn't really grasp how unique this was and important to be a fiduciary, and all of that, because what do they care? "It's going up 20% … fiduciary thing doesn't really matter to me." But where we got traction was with plan sponsors. So, that kind of an ah-ha moment is, "Wait a minute, we're focused on the wrong market."
So, we started poking around there. And one of the things that I learned, there was this massive profit-sharing plan of $250,000. Now, I'm not … talking about the assets, right? Back then, that was a reasonable amount of money. So, I got in there and they had some issues with plan design and other things, which I had to study up on really quickly, and ultimately was able to create a solution for them that didn't have anything to do with investing the money. But I got the money, it came along. And that was a moment where I said, "Wait a minute. We don't really have a differentiated investment offering … against Merrill Lynch or whoever else. But if we can solve plan sponsor problems holistically, we're going to end up with the assets." And sure enough, that was exactly what happened.
So, the retirement … clearly understood the fiduciary aspects and they were clearly in need of help with the non-investment ancillary type things. So, that clicked. And originally, it was pension and profit-sharing. Then obviously, the 401(k) industry started to swell. And what we found out there is that the real magic ingredient was participant enrollment; not advice, not wellness, good old-fashioned enrollment. And that's a muscle play. That's blue collar, get up, lace them up, you're on the third shift of a textile company, talking to a single mother of three and trying to get them to put money in an account for their ultimate retirement? That could be in the middle of the night in the third shift, and then we're at daybreak, standing on the back of a truck down in eastern North Carolina enrolling construction workers as the sun's coming up.
We had an incident where one of my partners was giving a presentation and out of the sky comes a sausage biscuit, hits him right in the chest. Essentially what happened, the guy didn't tell us, but the people that had the plan before us screwed up their statements and it looked like they had taken all their money, so the employer was getting hammered for stealing the money. And of course, he didn't, and he answered all this. But this guy in the back didn't quite get the memo, and he heaves a sausage biscuit. So, it was hard work, and nobody was willing to do it. In the '90s, all the brokers and advisors were making a ton of money. So we really worked there. And to this day, that helps us, knowing how to engage with participants and folks from all walks of life, from the cash register to the C-suite. And it's a big part of our business today.
Josh Itzoe: That's great. So, how have you seen ... So, kind of the early days and enrollment. What would you say are the biggest changes? So really, the question is where have we come from and where are we going? So, what do you feel like the biggest changes have been over, let's say, the last five to 10 years, really in the retirement ERISA world, especially for advisors, being the advisory firm that you guys are? And where do you think advisors need to go to compete over the next five to 10 years?
Fielding Miller: Well, I would say the societal issue is that we've clearly gone to a do-it-yourself approach. Even when 401(k)s were coming along, they were the primary savings instrument. You still had pensions and Social Security and things like that. But as we all know, it's evolved into the savings vehicle, which requires self-engagement, making investment decisions, and things like that. Well, that's a seismic shift, if you think about it. And as we all know, the average individual is not going to invest money well. They're not going to make good decisions, so they need help.
So, that's why we, once again, just feel like engaging with … in different ways, helping them plan and save and invest for retirement, is important. And employers are starting to see that it's very good financially to get these participants helped because they're going to wake up one day and have a bunch of 70-year-olds walking around with very expensive benefits that can't afford to retire. So, if you just look at it financially, it makes sense to invest in this process now and help their people along.
So, I think that is only going to get more important because you've got all these baby boomers headed towards retirement, underfunded, not prepared. That's going to build up. We'll wake up one day and there will be a retirement crisis. It's there. We know that it's coming. So, that participant engagement has been super important and I just think it's going to grow in importance over time. And you mentioned competing in the future. Well, who are we going to be competing against and what are we going to be competing for? And there's never been a five- or 10-year period where all that didn't change quite a bit.
So I would say as we look forward, we're going to have to deal with things like machine learning, the Netflix experience, where there's this continuous data processing that's dialing in a custom solution, advice solution for folks. You've got all kinds of artificial intelligence that's going to take any kind of linear process down to nothing. So, you better start thinking about, how are you going to add value when some of the value proposition you have today is going to go away? It's kind of like the old asset allocation, right? That was a big deal to do asset allocation. And now anybody can do it. It's no big deal. If that was your value proposition and you didn't evolve, you're dead.
And if you're just focused on the investment side of the house, which most of us were for a long time, if you haven't evolved in offering more holistic services, you're dead. So, how do you evolve with this change environment? And I think we've got to be very aware of the pressures that are going on in our vendor industry, custodians, providers, and things like that, asset managers; they're under a lot of pressure. And they're going to look for ways to dis-intermediate us, because it's a very consistent revenue stream.
Furthermore, if you think about the risk they face, blockchain, that has the potential to disrupt them or perhaps even the opposite, make them a lot better. And it’s in kind of the processing business, and I think about custody and plan providers. That's going to create a new day, and what are they going to do with that? Are they going to, once again, look for other sources of revenue, or are they going to invest in it, embrace it? We don't know. So, there's just a lot of things that we're going to have to do in the future. The robo solutions weren't any good. They're going to get better in generation two, three, four. I think those types of things are going to be supportive of distribution as opposed to trying to dis-intermediate us, but we don't know. There's always the risk of big tech coming in in various ways. There's increased compliance costs, there's increased risk. You've got lower investment returns expected. There's just a lot of things that you're going to have to get right in the future to be competitive.
And our stance, Josh, is we have reinvested half of our profits every year back into the business for a long, long time. So, we're always trying to innovate and come up with new ideas. Some of them were terrible. Some of them were really good. And we have this what we call stump works team. But that's what we do. We sit down and we talk through ideas that could be transformative to the business or the industry. And we have the application development team in there. We've got messaging, we've got project management, myself, we've got advisor reps, just vetting ideas and trying to see how are we going to position ourselves for this new age? So, I think there's a lot of change coming, but I don't think there's anything that's insurmountable, frankly. But you have to have your eye pretty far down the road.
Josh Itzoe: Right. You mentioned just about providers, and some of the trends that are taking place there. You saw recently Empower buying Personal Capital, and this battle for ... Years ago, when a lot of these record keepers could rely on asset management revenue, that a lot of that has evaporated. And this battle for ... I think you have two things, really, affecting the industry, right? There's that competitive pressure. And I'd be really interested in terms of when you talk about the participant engagement in the experience and advice, who do you think is best positioned to deliver that and how do advisors and record keepers work together on that? So, you've got that piece, but then you also have consolidation. And it seems like, like in lots of other industries, you've got the drive for scale, we've got fewer vendors to work with. And it looks like that landscape is continuing to consolidate. So, what kind of pressures do you think that puts on plan sponsors and advisors in general when there are fewer dates to the dance, if you will?
Fielding Miller: We got a long way to go. I mean, I think last count, I had to deal with probably 92 different record keepers and providers. So, we wish they would consolidate a lot faster because the vast majority of our … clients with 10 to 12 …. but consolidation's the kind of thing that everybody predicts it's going to be very different in five years. It never happens in five years. It always takes a lot longer. And that industry, as we all know, has been consolidating. But I think as related to the customer, I think it's a good thing, other than the fact … a lot of transitions. If they're already with one of the winners, I think it's a good thing because with the scale they get, they can drive costs down and be more competitive, bring more service … I don’t think that’s necessarily bad. I think in terms of who's best positioned, now were you talking about to deliver participant advice, or the record keepers themselves?
Josh Itzoe: Correct. The participant advice.
Fielding Miller: So, it's a little bit self-serving, but I think we are. And really, what I mean by that is the RA, the independent advisor that can act in a fiduciary capacity, that's the right model. You've got history on your side here. And whoever can deliver that in a scaled way is going to win the day. So, as I said, we've been reinvesting in the business for a long time. We put more money in that area of our business than anything in the last five years, because we believe in this thesis. And here's a great example of why I think our position at the table ... secure. We have a pretty substantial book of clients in the higher education space, 403(b) space. And as you know, all of these 403(b) plans, they started out with all these multiple providers. That was the model: just let anybody in and let people pick. Well, that's a disaster, right?
So, let's just say we help them get it … and the usual suspects. Well, who is going to provide objective advice to someone who has access to two or three platforms? Well, it isn't going to be the providers. It's going to be somebody independent that can sit down with them and show them the pros and cons and how to put things together. So, that's going to be very valuable in that particular segment, and I think it's going to be valuable elsewhere. And I just think being an RA, having a specialization in participant engagement, investing ahead and having the capital and resources to serve them, that's the winner, in my view. And the reason I started out with ... I think we're in the best position is I do think we're … in terms of that service offering and investment, and we're committed to investing heavily going forward.
Josh Itzoe: So, over the past five years you said that participant experience, that engagement experience, has been where you've invested most heavily. What does that look like? What have some of those investments led to? What's the CAPTRUST participant experience? What are the key pillars and principles behind what you guys believe about the participant experience?
Fielding Miller: Meet them where they are, right? And that means a lot of different things. It means when you’re meeting with people, be sure you're communicating with them about what they need to learn, about the things they really need to be focused on. We've developed a multi-tiered offering where we have an advice desk of 20+ people. We have field retirement counselors that go out around the country that are in various locations and time zones. We developed a tablet technology called Blueprint where essentially, instead of doing one-on-one meetings, you can do maybe one-on-three or one-on-five. Everybody has a tablet, then you're walking through, "Here's how to enter your information." We already had their plan information loaded, the plan features, the investments. This is about getting your outside assets and getting everything in sync. So, you can actually do this and tell them how to put it in, and ultimately, you go one-on-one to make sure it's right.
And at the end of that, they're going to get two things. One, they're going to get this financial plan that'll be emailed to them that tells them where the gaps are and what we're recommending doing. And number two, they make the changes on the spot. They have to come to the meeting with a password, because as you well know, if they don't do it then, the percentages of people that will make a change go down dramatically, so push that issue, it's just good behavioral finance concepts there.
Then we have webinars, seminars, a newsletter, about anything you can think of, a dedicated website. We've been doing a lot of videos that have been super impactful. But Josh, if you add all that up, it's meet them where they are. If you're talking to someone on the cash register, that's one engagement. If you're talking to someone … another engagement. And we do have an array of services that are designed for the C-suite that are different, more advanced, because their situations are more complicated. And we're continuing to build that out.
Josh Itzoe: That's great. That's great. It sounds like, in a lot of ways, the play book from what a lot of the record keepers did back in the day in terms of call centers but also retirement counselors going out and instill that. How do you think COVID-19 ... and we've been stuck for six months or whatever in this virtual world, how have you seen that change the participant engagement experience over the past six months? Have you seen any differences, and how do you think that will evolve coming out of this? Is it going to be different? Is it going to go back to the way that it was?
Fielding Miller: Well, I think the world is different. It's going to be different. This has been a bizarre year. It's going to be different in a lot of ways. Our philosophy, Josh, is if you already have a relationship, just a virtual interaction is fine. If you don't have a relationship, it would be very difficult to start one. So, I think it'll be a while before you're going to start relationships virtually. We get a lot of questions from our colleagues about work from home going forward and things like that. And my answer is, "That's not a new request, by the way." But now they think they've got a new … Our view is, listen, we're a client service-oriented business, and you can't do that from home. You can't collaborate from home. If you're working beside someone and they're jammed up on really hard stuff and you're finished, you can look over there and say, "Hey, let me help you."
Well, you can't do that if you're two silos, you're in two different places. So, I think you … collaboration. I think it's less efficient. There's pros and cons to it. But I would say we all were incredibly productive for maybe March, April, May, in there, a little bit of an adrenaline rush, and we got it done. But I get the sense that it's starting to fade. People, they're not reaching across the desk to help somebody. They're probably going to walk the dog, or whatever.
Now what … our view is that we're going to offer a lot more flexibility to work from home. If you need to work from home, fine. If you've got kids at home or someone's sick or whatever, you got to meet the cable person, we get it. We can work from home if you clear it. But that's not going to be standard, you get to work from home on Fridays, or something like that, even though that's what everybody wants. The dress code's another one. Everybody wants to relax the dress code. I say, "You know what? The work hours, the location, the dress code was here before you came to work when you wanted the job. So, it just doesn't necessarily change overnight." And I know a lot of firms see it differently. That's just my take on it.
Josh Itzoe: Yeah, I think we've experienced a lot of the similar things in conversations. It's interesting, we ... just over the years, in seeing a lot of plan sponsors historically have placed a high value, I think, in coming to the break room, coming to the work room, come on site, meet with our people on site. We had started to see that change and evolve where rolling out some things where participants could engage virtually, whether that's through a Zoom meeting or a Teams call or a 1-800 number or whatever that might look like. How have you guys found plan sponsors? Are you finding that they still really highly value, meet our people where they are on site? Have they been more open to that virtual engagement, like, "Hey, as long as you have resources, our people can choose to meet with you the way that they want to"? Obviously, going out on site, it's expensive and it's time-intensive. How have you seen that evolve, and are you seeing more of a trend to virtual engagement with participants, or still much more heavy of, "Hey, we want you to come out on site, or certainly, if we get back to normal, we want you to come back and be on site with our people"?
Fielding Miller: It's all over the board. Some clients like the virtual aspects where they're dealing with the advice desk and getting all the benefits of the webinars and that sort of stuff. Some want to have people there. And I think the more paternalistic clients like the boots on the ground. But our view is that here's a menu of things; let's figure out what it is you're trying to solve for. And it's typically some combination, like, "I need some people spending some time at this location until we get them up and running, and then we're going to go over here and then we'll be done for a while, and then we'll acquire another company."
So, it's kind of a custom approach, just dependent on what they're trying to solve for. We've been adding retirement counselors in the field over the years. I think we're ... Gosh, it's probably around 25-ish, somewhere in there. And five years ago, we might have had six. So, it's growing. And it's not necessarily the white collar businesses that want to meet with somebody. It's all over the board. They want-
Josh Itzoe: Right. So, we talked a lot about wellness and participant experience and what that looks like. How do you see or how do you think conversations with plan sponsors ... And one of the great points I think you brought up was just things that are new and innovative and a differentiator now, five years from now are going to be commodities. Asset allocation advice, back in the day, having an investment policy statement and having due diligence criteria, that was a differentiator. Nowadays, you can outsource that for two basis points. That's not a differentiator. At CAPTRUST, how are you seeing conversations with retirement planning committees and plan fiduciaries, how are those evolving? And if you were a retirement plan committee member, what do you think they should be thinking about, moving forward? What types of conversations should they be having? What should they be keeping their eye on in order to really stay at the forefront of how retirement programs are evolving?
Fielding Miller: Yes. So, this won't be unique just to CAPTRUST, but kind of the way we think about it, and that is that there's ... We call it the five pillars, in which a plan sponsor needs to have all of these covered to be successful. And of the five, this year, it's ... Basically, they're plan design, it's the fiduciary aspects, it's the investment aspects, it's the vendor management, and then it's the participant engagement, right? So that's the five bodies of work. Well, in any given year, it's like the old Whack-a-mole. Remember Whack-a-mole? Your kids ever play that? Do you know what I'm talking about?
Josh Itzoe: They did. Yep.
Fielding Miller: A mole pops up and you whack it, and another one pops up. So, I think you have to really get the plan sponsor to understand that it's not just solving your problem today. It's thinking ahead and getting out in front of things that could happen tomorrow and tightening it all down. So, if you're in there competing on funds and fees and it's fiduciary alone, that runs its course. You're going to get the fees negotiated down, you get the investment menu tight, the fiduciary process tight, you don't want that just to be your value proposition. So, one of the things we've done, for example, in plan design, which I think's pretty interesting, is we have the benefit of having lots of plans that virtually cover every slice of the market from small to large, jumbo, every record keeper, every size company and plan, every industry, every geography. I mean, we've got data that I think's more valuable than record keeper data because it's not just one firm's way.
So, with that, we have everybody's plan design information, so we can say, "Okay, you're in this industry. We have 21 other companies in that industry, and here's 10 that have the most in common with you. Here's how they're doing, and here's how you're doing, and let's talk through" ... You get to see what your peers are doing, but also, you get to dial in on which of these aspects are the most important for you. So you could have a lot of really interesting conversations on plan design, and we're able to bring that information forward in a very efficient way. So, that's an issue.
Then you can go down the fiduciary process and, frankly, that's going to change as the politics change, legislation changes. That's going to come and go. I mean, they're goofing around now with fiduciary rule and all that again, and it could be more different than it was under the Obama administration, which, by the way, is better for us than the new administration in terms of our business. And then you go down the line, investments. There was some discussion the other day that they're going to allow ... They're talking about allowing private investments in the plan, private equity, but not ESG funds. Now, how does that make sense, unless the hedge fund managers are big contributors?
Josh Itzoe: Right, right.
Fielding Miller: It's funny how every year, they—
Josh Itzoe: The private equity space is licking their chops right now.
Fielding Miller: Yeah, but it can't happen—that's the way it's—
Josh Itzoe: That’s all the potential capital.
Fielding Miller: Yeah. So, if you end up with ... They were going to … definitions of fiduciary. You think a client is going to figure that out? It's so nuanced that they're just going to glaze over and, "Well, they're a fiduciary, you're a fiduciary, so what's the difference?" So, really hard to differentiate there. But to your question of how do you differentiate in the future, you got to lock all these things down, these five areas, and you have to continue to innovate because the issues are going to change, and what they're trying to solve for is going to change. So you've got to continue down the path of enhancing those services.
Josh Itzoe: I think that's great. I'm in complete agreement, and my new book, The Fiduciary Formula: 6 Essential Elements to Create the Perfect Corporate Retirement Plan, of which you were able to find little blurb in the front, which I appreciate ... The same type of thing, which those are the six areas. And I like that Whack-a-mole analogy, is that I think the key is knowing what's important to clients. And you talked about interesting conversations. One of my mentors says that he or she who controls the metaphor controls the conversations. It sounds like that's what you're saying in a lot of ways, is being connected with clients and plan sponsors and, on one hand, understanding where things are changing out in the marketplace, but being able to translate that and help clients understand and identify what's most important to them right now, but also guiding them so that they can be ready to address those things down the road.
You guys have had tremendous organic growth. I think you guys have grown something like compound, like 15% or 20% a year annually since inception, which when you're small is really easy, but once that denominator starts to get big, it's hard to grow. Part of what you've done is acquisitions over the years. And obviously, I think, and we alluded to this earlier, you started creating a culture and an engine and a platform and an experience to really attract high-quality retirement plan advisors. And you've opened that aperture, and you mentioned there's a lot more wealth-focused firms than there are retirement firms. So, how many acquisitions have you guys done, ballpark, since inception?
Fielding Miller: Well, if you count lift outs and things like that, it's low 40s. But I would say the acquisition of free-standing firms is probably closer to low 30s. You're right about there being fewer acquisition opportunities in retirement, but our success in retirement has mostly come from hiring and training new advisors and building an organic practice. Actually, the M&A gets the headlines, but the thing that we're the most proud of internally is our ability to develop talent and help them be successful.
Josh Itzoe: That was one of the questions I was going to ask, actually, was just would you say that's the most rewarding thing that you've experienced, or what is the most rewarding thing, what you look back on CAPTRUST? And one, did you have any idea 20 years ago, late '90s, that CAPTRUST would look today like it looks? Did you anticipate that ahead of time?
Fielding Miller: I would love to say that I had this epiphany, this vision, and had this all planned out, but it's very incremental. We were trying to make a living, and then we're trying to grow a little bit. And we would hire and train an advisor, and when they got up, we would hire and train another one you would kind of bootstrap their way along. And then probably the most aggressive thing that we did is back in 2006, I laid out a 10-year plan, which is a lot of things we've already talked about. But one of them was I put a revenue target on it. And we were at about $14 million in revenue. I said, "Guys, in 10 years, I want to be at $100 million in revenue," and that's a big goal. That's like 7X, right, or close to it? Yeah. And I got a lot of eye rolls, but we did it.
And the way we did it was through attracting talent, and just one brick at a time. So, you can't really see out 10 years. Well, I certainly can't. What we can do is say, "Listen, if we're going to" ... Deciding the revenue number helps you make decisions today. Here's a real simple example. If you're going to buy a phone system ... And we've all done this. We bought a phone system, we had to buy another phone system as you grow. Well, the next phone system you buy ought to be able to handle 1,000 employees, not 100. So, it gives you clarity on if you know how tall you want the building to be, that tells you how big to build the foundation, and how sturdy. So, it gives you a lot of clarity on decision-making. So, that's helpful to have that North Star. It was only one of 10 goals, but it was helpful.
Then in three to five years, it's a little bit easier to predict. So it's kind of been in those segments that will add up to 10-year plans. We just did our other one back in '17. So, no, I didn't think this is where it would be 20 years ago, but I did five years ago. And I obviously have big expectations for the next five years, and so on. But at the same time, a lot of the core principles and strategies and philosophies are exactly the same, exactly the same. Now, running lots of offices and lots of employees, we had to create new muscles for that. I mean, we started from scratch, so what do I know about running a larger company? Well, more than I did five years ago. You just have to learn it.
Josh Itzoe: Right. So, that's a great lead-in. You've obviously done a lot of things right. What are some of the mistakes you made? If you had to look back, what were some of the mistakes you've made, and what do you wish you could take a mulligan or a gimme on?
Fielding Miller: I think one that sticks out, as we were growing and having growing pains, this probably goes back 14, 15 years ago, I was burned out. I was really burned out. And I decided to restructure, and I hired a guy to come in and be chief operating officer and gave him a lot of latitude to do things. He had great management experience. He was the wrong guy. So, I did several things wrong. I made a big decision when I was tired. Because I was tired, I didn't do the due diligence I should have. And then it took me too long to figure out the problem. Then it took me too long to fix the problem. So, I learned a lot of lessons in one mistake. And since then, we've obviously gotten through that, and you learn great things. And he made lots of contributions, but he just wasn't the right fit for us. The next time around, when it came time to hire a COO, I was a lot more thoughtful and I ended up getting a rockstar, and this guy is so valuable. He's our president now, Ben Goldstein. And he's done so much to make us a successful company, I just can't even quantify it. So, that—
Josh Itzoe: What was-
Fielding Miller: If you're growing and taking risks, like we all do, you're going to make mistakes. But hopefully, we fail small, we learn, and we move on.
Josh Itzoe: Yeah. It's funny, I've got four kids, and I always tell them that I want them to fail because if they're failing, it means they're taking risks. I just want them to fail forward and fail fast-
Fielding Miller: And get up.
Josh Itzoe: ... and not be afraid to fail. Right, and get up. Exactly. Just out of curiosity, so you got burned out, what drove that? Where was that coming from?
Fielding Miller: I don't know, classic stuff, driving too hard, no balance in your life, kids, stress. I don't know. That's the only time in my life I've felt that way, so I'm not exactly sure. I just think … overwhelmed, and wasn't mature enough to understand it or admit it. I just didn't have the ability to be introspective, at least I didn't until I got a little bit older. So, I don't know if you've ever been there, but it's overwhelming. I mean, it's like you're in quicksand. You can't seem to move like you want to move, and it's tough. Hopefully, that never happens again.
Josh Itzoe: Yeah, right. No, honestly, I feel like I went through a period recently that I started to emerge from, and part of that's been tied to a bit of a role change with me, as well. But the complexities ... And obviously, we're 25 people, so we're a lot smaller than you are. But 25 people is a lot different and a lot bigger than 15 people was.
Fielding Miller: Yes, it is.
Josh Itzoe: And it's a lot different than five people was. And the changing of roles over time, the pressure, it gets hard, and it gets hard as that evolves. So-
Fielding Miller: Hey, Josh-
Josh Itzoe: One of the things I admire-
Fielding Miller: I'm sorry.
Josh Itzoe: Go ahead.
Fielding Miller: So, you asked me about the most rewarding part. I'm not sure I answered.
Josh Itzoe: Yeah.
Fielding Miller: In retrospect, the most rewarding ... I've experienced or witnessed is the impact of the firm, the positive impact that we've made. And I think we've made a great impact on our colleagues. I know we've done it with our clients. We're very engaged in the community. We're trying to leave a mark. And that starts out as a philosophy and a preference, and then it starts to gather steam. And the most rewarding thing is to know that it's very much grassroots, it's not a top-down focus. It's basically the younger folks coming in, the millennials. They're very impact-oriented. So, just … life of its own, a momentum of its own, has been super rewarding to me, and it gets more rewarding as I get older.
Josh Itzoe: How have you seen your role change over the years? What are you focusing on now that you didn't focus on five years ago or 10 years ago?
Fielding Miller: One of the benefits of scale is you can afford more talent, better talent, to do various things, so you get elevated out of ... Like I don't spend any time anymore on the financial aspect or the legal aspects, unless there's a problem. I've got people that are way better—
Josh Itzoe: That's a good thing you're not focused on that.
Fielding Miller: Well, I got asked this question the other day, very similar. One of the things you have to understand is as you go up the ladder, the complexity of problems you deal with goes way up. And here's an example. So, you've got an entry level person that has something they don't know what to do with, they go to their manager. If the manager doesn't know how to solve it, they go to their manager, and it keeps going up. And by the time it lands on my desk, there is no easy answer. It's hard. It's kind of a conundrum. So, you spend a lot of time … complicated things or problems to solve. But my personality, that really works well. I've got huge ADD. I like lots of things to dig into and problems to solve, so there's enough variety there that it really works well with my personality.
So, there's a lot of that. But every time you get a complicated problem, usually there's an opportunity somewhere in the neighborhood. So, I think I'm pretty good at figuring out how do we flip this around? And if we're dealing with this, does that mean that our competitors are dealing with something similar? And if they're dealing with it, I think we're in a better position to solve for it than someone that maybe hasn't gotten to scale. So, that's why it's stimulating for me to take something that's really complicated and hard to deal with and try to turn it into something positive.
Josh Itzoe: Right, right. You guys recently took, I think for the first time ever, outside capital. I think it was GTCR as a private equity partner. I think they bought a 25% stake in CAPTRUST. That's a big deal, never taking outside capital for 20+ years and doing that. And I know the amount of calls that I get every month from private equity firms wanting to invest in our company. I can only imagine how many calls you and your team got. But what really drove the decision to move forward in that, and why now? And what are you guys doing with that? How are you investing those dollars moving forward? To the extent that you feel like you can share.
Fielding Miller: Well, that's a great question. Listen, as you have already mentioned, and I think most people that know me would agree, I'm very transparent about what we're doing and why we're doing it, because the more people that know that, that think the same way, are going to be drawn to us and maybe are going to want to have a conversation. And those that don't, we just disagree … it’s like that. So, we grew the business by reinvesting our products, for years. And we took on a little bit of bank debt. But I had a little experience right out of college where I about went bankrupt at age 25 because I took too much leverage in the real estate market. So, I've always been averse to debt and didn't really think this business, it was necessary to have a lot. But … acquisition and whatnot, we needed more capital, so we had to stretch those guidelines. And I got to two times, and I just started feeling like I don't want to leverage this business, so we're going to have to come up with capital another way.
So, we looked at a lot of different things, and I was very much against private equity in the traditional sense because typically they're going to buy in, and it's typically a majority. And then three to five years later, another one, another one, another one. So, there's no benefit to clients or employees. So, we said, "Look, we will take a minority investor to bring us capital. They have no path to majority. And they have to hold for at least seven years." So, that thins the herd out pretty quick. But there's a lot of people that want to be in this industry right now and were willing to take a minority stake. So from that point, it was, "Okay, under these circumstances, we would like to have an investor." So the way we differentiated one firm from the other was they all wanted to give you money, and the valuations were really strong. But which one could offer us strategic value in addition to the money? How can you help us grow and evolve and build the business as a partner?
And that's why we landed on GTCR. They've got a real history of being able to do that. And sure enough, we're a few months in and they've helped us in a number of ways. So, that's been very positive and we're happy with the decision. Now, we started this process probably nine months ago. It just happened to land during COVID, which is a great time because there's a lot of people on their heels and have issues. I think it's going to accelerate the M&A pipeline. It already has. So, it's a good time. And your question about how are we going to use it? Well, it's primarily to fund the growth.
Josh Itzoe: So, you think it's a good time coming out of ... It's interesting, with all the consolidation in the industry and obviously the multiples have been really healthy for RIAs and advisory firms ... It seems like it had ... So, your thesis is that you think that's going to continue with COVID now and firms wanting to essentially take some chips off the table? It seemed like it was very much a seller's market prior where there was a lot more risk being taken on by buyers and a lot less by sellers. I suspect that that risk relationship or ratio is probably going to shift it back to be a little bit more fair and split between buyers and sellers. Do you think multiples will stay the way that they are? Do you think those are going to recede? What do you think the state of the M&A market's going to look like over the next three to five years for IRAs?
Fielding Miller: Well, as it relates to multiples, I think there's going to be a bigger and bigger divide between the companies that scale and those that are not. So, I think the larger firms, the multiples, are going to hold. I think the smaller firms are going to shrink. And what was the other part of your question?
Josh Itzoe: Just about risk sharing between-
Fielding Miller: Oh, yeah. Yeah, whether it's the buyer or the seller's market.
Josh Itzoe: ... buyer and seller.
Fielding Miller: Yeah, yeah. It's going to continue to be a seller's market for a while, I think just to play off some of this, because you have, as you said, a lot of private equity firms and others trying to buy their way into the business. You can't just start in the business, you've got to buy your way in. So, that's going to … multiples up for a little while. But if you're going to buy your way into the business, you're going to buy one of the better businesses that are at scale or close to scale, and there aren't many. I mean, there's less than two hands to count on. Let it run its course, right? And whoever's in is going to be in, and others can't get in, so then I think it's going to settle down quite a bit, evaluations.
Josh Itzoe: Right.
Fielding Miller: The buyer to seller.
Josh Itzoe: Right. Well, as we wrap, and this has been a lot of fun, the whole purpose of this podcast is to make ERISA fiduciary smarter. So given how long you've been in this industry and the incredible things that you and your team have achieved, what would be your single best piece of advice to make ERISA fiduciaries smarter, so thinking about it, let's say, from the perspective of a plan sponsor?
Fielding Miller: Yeah, our philosophy has always been as you're thinking through decisions as a plan sponsor, or strategies, you have to start with the participant and work backwards every single time. If you do that, you're not going to get in trouble as a fiduciary. You're going to have your dollars and your time and attention focused on the right things, because that's what we're here to do. We're not here to be fiduciary, follow a fiduciary process. That's just what's necessary to … get treated in the right way.
So, if a plan sponsor, whatever they're solving for, whichever Whack-a-mole they're about to hit, if they keep that as their North Star, they're always going to make good decisions, and for the right reasons. If it's just, "We're going to cut costs on the plan because we can save this money," well, wait a minute. What are your participants going to give up by you doing it, and is that going to create a bigger long-term problem?
Well, then they may pause and say, "Yeah, that's a good point. Maybe we ought to rethink this. We're going to be penny wise and pound foolish if we're not careful."
Josh Itzoe: I think that is great advice. So, we'll publish the show notes after this. For people who want to learn more about you, connect with you, learn more about CAPTRUST, connect with your people, where can they find you?
Fielding Miller: The easiest—
Josh Itzoe: What's the best way for people to connect with you?
Fielding Miller: On the web at captrust.com. Anybody can call me if they want to, anytime. I'm very open to having conversations and, like you, I've committed myself to this industry. It's what I've done virtually my whole career. I'm passionate about it. As I said, we're on the right side of history here. RIA assets have now equaled brokerage firm assets. That is an incredible statement, and that's only going to get better. And I want to be part of that revolution, and I'm willing to help anybody that has the same interest and passion.
Josh Itzoe: Wow. You have been an incredible, I think, leader within the industry, and really have, I think, helped pave the way. And I know myself and lots of people in the industry appreciate that. I think what you guys are doing at CAPTRUST, it's exceptional for clients. I think one of the things I'm most impressed about everybody that I meet is you guys have a pretty incredible culture. I know that's not by accident. I think you guys have been very intentional about getting, obviously, talented people, but also getting them focused on all the oars in the water rowing in the same direction. So, thank you so much for being on the podcast and for your insights, and wish you all the continued success out in the marketplace. Just take it easy on Greenspring Advisors when we come up against you guys. Have some pity on us, but thank you.
Fielding Miller: We've got a whole war chest of money here, Josh. We've got a whole bunch of cash. We should talk. No, thank you. I want to wish you the best of luck-
Josh Itzoe: Absolutely.
Fielding Miller: ... on your book.
Josh Itzoe: Thank you.
Fielding Miller: That's a big—I know that you're glad to have that done, and I know it'll make a difference out there. So well done, and I appreciate the opportunity to chat this morning.
Josh Itzoe: Thanks for listening to today's episode with Fielding Miller from CAPTRUST. I hope you enjoyed our discussion and it helped make you a smarter ERISA fiduciary.
If you'd like more information or you'd like to connect and learn more, go to fiduciaryu.com. I've got some great resources there for you, including each episode, along with show notes, articles, free tools, and an online fiduciary training course. And make sure to sign up to receive each episode when it's available, as well as other exclusive content.
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Greenspring Advisors is a registered investment advisor. The opinions I express on the show are my own and do not reflect the opinions of my guests or the companies they work for. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. The information and content presented on the show is for educational purposes only, and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk, and unless otherwise stated, are not guaranteed. Information expressed does not take into account your specific situation, or objectives, and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. And past performance is not indicative of future performance.
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