Tuesday, 11 August 2020

Review of Captrust

Review of Captrust
20 Jul
11:28

Updated on Monday, July 20, 2020

Captrust is an independent registered investment advisory firm headquartered in Raleigh, N.C., with more than 30 offices nationwide and plans to grow larger. The current team of nearly 625 employees manages the portfolios of wealthy and middle-income individuals and families, including business owners, professional athletes and certain retirement plan participants. The team also offers financial planning to those clients. Institutional investors, such as pension and profit-sharing plans, account for the bulk of the firm’s assets under management (AUM).

All information included in this profile is accurate as of July 20, 2020. For more information, please consult Captrust’s website.

Assets under management: $389,150,706,027
Minimum investment: Generally $50,000, but can be waived
Fee structure: A percentage of AUM; hourly charges; fixed fees; performance-based fees
Headquarters location: 4208 Six Forks Road, Suite 1700
Raleigh, North Carolina 27609
captrust.com
(800) 216-0645

Overview of Captrust

The idea of Captrust, legally known as CapFinancial Partners, LLC, initially brewed in the late 1980s when co-founder Fielding Miller grew dissatisfied with what he viewed as conflicts of interest in parts of the financial services industry. Miller and his partner, David Perkins, teamed up to build a fee-only advisory firm, where clients typically pay a transparent percentage of assets under management. Miller and Perkins, along with a team of 11 former employees from the brokerage firm Interstate/Johnson Lane (later acquired by Wachovia), opened their shop in 1997. Captrust registered as an investment advisor with the SEC in 2003.

Today, the firm manages more than $389 billion in assets, mostly from retirement plans. Just under $15 billion comes from wealth planning clients. The team of 624 includes 326 employees who hold investment advisory and research roles.

The firm has completed more than 40 acquisitions since 2006, with plans to grow further. Captrust is primarily owned and operated by Miller and other employees, although private equity firm GTCR recently made an investment to help fuel additional growth.

What types of clients does Captrust serve?

Captrust’s client list includes many individual investors as well as high net worth individuals, who the SEC defines as having at least $750,000 under management or a total net worth of at least $1.5 million. Business executives and owners as well as professional athletes will find specific resources for their needs, such as succession or benefits planning.

Generally, the firm requires individuals to invest at least $50,000 to open an account, although certain managed accounts may require an investment of $100,000 or more. Advisors can waive that requirement under certain circumstances.

In addition to its work with individual investors, the firm also has a large institutional business. It serves retirement, pension and profit-sharing plans; banking and thrift institutions; endowments; charitable organizations; state and local governments; insurance companies; investment companies; and corporations and other businesses. In fact, some companies hire Captrust to help their employees manage their retirement accounts and plan for their financial future.

Services offered by Captrust

For individuals and families, Captrust’s team manages their portfolios and helps them plan for their financial futures.

The financial planning process typically starts with determining financial goals, then modeling income, expenses and savings scenarios to determine the likelihood of reaching those goals, and finally providing the necessary actions to make sure clients prove successful. Topics addressed can include education planning, retirement planning, estate and legacy planning, charitable giving and insurance needs. Financial plans or other insight is offered on an a-la-carte consultation basis.

As for investment management, Captrust can help clients build and manage a suitable portfolio by conducting an asset allocation analysis and identifying appropriate managers and mutual funds. Clients can choose to give Captrust discretionary control over their account, meaning clients do not sign off on each trading decision, or they can listen to investment advice from Captrust but make the final decisions themselves, known as a nondiscretionary arrangement.

Here is a list of services that Captrust offers:

  • Investment advisory services (separately managed and wrap fee accounts; discretionary and non-discretionary)
  • Financial planning services
    • Retirement planning
    • Estate and legacy planning
    • Charitable gift planning
    • Education planning
    • Tax planning
    • Business succession planning
    • Corporate benefits planning
    • Cash flow planning and projection
    • Insurance planning
  • Employee benefit plan services
  • Publications of periodicals or newsletters

Nearly 250 of Captrust’s advisors are also separately licensed as broker-dealers, meaning they can buy and sell investments for clients outside of any advisory relationship and earn commissions. The firm’s affiliated broker-dealer is CapFinancial Securities. More than 100 advisors can also sell insurance products, such as life insurance and variable annuities.

How Captrust invests your money

Captrust clients can expect to receive custom portfolio recommendations tailored to their specific needs, based on factors like their goals, time horizon, risk tolerance, net worth, net income, tax situation and age. The recommendations may include a mix of U.S. and international stocks and bonds, mutual funds, commodities, options strategies, margin transactions, real estate, cash and strategic opportunities. Clients can opt for a Captrust financial advisor or the Captrust investment committee to manage their account and recommend specific strategies.

In the firm’s separately managed account program, the advisor can recommend appropriate third-party portfolio managers who will have discretionary authority over the account. Typically, managers in this program use long-only equity and fixed income strategies, although occasionally, managers are recommended that short securities or use options, futures, derivatives or other more sophisticated strategies. Clients in this program must custody their assets with Pershing.

Fees Captrust charges for its services

Generally, clients pay a fee calculated as a percentage of assets under management. Each fee is negotiated directly with the individual financial advisor, and thus can vary by advisor. Captrust does set maximum fees, however, which are outlined in the table below:

Maximum Rates for Most Investment Advisory Accounts*
Assets under management Maximum annual fee
$0 to $500,000 2.25%
$500,001 to $1,000,000 2.00%
$1,000,001 to $2,000,000 1.75%
$2,000,001 to $5,000,000 1.50%
Over $5,000,001 1.25%
*Excludes separately managed wrap accounts.

Most accounts adhere to the maximums outlined in the table above. For separately managed wrap accounts (both fixed income and equity), however, the maximum advisory fee to Captrust is as follows:

Maximum Rates for Equity and Fixed Income SMA Accounts
Assets under management Maximum annual fee
First $1 million Up to 2.25%
Next $4 million Up to 1.75%
Over $5 million Up to 1.25%

On top of the advisory fee, clients will also owe an additional third-party manager and platform fee that ranges from 0.20% up to 1.00%.

Clients can bundle their advisory fee with transaction and custodian costs, known as a wrap fee account. Alternatively, clients can choose to pay a standalone advisory fee to Captrust and pay transaction and custodian costs separately, known as a non-wrap account. Either way, clients are still responsible for internal mutual fund and ETF fees. Fees typically are payable quarterly in advance, and can be automatically deducted from their account.

For consultations on specific issues, fees vary by service and are negotiable. Generally, clients pay flat fees ranging from $10,000 to $250,000 on an annual basis. Separately, a limited number of investors in three private funds pay performance-based fees that Captrust shares in.

Captrust’s highlights

  • Customized portfolios: Advisors create custom portfolios specifically tailored to each client. The firm does not take a one-size-fits-all approach.
  • Low account minimums: Unlike many firms that require six or seven-figure investments, Captrust’s advisors generally require only $50,000 to establish an account, which can be waived under certain circumstances.
  • Broad menu of services: Clients are able to choose among many different product offerings. Options include handing over control of the account or holding onto the final decision-making, and paying one bundled fee or paying separately for advisory, trading and custodian costs. Clients also can choose whether they prefer their financial advisor, Captrust’s investment committee or a third party managing their account. Finally, the firm provides specific resources for business executives and owners, professional athletes and retirement plan participants.
  • Industry recognition: Nearly a dozen Captrust advisors or teams recently landed on the Barron’s Top 50 Institutional Consulting Teams ranking. Additionally, the National Association of Plan Advisors (NAPA) recently included Captrust on its 2019 list of the top defined contribution advisor teams and on its list of the top defined contribution advisor multi-office firms.

Captrust’s downsides

  • Potentially high fees that aren’t published upfront: Clients negotiate fees with each individual advisor, so it’s difficult to compare prices without shopping each advisor. Clients who end up paying fees close to the maximums allowed are paying fees higher than compared with the national industry average, which is 1.17%, according to a study from RIA In a Box. The maximum rate for most accounts up to $500,000 at Captrust is 2.25%.
  • Conflicts of interest related to certain commission revenue: Advisors at Captrust can earn commission revenue on certain products, such as life insurance and variable annuities. That income creates a potential conflict of interest, since advisors have a financial incentive to recommend one product or investment over another.
  • Pays for referrals: Captrust pays certain third parties for referrals. Anytime someone recommends Captrust, investors should always ask what specifically is driving the recommendation, and what that person stands to gain from it.

Captrust disciplinary disclosures

The SEC requires registered investment advisors to disclose on their Form ADV any civil, regulatory or criminal issues related to the firm, its employees or its affiliates that would be material to clients when evaluating the firm or the integrity of the management team. Captrust has no such events to disclose. However, the firm adds that each individual financial advisor who acts as a portfolio manager has their own Form ADV, so clients should refer to those forms to learn more about events against a specific advisor.

Captrust onboarding process

To learn if a Captrust advisor is located near you, use the Find an Advisor tab on the firm’s website. Potential clients can contact the firm by calling their toll free number at 800-216-0645, or by filling out the form on the Contact Us page. The form requests your name, contact information and a brief message.

Before a relationship formally begins, Captrust provides clients with a written agreement that details fees and services. Once on board, it is the client’s responsibility to notify Captrust in writing of any changes to their goals or financial situation. Clients should expect periodic reviews from their advisor.

Is Captrust right for you?

If you are looking for a financial advisory firm that works with modest income investors in addition to the wealthy, and that offers financial planning around topics such as retirement, education and stock compensation in addition to portfolio management, use the advisor search tool to learn if a Captrust advisor is in your area. Similarly, business executives and owners as well as professional athletes may want to consider Captrust since specific resources are dedicated to investors like them.

That said, it’s up to you to negotiate a reasonable fee with Captrust that does not approach the maximum allowed, since those maximums can climb as high as two times the national average. Investors looking for wrap accounts who prefer not to use Pershing to custody their assets may want to look elsewhere as well, as Captrust requires those clients to use Pershing.

Whenever you’re shopping for a financial advisor, you should always research at least two or three options and make sure you understand the difference in services and costs. Otherwise you risk paying too much, which cuts into your returns, or missing out on key financial planning items that could help secure your and your family’s financial future.

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Source: https://www.magnifymoney.com/blog/investing/captrust-review-ria/

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