As DOL investigation continues, Geller Group says it is executing the final stage of a four-year succession plan

Despite an investigation by the Department of Labor into a possible conflict of interest with its auditing procedures, and the retirement last week of its two top executives, The Geller Group LLC and Geller Advisor Group are in solid shape, says Alan Pfeffer, who took the reins of the businesses last Thursday.

Though Pfeffer, 53, who was previously the company’s chief compliance officer, declined specifically to say whether the departure of Sheldon Geller, 52, and Manny Ehrlich, his long-time partner, 56, was related to the DOL investigation, Pfeffer said that a succession into his hands had been in the works since soon after Focus Financial purchased an interest in the firm in 2006. Geller helped found the company in 1986.

“This is something Sheldon and Manny wanted for a long time,” Pfeffer says. “It was really time to enjoy the fruits of their labor. Summer is a great time to do that.”

Succession planning is something that Focus Financial takes an active hand in with its partner firms, says Rudy Adolf, CEO of the big New York-based roll-up.

Next generation

“Focus’s role is as a financial and organizational strategic bridge between the founders and the next generation. We frequently support the process of identifying and recruiting next generation leaders.”

Geller has about $1 billion of assets under administration and its customers have, with few exceptions, stayed in place, Pfeffer says.

“There’s been some fallout but against a client base of 700 [firms], maybe – as a result of the investigation – a handful [have moved their accounts],” he adds. Pfeffer did not specify how many.

Big new accounts

Geller also won new accounts last year — including ones from a major accounting firm, a big real estate client and two law firms, he says.

Pfeffer offers some additional numbers to back up his assertion that the company is doing fine.

Geller is not a traditional RIA that serves high net worth clients on a retail basis; all of its accounts are retirement plan-related. Geller has 340 firms that it advises as an RIA under Geller Advisory Group and an additional 700 firms that use it as an administrator under The Geller Group LLC.

Of those 700 firms about 150 have defined benefit plans and the other 550 are defined contribution plans. The vast majority of those DC plans are 401(k) plans. The average client has 50 to 500 employees.

Geller Group has about 60 employees and Geller Advisory has eight employees. The employees and clients were informed of the departure by this letter from Rajini Kodialam, senior vice president of Focus Financial Partners.

Focus Financial declined to disclose precisely how much of Geller it acquired but Adolf offered this guidance. “Focus acquires a certain percentage of a firm’s ongoing economic interest, typically between 40-70%, in exchange for cash and an ownership position in Focus Financial Partners,” he says. “The Geller transaction is consistent with this structure though we don’t disclose particular details on any of our partner transactions.”

The DOL investigation – which started around December — centers around whether Geller had a conflict of interest when it recommended to plan sponsors that they use an auditor in which it allegedly held an undisclosed interest, according to reports in InvestmentNews. “The auditor, Caesar & Associates, worked out of Geller’s headquarters, its employees for several years received checks directly from Geller, and Geller officials reportedly signed off on some of the audits, the reports added,” said an InvestmentNews article.

Here is what Geller has to say about the Labor Department’s investigation:

No allegations

“The investigation is ongoing and we are cooperating completely,” he says. “What I’d want anyone to know is that it’s an investigation. Not only have there been no findings; there have been no allegations.”

Pfeffer, meanwhile, says his goal is to take the company forward and he believes he has the qualifications to do so. He formerly worked for a similar firm — Schloss & Co. — which was acquired by Benefits Street before buying itself back.

He believes that he learned a great deal about succession from that sale to the San Francisco-based firm. “That was a textbook case of what not to do,” he says. He believes the succession failed because the four key people at Schloss were alienated and left.

Right now, Pfeffer is working to meet all the employees to be certain that they understand the company’s vision.

That vision involves taking advantage of the intrinsic benefits of competing for 401(k) business as an RIA at a time when the value of this business and regulatory model is being viewed favorably — especially relative to stock brokers selling plans. See: RIAs are starting to create their own 401(k) companies as alternatives to John Hancock and The Principal.

“We have a great [RIA-based] model, and this is what the business is evolving to. Sometimes you have to be smart enough to know what isn’t broken.”