BJ Group - GE Private Asset Management

Top 2. Apr 27, 2004 10:04 AM

» Kirk - August 07, 2000: Small advisers proving hard to consume

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Investment News ~ August 07, 2000

Small advisers proving hard to consume

Michael Fritz

Though several ambitious efforts to consolidate small-fry financial advisers have stalled, Centurion Capital Group Inc. appears to be off to a solid start.

The La Jolla, Calif., financial services holding company last week acquired the BJ Group Inc., an obscure but successful mutual fund allocation business run by two high-profile investment newsletter publishers, Sheldon Jacobs and Robert Brinker.

``Everyone is trying to fit acquisitions into one neat hole, and you can't do it that way. We are trying to be different,'' says Joseph Duran, president of Centurion Capital Management, a subsidiary that targets advisers managing more than $250 million who usually are willing to relinquish day-to-day business operations.

Centurion executives say the ultimate purchase price of BJ Group depends on its achievement of certain profit goals, but an investment banking source estimates that the business may have fetched $15 million to $20 million.

BJ Group's assets under management - $613 million through last December, according to regulatory filings - have been growing at 30% to 50% annually over the last six years, according to Centurion.

Mr. Brinker, publisher of the newsletter Marketimer, host of the weekly network radio show ``Moneytalk'' and chairman of BJ Group, declined to comment. Mr. Jacobs, president of the advisory business, did not return telephone calls.

Tough sledding

Outside of Centurion and National Financial Partners in New York, which is continuing plans to acquire 200 to 300 high-end, insurance-oriented advisory firms over the next four years, few financial adviser consolidation efforts appear to be on track.

Canadian financial services marketer Assante Corp. of Winnipeg, Manitoba, has yet to act on an acquisition plan unveiled last fall. It wants to add $6 billion in assets under management by acquiring 20 fee-based advisers over 18 months.

Centurion, which markets wrap accounts, money management and trust services to 700 advisers and stockbrokers, announced plans last November to accumulate up to $10 billion in assets by acquiring 10 to 12 advisory firms annually over the next three years. It manages $1.4 billion, not including BJ's assets.

The BJ Group's acquisition by Centurion's capital management unit is the third such deal this year. In the first quarter, Centurion's Financial Advisors Inc. unit bought Hinds Financial Group Inc., a Lakewood, Colo., planner managing $105 million, and Hesse Financial Advisors, a Roswell, Ga., firm managing $125 million.

Some industry observers say the independent nature of advisers makes them poor candidates for a large-scale consolidation play.

``By definition, they are difficult to buy,'' says W. Patrick Clarke, president and CEO of Clarke Lanzen Skalla Investment Firm Inc., an Omaha, Neb., marketer of separate accounts sold through independent advisers. ``I would also think they would be hard to manage after you owned them.''

Dividing the spoils

While Mr. Brinker and Mr. Jacobs no longer will run the company, they have signed multiyear contracts to continue providing asset allocation advice to BJ clients, says Mr. Duran.

The deal doesn't include Mr. Jacobs' No-Load Fund Investor newsletter or Mr. Brinker's Marketimer publication.

The private equity unit of Putnam Lovell Securities Inc., which bought a 24.5% stake in Centurion last October, is backing Centurion's consolidation effort (InvestmentNews, Nov. 15, 1999). The holding company also is financing acquisitions through a $25 million revolving line of credit with Unionbancal Corp. in San Francisco.

BJ Group's 2,247 accounts through December 1999 held an average of $273,000. The advisory requires at least $100,000 to open an account and allocates customer funds into no-load mutual funds available through Charles Schwab Corp.'s fund supermarket.

Annual fees range from 1.5% of assets for accounts less than $500,000 to 0.6% for accounts under $4 million, generating an estimated $6 million annually.

Mr. Brinker, 58, and Mr. Jacobs, 69, are the principal shareholders. Mr. Jacobs' two children - Roy, 35, a Phoenix real estate agent, and Julie, 31, a financial adviser in Denver, each held 10% to 25% stakes in the business, according to a recent regulatory filing.

All BJ Group's employees are remaining and have received ``enhanced'' salaries and retirement savings, and health plan coverage as part of the deal.

Centurion's Mr. Duran hopes to increase the 14-year-old firm's asset base by attracting additional business from its existing clients through new product offerings such as separate-account management and trust services, as well as stepped-up marketing assistance.

In addition, Centurion plans to largely end BJ Group's longstanding custody and trading relationship with Schwab. It will transfer the bulk of the accounts to Centurion's Phoenix trust company unit, which has custody of $1.7 billion and operates its own fund supermarket.

The fees are now as high as 2%... inflation I suppose. smile

-- posted by Kirk

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Top 3. Apr 27, 2004 10:09 AM

» Kirk - March 12, 2001: Small deals may augur planning consolidation

Investment News ~ March 12, 2001

Small deals may augur planning consolidation's future

Michael Fritz

A regional effort to acquire independent financial planners and tax preparers in southwest Florida could prove a viable alternative to national consolidation.

Outlook Financial Advisors Inc., a Tampa, Fla., holding company, in January bought Omni Tax and Financial Advisors Inc., a Tampa fee-based planner that manages $25.6 million in non-discretionary assets.

Brian Hershberger, a former KPMG LLP financial planner who runs Outlook, followed that deal with the purchase last month of Frances G. Doyle Investment and Tax Strategies Inc., a Tampa accountancy.

``We are finding there are a lot of smaller advisers who are going through the same growing pains and operations issues,'' says Mr. Hershberger, 34, Outlook's president and chief operating officer. ``The concept is to get a number of us together to offer more services to customers and become a more comprehensive operation.''

Though Mr. Hershberger's regional consolidation play is modest compared with the handful of national and superregional efforts launched over the past three years, it may be emblematic of how consolidation efforts are most likely to play out among independent planners.

``We advise planners to look in their back yard within a 100-mile radius,'' says Dan Cunningham, an evaluation and negotiation consultant at Moss Adams LLP in Seattle. ``There is not a lot of competition for smaller firms, so you can often acquire them on more attractive terms,'' he adds.

national scene quiet

With the exception of deals by National Financial Partners in New York and Highland Capital Holding Corp. in Birmingham, Ala., most national acquisition efforts have failed to get off the ground, or appear stalled.

Centurion Capital Group Inc., the La Jolla, Calif., financial services holding company backed by the private-equity unit of Putnam Lovell Securities Inc., completed three acquisitions last year, adding some $843 million in assets.

However, the company hasn't announced any new agreements since buying BJ Group Inc. of Irvington, N.Y., in August.

The problem: a dearth of fee-based planners interested in joining the holding company, says Jerry Dipoto Jr., president of Centurion Trust Co., a Phoenix unit overseeing the acquisition efforts.

National Financial Partners, which is consolidating insurance, employee benefit and financial planning companies, has recently turned its efforts toward buying independent investment advisers.

The move coincides with efforts in Washington to repeal or sharply reduce federal estate taxes, which could affect National Financial's network of high-end insurance producers who sell estate planning-related life insurance. The company is backed by a $125 million investment by Apollo Management LP, an investment vehicle of Leon Black.

Ambitious Goals

Mr. Hershberger says he hopes to acquire at least one investment advisory business and one tax and accounting firm in each of the next four years.

The company is targeting fee-based planners in southwest Florida and Atlanta with $25 million to $75 million under management.

Under Outlook's acquisition model, it expects to purchase 100% interests in affiliates, subject to a five-year earn-out. Mr. Hershberger says he is also mulling partial stakes.

``The goal is to add about $50 million a year through acquisitions,'' says Mr. Hershberger.

After five years, he hopes to have built Outlook Financial to $400 million in assets, half of that growth through acquisitions.

Before forming Outlook Financial in September 1999, Mr. Hershberger worked four years as a senior manager in the financial planning practice of KPMG in Atlanta and two years at Ernst & Young LLP in Houston.

His consolidation effort is backed by four children of Walter J. Eising, an investor in the leveraged buyout of Columbus McKinnon Corp., an Amherst, N.Y., manufacturer of chains and hoists that went public in 1996. Each of the four has at least a 10% stake in Outlook.

Like other planner consolidation efforts, Outlook will provide management, marketing and operational support to its affiliates.

By combining financial planning and accounting firms, Mr. Hershberger aims to make a broader range of services available to the affiliates.

The planning service puts client assets in custody with ProEquities Inc., a broker-dealer unit of Protective Life Corp., an insurer.

-- posted by Kirk

Top 4. May 11, 2004 3:56 PM

» Kirk - Advertised Results show QQQ effects

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How many have seen the latest advertisements from the "BJ Group Service" part of GE Capital?

Some of those managed accounts, like the Aggressive Growth and Growth portfolios, were hammered by following his QQQ advice to the point they are still well below their 2000 highs. Who'd have thought that from listening to Brinker on the radio?

BJ Group Nasdaq100 Memo

Note the date of that letter. QQQs were about $87 the day that letter was dated. QQQ fell all the way to $19 and change and are currently at $35.19.

The results are still pretty darned good over 5 years, but hardly the results one would expect to get following Brinker according to his advertising. If I check his web site he is advertising more than a double for 5 years (115% for P1) yet the aggressive growth portfolio he oversees at the BJ Group for as much as a 2% fee looks like it hardly made 20% ($120K to $140K) over the same 5 year period (Dec 1998 - Dec 2003).

QQQ Details

-- posted by Kirk

Top 5. Jun 11, 2004 8:55 AM

» Kirk - Aggressive Growth Portfolio

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Fortunately for us practitioners of due diligence, there is a record of his results at the money management company Brinker advertises in his newsletter. Bob Brinker and Sheldon Jacobs used to own the “BJ Group.” They sold it and now Brinker advises them on asset allocation.

These results

Click for a full sized image
<img src=http://www.suite101.com/files/mysites/Brinker/BJG_P1.jpg width=520 height=486>

clearly show the effects of his QQQ advice on his portfolio. It did no better than the appropriate buy and hold index benchmarks since the market peaked in early 2000!

Make no mistake, these are good results as anyone that matches benchmarks are beating what most do on their own, but you can do the same just from buying the index funds in a diversified portfolio.

I'd STRONGLY recommend everyone read these books first before they send ANY of us money for newsletters or far more to manage your money:

The Lazy Person's Guide to Investing by Paul Farrell
A simple and easy to understand book that offers many well diversified, indexed portfolios and data to show how well they work.
The Four Pillars of Investing : Lessons for Building a Winning Portfolio by William J. Bernstein
“A Triumph! It is my candidate for the best investment book of 2002.”
-----John Bogle, founder of the Vanguard Group.

If you are going to pay the BJ Group or GE Asset Management $2,000 to manage $100,000 of your hard earned money, then make sure you understand the past results they achieved and how they propose to give you better results than what you can get from one of the portfolios offered in the above two books.

-- posted by Kirk