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Verdence Unravels Clients' Wealth Complexity, Smiles On Alternative Assets

Tom Burroughes, Group Editor , September 15, 2020

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It is perhaps reflective of current investment thinking that a person with almost two decades at a hedge fund is now leading a family offices practice at Verdence, the US RIA.

A Maryland-based wealth management house says it has identified two problems faced by ultra-high net worth families.

Verdence Capital Advisors told Family Wealth Report that it reckons UHNW clients have two “bookended problems": Individual families who are personally managing the complexities of significant wealth - with disparate accounts, financial and tax strategies, and a multitude of service professionals to govern - and families who manage the burden of a single-family office unnecessarily and are not receiving a shared cost structure, access to unique investment strategies and have multiple layers of financial, tax and legal advice.

“Our focus will be to identify and educate both. Whether they ultimately choose our multi-family team or not, educating UHNW individuals of the game-changing options available to them is an important part of the work we do,” the firm, which also has offices in Alexandria, Virginia and Los Angeles in California, said.

Untying the knots of families’ wealth - a sort of ongoing project management function - is for some a pretty good description of what family offices are set up for. 

Verdence recently appointed Mike Harris to lead its multi-family office division. He came over after spending almost two decades at Campbell & Company LP, a multi-billion-dollar hedge fund where he was most recently its president. That a person with a strong background in alternative investment took up a family offices role demonstrates the close connections. (The connections can be even stronger when one considers how many hedge fund firms have reinvented themselves as family offices, although this has been largely to avoid regulations on firms running non-family money.)

The firm, which has fewer than 1,000 clients (it does not disclose exact numbers) talked to FWR recently about issues associated with alternative investments such as private equity, a subject that remains hot as clients seek the illiquidity premium from private market assets when conventional equity yields have been squeezed. 

And Verdence argues that the Security & Exchange Commission’s recent adjustment to its “accredited investor” regime, potentially widening some access to otherwise hard-to-enter alternative assets, was overall a good move. 

“The SEC’s recent decision to widen the term “accredited investor” is a step in the right direction to enable more investors to be able to benefit from the same opportunities in alternative investments that our high net worth clients already enjoy,” the firm said.  

The business has operated as an independent RIA since July 2017 under its present name. The original firm started as The Kelly Group within Merrill Lynch; then it became Kelly Wealth Management, an RIA within Hightower.

The business says it targets family office clients and is fee-only, with no commissions, soft dollars or sponsorship. Its ideal traditional private client has $5 million or more in wealth and as far as MFO clients are concerned, it seeks those with $35 million or above.

In the DNA
“Alternative investments is part of the conversations we are having with clients. The higher net worth, the more likely that conversations are going to be two-way….they [clients] bring us deals and we can talk about them,” Leo Kelly, chief executive, told FWR. 

“The higher net worth, the more likely that conversations are going to be two-way….they [clients] bring us deals and we can talk about them. With family offices and UHNW clients, it is normal for clients to contact us and say they’d like to invest in this or that…..and ask what we think,” he said. “Our presence in the private equity world is evolving and it is part of our DNA.”

Trying to time markets, whether in public or private markets, is typically a pointless exercise, Kelly continued. “I always push back against the question `is now a good time to get into private equity’? “The answer is always `yes’. The point is what private equity.”

Kelly added that now is a “great time” to invest in distressed debt and mezzanine funds, given the stresses that a number of firms are under amid the pandemic.

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