by Cynthia Harrington
The proof, as they say, is in the pudding.
Since the 2001 marriage of accounting firm Hill, Barth & King with Sorce Financial, assets under management at the new group — HBK Sorce Financial — grew by over 50 percent, while staff size roughly doubled.
Referrals from Hill, Barth & King drove asset growth from just under $400 million to $600 million. “The overwhelming majority of partners and managers are now comfortable with the idea,” said Bruce Walston, CPA, a principal in HBK’s Boardman, Ohio, office.
Obviously, both concerns remain happy with the three-year-old union.
The synergies between the two firms that were pointed out pre-merger have played out in several ways. The CPAs see the advantage of delivering extra value to clients. Several successful referrals came from getting clients out of bad situations with their old financial advisors. Some of these clients not only suffered with the market declines in 2001 and 2002, but were also paying unnecessarily high fees. “We wouldn’t have had the expertise to see the problems with the clients’ accounts without the resources of the financial services group,” said Walston.
The strength of the combination supports growth in personnel. Already the largest independent group in northwest Pennsylvania at 17 financial advisors at the time of the merger, the professional staff of HBK Sorce now numbers 40. Some new hires handle the increased client base, while others expand the group’s expertise in certain areas.
“We have key competencies in HBK Sorce,” said Chris Allegretti, CPA and principal at Hill, Barth & King. “One is the retirement planning group that is dedicated just to that service.”
Other new employees are experienced financial advisors. The firm now has advisors covering all the 18 HBK offices in Florida, Ohio, Pennsylvania and Virginia. “These professionals wouldn’t have been interested in coming on board without the availability of the resources at HBK Sorce,” said Allegretti.
Both firms were considering a merger prior to their marriage in January 2001. A bank had initially been courting Sorce Financial, while Hill, Barth & King had reviewed several models of offering financial services to their clients.
Neither found the right fit. Then Sorce’s accountant with Hill, Barth & King suggested that the two might be a good match. “HBK had done my taxes for 20 years,” says Gregory J. Sorce, CFP, of HBK Sorce Financial, in Erie, Pa. “As soon as the consideration of the bank merger ended, we started talking with Hill, Barth & King.”
Gregory Sorce and his brother established their independent firm in 1995 after several years as employees of larger financial services firms.
“Being independent, we can provide clients with advice that is completely in their best interest,” said Sorce. “We can work with almost any mutual fund company or insurance company to find the best solution.”
In the late 1990s, Hill, Barth & King decided to investigate how to offer financial services to their clients. HBK partners recognized the need on the part of their clients and wanted to deliver the extra value.
They didn’t want the strict referral model, because they wanted to stay involved with the client and not just hand them off. Nor did they want to re-invent the wheel by starting up an in-house division. They were wary of the potential culture clash of bringing a financial advisor or insurance professional into the accounting firm. “With Sorce we got everything in one package,” Allegretti said. “They’re committed to client service, they bring investing and insurance expertise, and they’re planning-based, not sales-based.”
And the focus on planning supported growth, even during the market downturn. Sorce reported that they lost few clients despite the disaster in equity prices. The way it works: Every client starts with a fee-based financial plan, Then they implement the plan for clients that want that. “We have a holistic approach to managing clients’ assets,” said Sorce. “We see ourselves as the quarterback, with no preconceived notions about what the client should have in their portfolios.”
Client service is a key ingredient to both firms. “We review accounts on a regular basis to rebalance back to the target allocations,” Sorce said. “The firm has an edict for planners that they must communicate with their clients a minimum of twice and often four times per year.” And the professional approach won over the CPAs at HBK, as well.
The momentum of referrals from the accountants to the planners is picking up. “They see us providing great service to their clients, month after month, year after year,” said Sorce. “They also see the business building.”
Expansion plans include additional markets, as well as providing financial services to other accounting firms. “We’ve been contacted even by some competitors,” said Allegretti. “They tried the referring model and it didn’t work.”
The firm is taking a good hard look at both additional markets and expanding in existing markets. Adding experienced professionals in existing markets is a proven strategy. “This is a spectacular opportunity for someone interested in a planning career,” said Sorce. “The organization is leaps and bounds above many organizations because of its independence, with lots of people with gray hair running the business, plus the built-in referral opportunities.”
“We find advisors who currently live and work in the target marketplaces and bring them into the offices as employees of the firm,” he continued. “There’s no question but that they are hooking up with a well-respected accounting and financial services firm.”
Three years later, the two firms find that they are still on the same page.
“The focus of our first few years has been to bring financial services into the firm and for the accounting side to understand and embrace the concept,” said Walston. “The increased momentum is evidence of the fact that success breeds success.”
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