Two large outsourced wealth management firms are adding sales staff a year in which both saw big growth.

Rockville, Md.-based Fortigent LLC has opened a West Coast office and installed a 15-year industry veteran to launch a sales effort from there.

Chad Given, most recently in a senior institutional sales position with Thomson Reuters in San Francisco, will head up Fortigent’s West Coast business development from that city.

Fortigent may make additional hires nationally to sell its unified managed account products.

Charlotte, N.C.-based Adhesion Wealth Advisor Solutions added a fifth sales person to its staff in January and it is looking to hire two or three more by the end of June, according to Michael Stier, its president and CEO.

Both moves reflect growing optimism about the already fast-growing market for outsourced wealth management services. “Outsourcing non-asset gathering activities is a growing need for a growing number of market subsegments,” he says.

Fortigent sees opportunity in California, according to Gary Carrai, senior managing director of consulting and sales for Fortigent.

Almost untapped.

“In many ways, it’s almost untapped,” he says. “Northern California, Southern California…you see huge pockets of wealth.”

Fortigent’s practice has grown to 68 firms with $35 billion of assets under management, up from about 48 firms at this time last year. Currently it has about 25 advisor clients located in the western third of the United States.

Fortigent performs due diligence on asset managers and RIAs value this service even more than they did in the pre-Madoff era, according to Carrai.

“Manager due diligence and risk management isn’t just something I say I do [as an advisor],” he says. “It’s something I have to prove I do and do well.”

Adhesion, which provides managed accounts, back office services and client performance reporting on an outsourced basis, also is growing at a fast clip — albeit for slightly different reasons. It serves 75 firms with $10 billion of assets under management, up from 50 firms last year at this time.

Roll-ups look to scale up

One driver of Adhesion’s growth is fast-growing firms like roll-ups that find scaling up services internally to be difficult. The second subsegment comprises wirehouse brokers.

Michael Stier: The challenge of replicating
the wirehouse environment from scratch is
very daunting for breakaways

“The challenge of replicating that environment from scratch is very daunting,” Stier says. Many would-be wirehouse breakaways end up giving up or folding themselves into existing firms to avoid facing the replication challenge, he adds.

Most referrals to Adhesion come from asset custodians looking to encourage wirehouse brokers to make the leap to independence, Stier says.

Carrai says that Fortigent’s growth is primarily from financial advisors seeking to serve a more upscale – and more profitable – segment of the market. He defines high net worth as clients who invest $3 million or more of assets.

“There are many providers targeting firms that serve the mass affluent market and relatively few with a defined niche in serving those targeting the high net worth,” he says.

Pipeline full

Stier says that Adhesion’s pipeline of prospective clients is also benefiting from his company’s positioning in the market.

“Not only is the pipeline full but the size and quality of the folks in the pipeline has definitely increased,” he says.

The reason for the improving quality of clients is a growing acceptance of outsourcing by big, sophisticated practices, Carrai says.

“There’s a greater level of confidence with outsourcing than I’ve seen in years,” he says. “Firms we’re talking to about outsourcing I would never have expected to be interested in outsourcing.”