Michael L. Brown
Title: President and CEO, Boston Financial Management
Age: 62
Experience: 34 years
Above all, Mike Brown respects his profession and values his firm’s independence. Originally a CPA by trade, Brown and his wife at one point founded their own accounting firm, and together grew that organization from two employees to over 100. A little over seven years ago, he joined Boston Financial Management as president. Recently, he sat down with Banker & Tradesman to talk about his firm’s recent acquisition of Emerson Investments and its future growth aspirations.
Q: Tell us a little bit about your recent acquisition. Why was Emerson a match?
A: We are acquisitive, we are interested in growing the firm. A lot of firms are selling to big roll-ups, or they’re selling to the banks. There are 15 of us who are shareholders and that is of no interest to us. We want to be the last independent wealth manager in town. We would rather work for ourselves than report in to New York or some private equity firm or whomever.
Emerson had the same thought. They have a very young group of advisors and investment strategists and they wanted to work for a long time and they had some minority shareholders that wanted to exit, so they went out and said to a very good investment banking firm, “We don’t want to talk to banks, we don’t want to talk to a roll up, we want to work for someone who’s going to remain independent.” And they have a great estate lawyer on the campus, they have financial planning and wonderful, robust research capabilities. They have outstanding investment performance. So it was a match.
Q: What regulatory challenges do you face in this space? How does that impact M&A in your industry?
A: We are regulated by the SEC and the Commonwealth of Massachusetts Securities Division, so we have two very sophisticated groups to make sure that we behave. As a result, we have a chief compliance officer and we have an outsourced SEC lawyer and a regulatory compliance firm – they just make sure we behave. If we get a black eye, the SEC will require us to post that, and who wants to do business with somebody who’s not obeying the SEC?
But a lot of the regulations that they’ve proposed are commonsensical so it’s OK. We have our money at Fidelity and Schwab. Bernie Madoff, he kept the money himself. He didn’t have a world-class Schwab, Fidelity or State Street holding the clients’ money, and if we have your money, we hold it in your name, not our name, so we can’t just reach in there and take it. A lot of that just is common sense, but it’s good to have government bodies to make sure that we behave.
That also might lend itself to why a lot of small RIAs will go to the roll up, they’ll go to sell their firm. It’s very expensive to comply with the government’s requirements. We spend a fortune on that. The same thing with research, the money that we spend on research of companies that we invest in. If somebody’s running a half-billion or a billion dollars, it’s hard to afford the cost to do it right, so you can see why the roll-ups are exactly as they are.
As I’ve said, we are acquisitive. So our goal is to continue to grow, so we are sustainable for say, another 100 years, and one way to grow is from existing clients. We like to hope we have 100 percent of a client’s money, but we don’t always. Another way to grow is just our marketing efforts, and a third is through acquisition.
I’ve spent a fair amount of time talking to competing firms that would have an interest in merging in with us. Emerson was really our first acquisition, so we have to digest that and make it work before we think about another acquisition.
Q: Do you have any particular goals as far as growth is concerned?
A: No, we don’t. At $2 billion we’re thrilled to death because the economies of scale, we have almost 800 individuals and families we serve, so would we like to be $3 billion someday? The idea of $5 or $10 billion, it’s not on our radar screen because having grown an accounting firm from two individuals to over 100, the thing we learned from that is that growing for growth’s sake alone makes no sense at all. There are requirements for that – like I said, to pay for research and compliance and client service is expensive – so you do have to continue to grow. And if you want to attract the best and the brightest, you must keep growing. Nobody that’s on top of their game wants to be with a frim that’s just stagnant. And I can appreciate that. So it is a requirement.
We’re in no rush at all, but if we’re talking to a firm with great talent, good employees and good clients, then we’re interested.
Brown’s Top Five Golf Courses:
- The Essex County Club
- Augusta National
- Bandon Dunes
- St. Andrews Old Course
- The Country Club of Florida
Watch an In Person outtake with Mike Brown.
