First Western Financial Inc. of Denver plans to continue buying small investment advisers in Colorado, California, and Arizona as part of its plan to double revenue and assets under management again this year.
Last week the private banking firm bought the investment manager GKM Advisers LLC of Westwood, Calif. — its third acquisition in California and seventh overall since its launch in 2004.
Scott Wylie, First Western's chairman and chief executive, said that it doubled its revenue and assets under management in 2008, to $2.1 billion, and that the numbers for the first four months of 2009 have him confident it can top $4 billion by the end of the year.
"We have a dedicated acquisition team and we are working on opportunities in Arizona, Colorado and California because that is where a lot of wealth is concentrated," he said in an interview last week. "I'd say in the next six months we will be announcing transactions in each of those states. There are opportunities in Colorado, three in Arizona, and in California there are things in Southern California and a couple in Northern California that are interesting. We have plenty of deals to keep us busy for the rest of the year."
The company's approach is to buy small registered investment advisory firms in a wealthy metropolitan region and then expand organically, Wylie said.
"I know it sounds like a roll-up strategy, but we are really targeting locations to start new, boutique private bank and trust companies," he said. "We want to find RIAs that fit well with us and use them and their relationships to give us a head start in a new region. Their executives will be the core of our investment team and they will hire in that area."
Wylie said that when he introduced the strategy to First Western's board of directors, he said he wanted to focus on expanding in the 10 largest cities in the West — Denver, Houston, Dallas, Austin, Phoenix, San Diego, San Francisco, Los Angeles, Portland and Seattle. So when his first acquisition, in 2004, was an investment adviser in Fort Collins, Colo., the board was "surprised," he said.
Wylie, who was the chairman and CEO of Northern Trust Bank of Colorado, a unit of Chicago's Northern Trust Corp., before First Western hired him in 2004, said First Western learned in Fort Collins that "there was a lot of wealth in smaller markets." Within a year it converted the Fort Collins investment firm into a full-service private bank. "We realized this was a major opportunity," Wylie said. "We started to look to find other Fort Collins in the western half of the United States, and we found that there were 46. Now our strategy is to use those 10 major cities as hubs and find the Fort Collins around them."
First Western has nine private banking and trust offices — five in Colorado, one in Arizona and three in California. In the Los Angeles area First Western has bought RIAs in Century City and, now, Westwood. In keeping with First Western's approach, GKM, which had $353 million of assets under management at the time of the acquisition, will adopt the First Western name, and its staff will be retained.
"Our model is to open in a location where we can make that office a $250 million bank and a $1 billion money manager within an eight-year period," Wylie said. "We have learned a lot in our first nine locations. There is certainly a pattern and we have key strategies about how to grow in areas with a lot of wealth concentration."
First Western targets households liquid net worth of more than $1 million. He said it typically targets first-generation wealth that is "relationship-oriented."
In November, First Western opened a start-up private banking and trust branch in Scottsdale, Ariz. Wylie said the company tried to acquire in the area but could not find the right fit. He said it hopes to buy an investment advisory firm in Arizona in the next six months.
