NewEdge opens Minnesota by hiring a $1.25 billion UBS team

James Shafer joined UBS in 2005 and spent the next two decades building a practice in Wayzata, the lakefront town west of Minneapolis, until it oversaw $1.25 billion in client assets under the name Shafer Block Wealth Management. This week he and seven colleagues left the wirehouse for NewEdge Wealth, which will base them in its first Minnesota office, its 22nd location nationally, and hand them the job of opening the Midwest for a firm whose existing addresses include New York, Chicago and San Francisco.

The roster says as much about the move as the number does. Shafer arrives as a managing director with Michael Block, a principal who followed him to UBS in 2011, alongside him, while Joseph Gossett, Pamela Smith and Rachelle Carlson-Oien come over as vice presidents and three support staff fill out a party of eight. Five client-facing names plus the service bench beneath them is the shape of an office changing platforms rather than a producer changing employers.

What a client experiences in a team move explains the headcount: when principals and their service bench leave together, the people clients call do not change and there is no handoff between one firm's service model and another's. A move that leaves the bench behind changes both, and that is the harder problem for a competing platform to fix later. The count of eight is a statement about continuity as much as capacity.

In the announcement, Rob Sechan, founder and managing partner of NewEdge Capital Group, made the case: "For decades, this team has worked closely with affluent communities around the Minneapolis area to mitigate risk, preserve wealth, manage cash flow and identify tax-efficient oversight." Those four functions are a compact description of what a mature advisory practice does all day, and the team's experience, per the same announcement, runs to wealth transfer, multi-generational wealth and planning related to substantial wealth. That is the business NewEdge Wealth exists to bill for, as the ultra-high-net-worth channel of NewEdge Capital Group based in Stamford, Connecticut, sitting alongside NewEdge Wealth Advisors, an RIA partnership platform for both 1099 contractors and W-2 employees.

Shafer's own explanation is shorter. "As Wayzata grew, so did our firm, and we needed a partner who could provide the technology, support and investment options to support our next phase of growth." Technology, support, investment options: the wording points at a platform ceiling rather than a payout dispute, an inference the announcement invites without confirming, and the distinction matters because a team that leaves over the grid and a team that leaves over what it cannot build ask a new firm for very different things.

Wayzata is the newest piece of a map NewEdge has acquired by hiring. In August the firm opened its 20th office, in Houston, around a team formerly with AllianceBernstein's Bernstein Private Wealth Management that had overseen $2.2 billion in client assets, and the same run of announcements brought four wealth managers to a Fort Lauderdale location, the firm's fourth in Florida. Recruiting has likewise carried the firm into Tennessee, Georgia and New Albany, Ohio, and it now counts more than 70 advisors across 20 locations with New York, Chicago and San Francisco among them. Houston was number 20 and Wayzata is number 22; the announcements do not identify the office in between.

Read the three markets together and the recruiting target is broader than the wirehouses: across a single stretch of announcements NewEdge pulled a team out of a wirehouse, a team out of an asset manager's private wealth arm and four advisors out of a bank's private bank, which suggests the platform's pitch travels across all three venues.

The Fort Lauderdale build deserves a second look, because all four hires — Paul Yates, Alexandra Escobedo, Trace Shapiro and Michael Wohlgemuth — list Bank of America's private bank among their previous employers. Two flavors of recruiting, then, and no acquisition in either case: a single transplanted team in Minnesota, a four-advisor pull from one institution in Florida. Buying a Minnesota RIA would bring clients, staff, systems and the work of merging all three; hiring a team brings the client relationships and pays for them out of the revenue those relationships generate. The trade is cheaper at the front and more fragile at the back. In a liftout the geography lasts exactly as long as the people do.

Compensation grids stay private and acquisition multiples rarely see daylight, but a liftout is a public act: a $1.25 billion book changed addresses, and the whole market can see it. A firm that keeps announcing liftouts is telling the industry where the capital for talent is going, and NewEdge has now said it in Texas, Ohio, Florida, Georgia, Tennessee and Minnesota.

NewEdge Wealth's registered assets sit just under $20 billion, by PWD's count, which sets the size of the bet: a $1.25 billion practice is a little over 6 percent of the platform arriving in one move, and the unit of expansion here is not a hundred small hires but roughly one billion-dollar team per new market. Houston, at $2.2 billion, does the same arithmetic at twice the size, and it is the larger of the two books the recent announcements put a number on.

The assets are the easy part to count; Sechan's statement points at what does not show up on a balance sheet — decades of relationships with the affluent communities around Minneapolis and the referral habits that come with them. That service list, risk, preservation, cash flow, tax oversight, is delivered by people rather than products, which is why a platform can recruit the delivery and not merely the demand. A wirehouse can restaff a branch in Wayzata, and there is every commercial reason to try, but what it cannot do quickly is reproduce a set of names that clients in the Minneapolis area have been calling since 2005. The client ties are why the new office can open with business on day one, and they are the capital NewEdge actually purchased.

Anchor is the word Sechan chose, and it fits a firm that expands this way: the first team in a market carries the brand risk, opens the office, staffs it and gives the platform its first local reference, while the next hires inherit that credibility. The sequence has already run in Florida, where NewEdge now has four offices, and in Ohio, where New Albany appears on a recruiting-driven expansion list that also includes Tennessee and Georgia. The logic compounds, since each new city gives the next recruiting conversation a local address to point at.

What NewEdge acquired in Wayzata is eight people, three of them support staff whose client relationships carry as much weight as the principals', and that makes the durability of the Minnesota office identical to the durability of the team inside it. If retention holds, the firm has a Midwest anchor and a template it has now run in Texas, Florida and Ohio; if it does not, it has a lease in Wayzata and a recruiting expense. Every expansion built on liftouts carries that condition, and NewEdge has taken it into the one market where it has no other footprint to fall back on.

The strategic case for hiring rather than buying is not complicated: a liftout is paid out of future revenue, an acquisition is paid up front and in full, and only one of those two bills can walk out the door later. NewEdge appears to have decided the walkout risk is worth the cheaper entry, and Minnesota will be the cleanest test the firm has run of that proposition because there is no legacy business in the state to absorb a bad outcome.

What UBS loses is a $1.25 billion book and the local franchise that produced it; the coverage does not say how the wirehouse's Minneapolis business looks now. NewEdge's next new market will arrive the same way this one did, as a team with a book attached, or it will arrive as a purchase, and the answer will say something about which side of the recruiting market is currently setting terms. The three support staff who moved with the principals are what let the Wayzata office open with clients already served, and they are the piece of this that UBS cannot refill with a single hire.