When Richard Bryant and Bobby Edgerton converse, folks often wonder why they call each other “group.”
It seems that when they started Capital Investment Group in Raleigh in 1984, the group included two people. The inside joke has become a trademark that reflects a sense of humor and confidence that has undergirded the duo’s efforts for 40 years.
The “group” now includes about 175 brokers and assistants in 12 states, managing nearly $8 billion of client assets. Bryant is among the longest-serving CEOS of any U.S. broker-dealer company.
Capital’s story revolves around the unconventional partnership of Bryant and Edgerton, who are two of Raleigh’s more colorful business people. The brokerage’s growth accelerated after Ben Brooks, a fraternity brother of Bryant’s, joined in 2001, when the business had more than $2 billion in assets under management. He became president in 2016.
“Bobby is one of the best stock pickers I’ve ever seen,” Brooks says. “And Richard is one of the most charismatic personalities you will ever meet. I try to be the glue that holds it together. Without some connectivity, it will never work.”
Nobody is more surprised by the private company’s success than Bryant himself. He grew up in Gastonia, where his father Harry ran Bryant Supply, an industrial parts distributorship that was among the state’s largest private companies for many years. He attended a local private school, then graduated from NC State in 1981.
He joined the family business, expecting to spend his life in Gaston County.
About a year later, he concluded selling parts and working with his father and two brothers didn’t fit his personality. So he moved back to Raleigh without a job. “I didn’t want to live the same life as my dad,” he says. “I thought the business was boring.” Maybe boring, but successful. A Dutch company, Hagemeyer, bought Bryant Supply in 2007.
Knowing that he could sell, and having majored in business, Bryant looked for work managing other people’s money. An initial rejection came from Interstate Securities, where he bombed the hiring test. That was embarrassing because of his family’s connections with several top brokers at the Charlotte-based company.
But First Jersey Securities hired him, and he spent a month there before concluding the business was bad news. He wasn’t alone in that perception. The fast-growing brokerage gained notoriety for its “boiler-room” approach and focus on mostly worthless penny stocks. Jersey Securities went bankrupt in 1987 and its founder went to prison for fraud.
But the one month gained Bryant enough credibility to get a job at the Raleigh office of Prudential Bache Securities, a national firm with a stronger reputation. The brokerage sent him for three weeks of training in New York City, which opened Bryant’s eyes to the industry’s potential. Pru-Bache’s emphasis on selling initial-public-offering stocks quickly soured Bryant, however, so he found himself at a crossroads.
At age 24, with nothing to lose, he left to start his own company, hoping his 30 or so clients, developed mostly through cold calling, would follow him. He enlisted the help of Dan Bell, who was the state’s chief securities industry regulator for much of the 1980s. He now practices law at the Kilpatrick Townsend and Stockton firm.
“It was extremely rare for a business person to come into our office and seek help starting a firm,” says Bell, who has remained a friend of Bryant. “People just didn’t do that because it is such a highly regulated industry. It was usually lawyers, but never the actual business owners.”
At the time, Bryant started talking about a partnership with Edgerton, who was then in his early 40s. Edgerton says he’d met Bryant “while we were out trolling, which I’ve done a lot in my life.” Indeed, the Raleigh bachelor has led an interesting life. In 1984, he was selling shoes for his family’s business inside a Nowell’s Clothiers store, playing lots of amateur golf tournaments and enjoying the capital city’s nightlife, the trolling thing.
But Edgerton’s greatest passion was picking undervalued stocks, mostly ones with little debt and lots of cash. He was then managing about $6 million for clients, earning about $44,000 in annual fees, he says. At a meeting at the TK Tripps’ restaurant near Meredith College, Edgerton agreed to merge his company with his younger friend. “I needed some compliance help. So I told Richard I’d split the management fees and see if we wanted to hang together.”
Bryant says he figured “we’d know within three years if the company would work. It helped that we were so young and we lived very cheaply.” The two leased a small north Raleigh office. Bell, whose mother had hired Edgerton to manage her money, met him there and was surprised to learn he’d joined with Bryant to start Capital.
With Edgerton’s investment skills and Bryant’s tenacity in attracting clients, the business clicked. While building his own clientele, Bryant started looking for brokers who wanted a less pressured environment than the largest investment firms.
It was an audacious strategy for a young, inexperienced guy, but showcased an entrepreneurial style, Bell says. “Most of the companies he was facing back then have all been gobbled up, while he’s one of the largest independent operators in the whole region.”
Merrill Lynch, Dean Witter and other so-called wirehouses had well-known brands and size-related marketing advantages, so Bryant’s pitch was basic. Capital’s brokers could keep as much as 90% of their commissions. At the time, the brokers’ cut was typically 30% to 40%.
Bryant earned an early lesson when he hired a fraternity brother as a Capital employee in the Washington, D.C. area, setting him up in an office. The broker had personal problems and failed at the business, leaving Bryant stuck with a lengthy real estate lease. The incident cost him about $7,000 overall. “It seemed like a lot of money at the time, but my father told me that would be a very inexpensive lesson over the long term,” he recalls.
Ever since, Capital has employed its brokers as independent contractors, among the first in the industry to use an approach that is now commonplace in the registered investment adviser industry. The approach attracts self-starters who want to build their own business, not work for a paycheck, Bryant says. “You’ve really got to believe in yourself.”
CLICKING HEELS
Among his recruits was Lonnie Waggoner, who was working for a larger brokerage in Charlotte’s SouthPark neighborhood in 1990. “Lonnie told me that when I left his house after he agreed to join Capital, he saw me clicking my heels. Which is true.” Waggoner stayed for 30 years before retiring.
Capital also benefited by creating other revenue sources. Bryant hired Bill Nicholson to lead the company’s insurance affiliate, which sells annuities and other products that have made up as much as 40% of revenue in some years. The UNC Chapel Hill graduate has worked at the company for nearly 30 years, serving as co-general agent of Capital Insurance Affiliates.
Capital has also managed the trust departments of some community banks in North Carolina over the years.
But the core business comes from brokers hired gradually over the years to fit Bryant’s model of one- or two-person offices in North Carolina and other East Coast states. Capital’s brokers operate from Massachusetts to Florida and the average tenure is more than 15 years. Only about one or two leave every year, mostly due to retirements, Brooks says.
Edgerton’s role in helping Capital grow also proved critical. There’s a reason he still manages 630 accounts; One won’t find someone who talks more enthusiastically about the stock picking process, Brooks notes.
Indeed, Edgerton is full of stories about buying Nvidia for a current cost basis of 27 cents; the shares now trade for $115. “I thought [CEO] Jensen Huang was an exceptionally smart, nice guy who owned the videogame chip market worldwide, and who never criticized his competition,” Edgerton says.
Or there’s Costco, which Edgerton says he started buying when it was trading for $40 on a split-adjusted basis. It now trades for about $920 in mid-September.
Edgerton, who turns 83 in October, still plays lots of tennis and golf at Carolina Country Club, and loves to mingle with hipsters at Tazza Kitchen in the Cameron Village shopping center. “For some reason, those 21 and 22-year-olds all like me,” he says. “I finished Wake Forest (University), but I don’t go back to those reunions. Half of my classmates are dead and the rest are married. They keep guys like me away because I’ve chased more women than most people in history.”
MAIN STREET AMERICA
Capital is unusual among investment companies in its focus on middle-income customers, Brooks says. The average client account is about $300,000, which tends to be less than some of the largest investment firms.
The company had about 200 brokers when Brooks became president; that number has declined because the company is trending toward having fewer brokers with more money under management, he says.
Recruiting brokers is challenging because the larger firms are offering huge upfront bonuses to lure successful candidates, Bryant says. “The market is too frothy right now. But I believe in inching the ball forward every day.”
The industry trend is for wealth management, in which advisers are compensated with a fee based on the amount of assets managed, rather than per transaction. Capital’s revenue is now split fairly evenly between the two styles. Hoping to attract more wealth managers, Capital hired veteran Wells Fargo executive Steve McKenzie. After about two years, he departed earlier this year to join Comerica, a Dallas-based regional bank.
Capital’s basic approach won’t change, Brooks says. “Most other companies target upper-class clients. We are perfect for Main Street America.”
The key to long-term success is to treat the brokers so well that they stick around, Bryant says. “If you treat people correctly, why would they leave?” ■
