Mariner sails as asset manager on the lookout for acquisitions

While he's too modest to boast about being a successful entrepreneur, Marty Bicknell is the first to admit that he's a poor prognosticator. When he and three other brokers and four support staff members left A.G. Edwards & Co. in May 2006 to create Mariner Wealth Advisors, he had no inkling that a financial meltdown was on the horizon or that his Leawood, Kan.-based retail-advisory firm would end up as a hybrid institutional/retail money manager. But fewer than five years after it opened, Mr. Bicknell's holding company, Mariner Holdings LLC, has grown to 270 employees and $9 billion in assets — with close to $7 billion of that coming from its fast-growing, institutionally oriented Montage Asset Management unit. “If I knew about the debacle of 2008, I probably wouldn't have done it,” Mr. Bicknell said about starting the firm. His goal at the time was to create a “quasi-family-office-type” service for wealthy clients. That's an area he knows well. His father, Gene Bicknell, founded the largest franchisee of Pizza Hut, National Pizza Co., which was sold to Merrill Lynch & Co. Inc. in 2006 for a reported $615 million. While Mr. Bicknell has been active in managing his family's assets, he said that the sale of the family business and the founding of Mariner were unrelated. “No one believes me when I say this, but it was absolutely a coincidence,” he said. The sale did propel his plans to go independent, though. Majority owned by Mr. Bicknell through his family holding company, Mariner Holdings has been self-financed with personal money, Mr. Bicknell said. Future acquisitions can be self-financed out of profits. Heading up the asset management business is Gary Henson, a former institutional money manager who joined in 2007 from the Kansas Farm Bureau. Mr. Henson is president of Mariner Holdings and chief investment officer of both Montage and Mariner Wealth Advisors. Mr. Bicknell runs wealth management as chief executive of Mariner Wealth Advisors. Montage has “a lot of lift-outs” from other firms, Mr. Bicknell said, including Scott Moore, chief investment officer of affiliate Nuance Investments LLC, a value manager, who joined about two years ago after a decade as portfolio manager at American Century Investments.

BIG BET ON MLPS

In 2009, Mariner made its most important acquisition to date: a majority stake in Tortoise Capital Advisors LLC, a manager of master limited partnerships. At the time, Tortoise managed $1.5 billion; it recently crossed $6.2 billion in assets, Mr. Bicknell said. In October, Tortoise came out with the second-largest MLP closed-end fund in history, raising $1.2 billion for the Tortoise MLP Fund Ticker:(NTG). Demand has been driven by investors and advisers hungry for yield. Tortoise has a “core competency built around energy infrastructure MLPs,” said Mike Taggart, a closed-end-fund strategist for Morningstar Inc. “These [Tortoise] guys have it down pretty good.” Mr. Bicknell acknowledged that he's bet heavily on MLPs. “If MLPs fall out of favor, we could lose billions in assets,” he said. One danger sign is that competitors have come out with similar offerings, Mr. Taggart said. The MLP fund market “is close to being oversaturated” Mr. Bicknell said. “There is probably a capacity issue at some point.” If MLPs cool, Montage is positioned in a number of other asset classes. In addition to Tortoise and Nuance, it owns Ascent Investment Partners LLC (fixed income), Convergence Investment Partners LLC (a quant shop), Mariner Real Estate Management LLC, Tactical Allocation Strategies Inc. (quantitative ETF manager) and two alternatives managers, Palmer Square Capital Management LLC and 440 Investment Group LLC. Like Tortoise, these units' offerings are distributed through other advisers as well as to Mariner clients. Mariner follows an open-architecture approach for clients, Mr. Bicknell said. Clients do own Tortoise MLP funds and a distressed-real-estate-loan fund “simply because there are no other options” for gaining exposure to those areas. The success of Tortoise aside, Mr. Bicknell hasn't forgotten about the wealth management business, which he points out is more stable than asset management. Mariner Advisors' 16 “client-facing advisers” serve on nine teams, Mr. Bicknell said. Each team includes a junior wealth adviser and a client service person, and handles about 100 client relationships. The Wall Street debacle has helped the firm land talent from A.G. Edwards, Wells Fargo, UBS and Smith Barney, as well as from accounting firms. Mariner has separate business development professionals who bring in relationships for the teams. Clients appreciate the division of labor, he said, adding that “from a retention and client satisfaction standpoint, it's off the charts.” In January, Mariner made its first acquisition in the wealth management space, buying the $357 million retail-advisory business of CBiz Inc., which provides accounting and other services to businesses. The purchase added another two dozen advisers and professionals working from CBiz offices in Denver, Kansas City, Kan., Los Angeles, New York, Philadelphia, San Diego and Cumberland, Md. Mr. Bicknell said he's looking for more wealth management acquisition possibilities, though he would not go into details. Gene Diederich, the former director of branches at A.G. Edwards who put Mr. Bicknell in charge of a branch office in Overland Park, Kan., would not be surprised at further expansion. “We'll read about him in the headlines,” said Mr. Diederich, now chief executive of the Moneta Group LLC, a wealth management firm. “I've never known anybody with a higher energy level and a harder work ethic.” For his part, Mr. Bicknell said he learned a lot during his 16 years under the late Ben Edwards III, former chief executive of A.G. Edwards. “Ben is the gentlemen who taught me everything I know.” Mr. Edwards, who died in April 2009 at 77, often irked securities analysts and shareholders by insisting that clients' interests came before shareholder profits. E-mail Dan Jamieson at djamieson@investmentnews.com.