Ben Marks, whose five-year-old Minnetonka firm manages more than $500 million, will host a client golf tournament in Paris next summer.
That would be Paris, Ill.
Marks, 50, the son of an Amboy, Minn., farmer, manages about $100 million for several dozen clients who became millionaires when they sold their employee-owned feed mill to Cargill Inc. in 1994.
“I play the farm card a lot,” quipped Marks, who once studied to be a veterinarian. “I can still talk corn and hogs. My brother farms. But most of our client growth is in the western suburbs [of Minneapolis].”
Marks and his partner, John Feste, and their eight-employee Marks Group also embody a growing trend away from Wall Street, which 20 years ago dominated the brokerage and money-management trade.
In 2008, Marks and five other brokers, who were managing money as a team at the Wayzata office of UBS Securities, left to start their own firm with about 170 clients and $220 million. The stock market was crashing amid the credit crisis, the failure of Lehman Brothers and the federal bailout of the nation’s largest financial institutions. The Great Recession followed.
Meanwhile, firms such as E.F. Hutton (where Marks started out), Kidder Peabody, Paine Webber and the retail brokerage of Piper Jaffray had merged into larger houses, such as Switzerland-based UBS and Merrill Lynch. Those bigger firms had well-publicized regulatory problems even before the recession.
“Investors want to do business with a local, independent firm that’s separate from the Wall Street institutions that create the products,” Marks said.
Overall, the number of financial advisers has declined from 339,920 in 2005 on Wall Street, at banks, insurance shops and regional brokerages to 307,623 last year, according to Cerulli Associates, the Boston-based research service. Meanwhile, registered investment advisers (RIAs) working at independent shops such as Marks Group, Disciplined Growth Investors and Minneapolis Portfolio Management Group have nearly doubled in number to 46,352, or about 15 percent of the industry, since 2005.
Managing, investing money
These RIAs, a subset of the adviser ranks who need additional industry certification, don’t just represent stocks and bonds to clients, but directly manage and invest their money.
In a recent report, Cerulli said this independent channel of financial adviser is expected to be the “sole source of head count growth through 2017,” as numbers decline in the traditional channels of Wall Street “wire houses,” banks and insurance companies, and regional brokerages.
Marks and Feste said their typical client, with a couple million dollars in investable assets, typically pays a 1 percent annual fee instead of the 2 percent they said usually is baked into fees, commissions and product charges associated with Wall Street shops and insurance companies.
“We’ve looked at customer statements where they pay 2 percent and then we show them where they paid 7 percent for a variable annuity and 3 percent per year,” Feste said. “Our fees are a line item on the client’s quarterly statement in real dollars,” Feste said.
The Marks Group spends a significant 5 percent on marketing annually, including several billboard ads in 2012 that attacked Wall Street firms, and a series of billboard and radio ads last spring that extolled Marks Group advisers as experienced client advocates. Marks said the campaigns helped to bring in about $50 million in new assets.
‘An upfront guy’
But most of the firm’s growth comes from increases in market value since 2009 and word-of-mouth referrals by existing clients.
“Ben Marks is an upfront guy,” said Steve Eitel, 69, who retired from the Illinois Cereal mill in 1994 after Cargill bought it. Marks got his first customer on a client referral that year while he worked at the former Dain Rauscher, now part of RBC Financial. Over the years, he picked up dozens more.
“I went with Harris Bank first,” Eitel said. “But people kept talking about how much they liked Ben and that he doesn’t hide things when things aren’t going well. Ben doesn’t just trade. I pay about 1 percent a year. I’ve never lost any sleep because of my investments with Ben Marks.”
Marks, whose composite equity portfolio has a lot of Minnesota and Midwestern names such as Fastenal, Mosaic and Medtronic, has produced competitive returns over the years. And his conservative approach, he said, has limited portfolio losses to about 75 percent of the overall market during downturns. He or another partner try to meet at least quarterly with clients. Marks personally visits Paris, Ill., every two months for client meetings.
Advances in technology and efficiencies in the distribution of financial products over the past 20 years have given independent advisers the same tools as the large financial complexes. But financial advisers usually are selected because clients are comfortable with them.
“Most of our clients are at or near retirement, ran a small business, or worked for a company for 30 years and rolled over a $2 million retirement to us,” Marks said. “They don’t see themselves as rich. They want us to be successful, too. But not too successful.”