by Melissa Klein

Irving, Texas - H.D. Vest, a pioneer in establishing a niche for CPAs to provide investment advisory services to their clients, is celebrating its 20th year in business and its second under the stewardship of California-based financial-services conglomerate Wells Fargo.

At the same time, executives at the home-grown broker/dealer and many of its reps maintain that it’s been business as usual since Vest became a subsidiary of Wells Fargo via a $127.5 million acquisition in July 2001.

While company founders Herb and Barbara Vest have moved on, Roger Ochs, who has served as president for five years and whose career at the firm spans more than 16 years, remains in charge of the firm’s day-to-day operations.

“The nucleus of the business has remained relatively the same in terms of maintaining our own brand and offering financial planning solutions,” said Ochs. “What’s different is the fact that we have the opportunity to leverage banking products that our reps didn’t have access to before.”

The Vest name remains, though today it is trailed by the identifier, “a non-bank subsidiary of Wells Fargo & Co.”

The Wells Fargo deal has broadened Vest reps’ arsenal to include banking products, such as mortgages, education loans, home equity lines of credit and small business lines of credit. Thanks in part, at least, to rock-bottom interest rates, mortgage products have proven the most popular of the banking products among Vest’s clients. “We expect to do $70 million in mortgage business this year,” said Ochs. “Two years ago, we were doing zero.”

Vest’s clearing firm will also change as a direct result of the deal. Later this year, the firm plans to move its clearing services from National Financial Services to Wells Fargo.

The move, which is expected to be in place as early as November of this year, was first announced at the firm’s annual Vest Fest conference in Las Vegas in May, where demonstrations of the new technology were held.

“The advantage is that we’ll own the technology, so it will be very customized for our advisors,” Ochs said of the move. He noted that the change shouldn’t have a material impact on most advisors.

Ochs admitted that reps had some concerns when the Wells Fargo deal was approved two years ago, but said that the firm hasn’t seen any attrition since the merger. “We’d been a mom-and-pop shop for 18 years,” he said. “[That] this big company was going to come in and try to change things was probably in the back of a lot of people’s minds.”

Said Ochs, “the biggest asset of any tax professional is their client base. Their biggest concern was that they would lose that client base. Our response to that is, those are always your clients. We’re here for you behind the scenes. We’re never going to get in between you and your clients.”

One representative who had concerns about the move said that, so far, his concerns have been unfounded. “When they said they were going with Wells Fargo, I kept waiting for things to change, for the name to change,” said Mal Morley, an enrolled agent from Pasadena, Texas, who’s been a rep since 1986. “I haven’t noticed a lot of changes.”

Syosset, N.Y.-based planner Gary Grab, a Vest rep since 1994, said that the only change he’s noticed is one for the better. “The back office support has improved 300 percent,” said Grab. “I’ve seen a major improvement in the skill level and professionalism. Before, I would have rated it a C to a D. Now I’d say it’s an A or B.”

“I think the support is equally good,” agreed Meredith Hoban Dunn, of Dunn & Hoban PC, in Westwood, Mass., who joined Vest three years ago. “One thing we’ve lost is the deferred compensation arrangement that used to exist. That was superb, but it was very expensive. That stopped with Wells Fargo.”

She continued, “My biggest concern was that we were going to have proprietary products, when we were trained that proprietary products probably weren’t in the best interest of our clients. But I’ve had very little contact from Wells Fargo. I don’t find them pushing their products.”

However, Hoban Dunn said that she has noticed a shift in the focus of her chapter’s monthly meetings. “During non-tax season, the meetings used to be geared toward CPE credits and now they’re gearing them toward sales. That has definitely been a shift, from education to sales. Is it surprising? Probably not,” she said.

“I wondered what the new company was going to do, how they were going to change things. I didn’t know what to expect,” said Gerry Trepanier, a CPA in Penbrook, Mass., who has been with Vest since 1992. “They’ve made very minor changes. They kept everything pretty much intact. I don’t have any real complaints.”

Trepanier did lament the departure of the firm’s founders. “The personal touch is gone,” he said. “You used to call up Barbara if you had a problem and she’d solve it. It’s become more of a corporate atmosphere instead of a family atmosphere, but that’s not necessarily bad.”

While Hoban Dunn, Morley and Grab say that they haven’t recommended any of the proprietary banking products to clients yet, Trepanier has used some of the mortgage products.

“The products allow me to become more beneficial to my clients. I can offer them more services,” said Trepanier. “Instead of going to the bank for a mortgage, I can do the mortgage for my clients. But there’s no pressure to push them. We’re independent. We all run our own businesses - they can’t force things on us like you can with an employee.”

Although Dean Owen wasn’t with the firm prior to the Wells Fargo merger, he likes what he’s seen at Vest so far. Owen, a CPA in Paducah, Ky., joined Vest in March after leaving another broker/dealer. “They seem to be able to balance the professional side of business with the fun side,” Owen said. “There are other broker/dealers who are also professional and good at what they do, but I didn’t get the impression they were having any fun. To me, Vest is like the Southwest Airlines of the broker/dealers.”

Certainly, a lot has changed since Herb Vest pioneered the idea of CPAs as financial advisors, not the least of which is the regulatory environment. While CPAs couldn’t accept commissions two decades ago, today, most states allow licensed CPAs to receive commissions for providing investment advice and services.

In addition, advances in technology have changed the way services are provided, and market forces have altered the way investors work with advisors.

For Vest, technology has had the most impact on marketing and administration. “We’ve really leveraged technology to help our advisors become better marketers,” said Ochs. In addition to its Vest Plan Solutions financial planning software, the firm has rolled out a client marketing system, and a 1040 analyst tool to help advisors identify planning opportunities based on clients’ tax returns. The firm has also developed a number of practice management tools that enable reps to perform such tasks as providing consolidated client reports and checking commissions right from their desktops.

A movement - though slow - toward fees has taken root in the advisor community. While the majority of advisors still offer commission-based services, about 20 percent of the revenues generated by Vest’s 6,000 reps, about half of whom are CPAs, come from fee services, according to Ochs. The firm rolled out its fee program, Vest Premier, in 1988.

“Only about 20 percent of the revenues our advisors generate are fee for service, primarily because they’re generally only engaged in fee relationships for clients with a lot of money,” said Ochs. “Everybody talks about how accountants want to do fee-based planning, but you can’t do it for everybody. We have a lot of clients that put in $25 a month. A fee-based solution isn’t right for all clients. In order to be a financial planner, advisors need to offer both or they’re limiting the options the client has.”

Today, one of Vest’s biggest challenges may be the same challenge it faced two decades ago. Addressing the 1,000 Vest reps at Vest Fest 2003, Ochs recalled how the challenge in the firm’s early days wasn’t convincing clients that they should get investment advice from tax professionals - it was convincing the tax professionals that they were “doing the right thing for clients” by providing investment advice.

After three years of a bear market, Ochs said that one of the toughest challenges is convincing advisors who got into the business right as the market went south to stick it out.

“We’re big advocates of diversification. But for reps who started out in 1999 and 2000, even with a well-diversified portfolio, no one’s been thrilled with the performance,” said Ochs. “We’re talking to them about re-balancing their client portfolios and finding other ways to provide clients with the right solutions. Everyone likes to blame the market, but we say, ‘Look, people still have to retire; they still have to put their kids through school. We’re in it for the long run, we need to stick it out.’ We’re pretty aggressive with the message that advisors have to do the right thing for clients.”

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