Fielding Miller makes Captrust a powerhouse
By Dan Barkin
Fielding Miller was manager of a bank branch, his first job out of college, and he wanted to make some extra money. So he started buying houses in Fayetteville for rental income. Nights and weekends, he’d fix them up, paint them, put in appliances. At the same time, he and his wife put their condo on the market because their first child was on the way and they had a buyer. They then bought a house in North Raleigh.
Disaster struck. All the rental houses became vacant, a risk faced by landlords when deployment orders come in a military town. The condo sale fell through.
It got worse. His wife’s employer hadn’t paid its staff’s health insurance premiums. “So, I’ve got a pregnant wife with no insurance, and I’ve got five mortgages. And I was making about $18,000 a year. That’s when I became a stockbroker … needing to make a lot more money to get out of trouble,” Miller says.
The near-bankruptcy at 25 turned out to be good fortune. In his first two years with Charlotte-based brokerage Interstate/Johnson Lane Inc., Miller became one of the company’s most successful young salesmen. His continued success would help him create, with other top Interstate advisers, a different kind of financial-services company that got paid based on annual fees rather than trading commissions. Captrust Financial Advisors opened in 1996, targeting companies and institutions wrestling with then-newfangled retirement plans called 401(k)s.
Today, Captrust is one of the largest independent U.S. wealth-management and institutional-investment advisory firms, with about 470 employees in 37 locations nationally, including Charlotte, Greensboro and Raleigh. It advises on more than $278 billion in client assets.
It’s also a homegrown Raleigh success story with 33 acquisitions since 2006. Revenue increased 24% last year to more than $100 million. At the end of 2017, 267 employees had ownership stakes and benefited from a compound annual return averaging 25% since 2004.
Miller, 57, “got the big decisions right” that have been necessary for Captrust to excel, says Wilson Hoyle III, a managing director who joined the company in the mid-’90s. “And he was tough enough to stay disciplined and not get distracted by other business lines or ideas that came in front of us.”
Miller learned about discipline while growing up in Lenoir. His father, Wayne, a World War II veteran, was a furniture executive who also served as a city councilman and United Way chairman. But he wasn’t an entrepreneur. “He thought more about safety and security than entrepreneurship, which came from my mother’s side,” recalls Miller. Her father was a school principal who started an insurance agency at age 50 and developed real estate.
Miller’s father was more interested in ensuring his three children understood the importance of education. He got Fielding a summer job on a loading dock, muscling furniture out of train cars and trucks.
“It was a brutal job,” Miller says. The message: “If you don’t go to college, this is what you’re going to be doing.”
Miller applied to one school, East Carolina University, joining a few friends and to “kind of get away from Lenoir.” Many Caldwell County high-school graduates land at Appalachian State University, which is 30 miles north.
At ECU he met his future wife, Kim, who was from Raleigh and also a business major. After graduation, Miller worked as a branch manager for Bank of America predecessor NCNB for 2 1/2 years. In 1986, following his harrowing experience in the real-estate market, he landed a job in Raleigh with Charlotte-based Interstate Securities Corp., which was then the largest independent securities firm based in North Carolina. It was tough work, the white-collar equivalent of unloading furniture.
“If you are willing to really, really work — and I’m talking nights and weekends, for three to five years — you can break through, and you can have a great career,” Miller says. “But it’s just so hard to break in, especially if you’re young. But I had no choice. I mean, I had five mortgages.”
He got off to a fast start. Within a year, he had dug out of his financial hole, and by 1988, he was recognized by a securities-industry publication as one of its “rookies of the year.”
Though successful, Miller says he was increasingly uncomfortable with charging commissions for each trade. Were brokers buying and selling stocks because it was right for the clients, or because it was the last week of the month?
He heard about firms providing advisory work for a flat fee, which struck Miller as a more sensible approach. So he gained his supervisors’ support to charge based on clients’ account holdings. His effort failed. “I just couldn’t get any traction. Wealth management, private clients didn’t really care. They didn’t really see it.”
But many folks in charge of retirement plans understood the need for a different approach. Company owners offering pension, profit-sharing and, increasingly, 401(k) plans had a problem. They weren’t experts at evaluating investment options, or handling the increasing regulatory paperwork, or executing mundane but critical tasks such as signing up employees.
“This is where Fielding really saw the bright light,” says Kel Normann, a longtime friend who runs a wealth-management firm in Sanford. “Fielding said, ‘You know what, I’m going to act as a consultant, and [he started] calling on retirement plans across the Southeast.”
Joined by Interstate colleague David Perkins, Miller says he could negotiate better deals with money managers and record-keepers than employers. It helped that the retirement market was shifting from traditional pension plans, which required hefty corporate contributions, in favor of 401(k)s, which put more of the investment decision-making onus on individuals. Such accounts now total more than $4.5 trillion in assets.
Miller’s strategy wasn’t complicated. Retirement plans file reams of paper with the federal government, exposing great detail on how much money is in the plans and who manages them. He and Perkins mined that information, then targeted smaller companies — a construction business, a community bank, a mid-sized hospital. The challenge was persuading prospects who were entrusted with the care of their employees’ retirement accounts, Perkins says.
“I set some appointments up for [Miller] on a Friday, and he calls me late in the day. He says, ‘Perkins, you’re not going to believe it. First appointment is like 8 o’clock. Guy’s a no-show. Second appointment, guy’s not interested, and I find that out pretty quick.
‘Backing up, it’s raining, ran into a telephone pole, dented my car. My next appointment is at 2 o’clock. Nothing.
‘And my last appointment, I’m just going to drive on. But I didn’t. I went on to the appointment.’”
That last call proved successful with a client who saw the benefit. “I hit the jackpot,” Perkins recalls Miller saying.
Refusing to give up was the secret to their growing success. Even with a dented car.
Also crucial was support from their bosses at what was now Interstate/Johnson Lane after the N.C. company’s purchase of a Savannah, Ga.-based brokerage in 1988.
In 1990, about four years into his tenure at Interstate, Miller was ready for a change, namely grabbing a bigger percentage of fees generated by his work and shifting away from a reliance on trading. Jim Morgan, a former chief investment officer at Interstate who had departed to run his own firm, returned as president that fall. “Things weren’t going well,” Morgan says. He recalls Miller’s comment that he and others were “a good portion of the way out the door” because of their dissatisfaction with the firm’s direction.
Morgan asked Miller to come to Charlotte for several months and help develop new ideas and a structure to make Interstate/Johnson Lane successful. If, after a year, Miller still wanted to leave, Morgan would help him get a good deal somewhere else.
Miller and Perkins stuck around, gaining an opportunity to learn from Morgan about the importance of teamwork and a unified mission. “It was all culture,” Miller says. “[Morgan] got people working together, pulling for each other, having some pride in the business.”
The efforts were so successful that the brokerage became a prize. In 1999, Wachovia Corp. paid $230 million for Interstate, part of a consolidation wave transforming the financial-services industry. Banks wanted fee income from wealth management, while brokerages often lacked the capital to compete with much bigger rivals.
By then, Miller and Perkins were managing more than $150 million in client assets ($227 million in 2018, adjusted for inflation) and had moved to a newly created division, Captrust. Two years later, Charlotte-based First Union Corp. bought Wachovia, creating a megabank that had little appeal to the entrepreneurial Miller. It became clear that Captrust needed to be on its own. In 2002, Captrust parted ways with its parent company, which was then preoccupied with its big merger. Little money changed hands in the process.
Entrepreneurship often means operating without a net, with no big bank account back at the home office. That was the story for Captrust in the early 2000s. “We were scared to death,” Perkins recalls.
Then Captrust got a boost from, of all places, the government. “What really was the catalyst for it to accelerate is in 2002, you had Sarbanes-Oxley as the result of [the Enron accounting scandal] and all of the shenanigans that went on with corporate America,” Miller says. The federal law required senior managers to take personal responsibility for much of what was happening at their institutions, including having sufficient checks in place to spot illegalities and stem excessive market losses. Companies now faced lots of liability in their handling of employees’ retirement accounts.
“Sarbanes-Oxley said you had to have a third-party adviser to help you through the process,” Miller says. “All of a sudden, firms like us were in huge demand.” By 2007, a decade after the duo joined Captrust, it was overseeing $19 billion.
Soon after Captrust became independent, Perkins departed to help start a hedge fund focused on alternative investments called Hatteras Investment Partners. Miller bought out Perkins’ interest in Captrust, and Perkins bought out his partner’s share of Hatteras. Perkins led Hatteras until selling the business to New York-based Realty Capital Securities for $40 million in 2014. He and several others repurchased the business a year later for about $5.5 million after an accounting scandal caused upheaval at Realty’s parent company. The Raleigh-based company is now called Hatteras Funds.
Miller faced a big decision: Was Captrust going to be a small advisory shop or something more? He answered that question by unveiling a 10-year plan in 2006. Annual revenue then totaled $14 million. Miller set a goal of $100 million, with much of the growth through acquisitions. He wanted to do it deliberately, buying partners interested in expanding their businesses serving similar types of clients rather than seeking a quick payout. Sellers needed to take at least 50% of the payment in Captrust stock.
Miller’s pitch to prospects was simple: Too much of their time was consumed running a business. “All these things you’ve got to do that have nothing to do with being a financial adviser. So, when we acquire them, we take all that stuff off of them, which frees them up to provide advice to more people.”
In every year since 2006, Captrust acquired one to three firms. In 2017, it bought seven. “They’ve done it without private equity,” says David DeVoe, a wealth-management industry consultant based in San Francisco. “Very rare.” Miller also took on little debt, remembering his early career experience of too much leverage. Since its early days, Captrust has reinvested half of its annual profit into growth opportunities.
The cautious approach served Captrust well during the financial crisis of 2007-09, which capsized many banks and financial-services companies. “I told everybody in the firm they had a job; you’re going to read a lot about layoffs and things like that. Everybody’s got a seat. Nobody’s getting a bonus, but you’ve got a seat.”
Miller’s calm was not lost on employees, Hoyle says. “You can get a lot of rah-rah speeches from various leaders, but when adversity hits, you see what they’re made of.”
In 2009, when many companies were hunkered down, Captrust moved into the top two floors of a new 17-story building adjacent to the Raleigh Beltline that bears the company’s name. “Our earnings went to zippo for the first six months of ’09, and then they started coming back,” Miller says. “Our revenues are asset-based,” and when assets are worth less, “that comes right off the bottom line.” Still, the company added 19 employees during the recession.
In 2016, Miller set a new 10-year goal of being in the largest 35 markets and increasing Captrust’s market value to $1 billion. Two years into the 10-year plan, Captrust is in 19 big markets and is valued at about $400 million.
DeVoe says Captrust can hit those targets because it has an experienced acquisition team and a technology platform that is attractive to many smaller advisers. The registered investment adviser industry is “hyper-fragmented” with 10,000 firms, he says.
Some opportunities will be in distant markets. Some will be much closer. Either way, Captrust moves quickly when finding a match.
That was the case with Greensboro’s Steve Morton, whose firm manages $400 million in assets for high-net worth clients. Last winter, he was having lunch with a friend whose son was interning at Captrust.
“My friend, just in passing, said, ‘I grew up with a guy that works there.’” If Morton was interested in learning about the company, he could set up a meeting.
Morton set a date for visiting the Captrust office in Raleigh. When he showed up, he discovered “the guy” was CEO Fielding Miller. “He gave me a card, and my jaw hit the floor and I’m like, ‘oh.’”
In September, Morton Wealth Management became Captrust’s 30th acquisition, adding three advisers in Greensboro to a roster of 34 in Raleigh and nine in Charlotte.
Morton says he was impressed by Captrust’s infrastructure and the freedom provided by the system. “You keep doing what you do, what you’re good at, and we take all that administrative stuff. … I’m like, ‘Oh my God, I can just go back to being a financial planner again. Where do I sign?’”
True to Captrust’s style, Morton had a choice of taking as much as 50% of the sales price in cash. “I took all equity,” he says. “I didn’t take anything off the table at all. I’m all in on this Captrust thing.”
One of Fielding Miller’s favored philanthropies is Hope Reins, a 33-acre ranch about 30 miles north of Raleigh that matches rescued horses with children suffering from chronic illness or emotional crisis. His interest in the nonprofit grew out of the loss of one of Kim and Fielding Miller’s two daughters, Cameron, from substance abuse in 2016.
She was a talented graphic designer who suffered from depression beginning in her late teens, which led to addiction, Miller says. “She was an awesome kid,” he says. Despite years of rehabilitation and counseling, “it just overwhelmed her.”
Hope Reins was started in north Raleigh in 2009 by Kim Tschirret, who grew up with an alcoholic father and found refuge in a horse during her childhood. The nonprofit moved a couple of miles north to its current location in 2015 and now houses about 15 horses, has nine full-time employees and had revenue of $1.1 million last year.
The Millers view Hope Reins as a way to help other children facing similar struggles.
“It’s powerful,” Miller says. “They take broken horses and broken kids and put them together, and they both come away healed.” In his daughter’s memory, the ranch includes Cameron’s Arena.
East Carolina University has also benefited from Miller’s success. He gave his alma mater $5 million in 2015, leading to a new School of Entrepreneurship within ECU’s College of Business. Separately, he organized the Captrust Community Foundation with a goal of giving away $10 million to charities that serve children.