Perhaps it’s a coincidence that four key people involved in the rapid growth of Raleigh’s Captrust financial services company hail from small North Carolina towns. But these guys don’t think so.
Fielding Miller, Wilson Hoyle and Ben Goldstein say spending their youth in Lenoir, Henderson and Windsor, respectively, has a lot to do with Captrust’s success. So does Jim Burr, a native of unincorporated Lucia in Gaston County who is now a managing director at Carlyle Group, a giant private-equity group that bought a stake in Captrust last year.
We’ll share details on how the company’s valuation has soared to the multi-billion dollar range, with its payroll tripling to more than 1,600 over the past five years. Captrust is profiting from increased demand for corporate-sponsored 401(Ks) and other retirement planning vehicles and, more recently, financial advice desired by wealthier families. It’s made 75-plus acquisitions.
But let’s start with the human roots of that success, embodied in lyrics from John Mellencamp’s “Small Town,” penned in 1985: “I cannot forget from where it is that I come from. I cannot forget the people who love me. Yeah, I can be myself here in this small town. And people let me be just what I want to be.”
That’s for real, says Hoyle, who joined Miller’s company in 1997. “The three of us benefited from the three things that most high-performing organizations and people need: Stability, belief and support. When I grew up in Henderson in the ’70s and ’80s, you were surrounded by a vibrant economy, you were surrounded by successful people, and it created a belief that you can do it. The three of us never wondered for a second if we could do it.”
Goldstein, president of Captrust since 2010, grew up in Bertie County, where his Russian immigrant family had moved after stops in Baltimore and Rocky Mount. “It was a very impoverished area, but I’m the better for it.”
Folks in big cities “can behave one way and get away with it because not everybody knows about it,” he says. “But that’s not the case in a small town. And in a company, if you say one thing about the mission, and behave in a different way, that sends the absolute worst message to employees. They will notice. So you better be who you say you are.”
In Lenoir, the county seat of Caldwell County, Miller says one couldn’t exhibit road rage because of the community’s tight-knit ways. “It would get back to your parents before you’d gotten even 100 yards past the other car.” The blue-collar city famous for its furniture factories also instilled “a sense of humility. You better grind it out and make your own way. The world can come apart economically, but you better get after it.”
That proved prophetic for Miller, who graduated from East Carolina University and worked for a bank in Fayetteville before joining the Interstate Securities brokerage in Raleigh in 1986. One year later, the stock market crashed, forcing many brokers to leave the business.
But Miller was too young and had too much personal debt to quit. He’d borrowed money to buy some rental properties in Fayetteville. In a time when cold-calling was the norm, he became one of the Charlotte-based brokerage’s top commissioned-based salesmen. That helped him gain the confidence of key company leaders, says Kel Normann, who also joined Interstate in Cary in 1986 and is a close friend of Miller.
Road Warrior
After a decade in the business, Miller and colleague David Perkins saw a bigger opportunity beyond their own financial advisory practices. Their plan was to offer retirement plan services to employers, which were increasingly offering 401(k) savings programs for their employees. A key early hire was Hoyle, a star kicker for Wake Forest’ University’s football team from 1986-89.
Supported by the brokerage and Wachovia, the Winston-Salem-based bank that bought the securities firm in 1999, Miller traveled across the Southeast to sign businesses, colleges and other institutions. In 2002, Captrust became an independent business because Wachovia and its new owner, First Union, were focused on their merger.
Around that time, Congress passed the Sarbanes-Oxley law that required companies to pay closer attention to managing their employees’ retirement accounts. The new rules were a catalyst for Captrust’s growth.
By 2010, after 13 years in business, the company had 140 employees and was overseeing $50 billion in client assets, mostly corporate retirement plan accounts. That same year, Miller hired Goldstein as chief operating officer, selecting him over two people with strong banking industry backgrounds. While running his consulting business in Raleigh, Goldstein had worked with many smaller real estate, technology and financial services companies.
“He had a small-company mindset and knew how to get a lot of things done,” Miller says. “He was like my Swiss army knife coming in the door, which really freed me up.”
A decade later, when Goldstein was promoted to president, Captrust had grown to 650 employees and $368 billion in assets.
By 2020, a majority of the company’s income still stemmed from fees charged to retirement plan clients. The fee tends to be five or 10 cents per $100 under advisement according to industry experts. In other words, $386 billion could kick off $200 million or more in revenue.
Four years later, that business has doubled in size, aided by more acquisitions and the stock market surge that boosts the value of accounts. Captrust’s clients now oversee retirement plans for more than 5 million employees and others.
“They are THE industry big cats,” says Fred Barstein, a Jupiter, Florida-based consultant, trainer and data provider for wealth management and retirement services clients. “Captrust is far and away the biggest aggregator of retirement plans.”
Culture Club
That’s only part of the story at Captrust. Having specialized in quarterbacking funds that manage money for millions of workers with relatively small retirement savings, officials also saw opportunity in “wealth management,” industry jargon for advising wealthier people.
In 2013, Miller hired Rush Benton to lead Captrust’s M&A efforts in buying well-run financial advisory firms whose leaders wanted a change and a payoff for building their operations. Before he left Captrust this spring to start a consulting business, Benton had worked on more than 40 acquisitions of successful investment advisers nationally, many with 10 to 30 employees. The biggest had 60. Miller called him “the primary face of our wealth management M&A strategy.”
The diversification is attractive for Captrust because wealth management clients typically pay fees of about 1% of their assets annually, or $10,000 on an $1 million account. By comparison, the company might earn less than $1,000 per $1 million as a retirement-plan fiduciary.
That disparity is why Captrust, since 2021, is taking in more revenue from wealth management than its much-larger retirement planning business, Goldstein says.
Many companies compete to acquire the best financial advisers because it’s a lucrative business, especially with the stock market heading steadily higher. Some sellers are fetching more than 15 times their pretax profit, a historic peak.
Captrust has excelled over the past decade in attracting new partners, without always offering the highest price, Barstein says. “Advisers pick Captrust because they like the brand, the culture and the system.”
In 2023, Captrust acquired nine wealth management firms with a combined $14.7 billion in assets, the company says. Those deals include the 12-person advisory company that Miller’s friend Normann had developed in Sanford. It had $1.3 billion in client assets. Last November, he sold the business to Captrust, reuniting with his longtime friend.
“I couldn’t be happier because I’m not having to deal with all of the headaches of owning and managing my own business, and I can spend more time working with my clients,” Normann says.
Miller and Normann “started our careers together. We said ‘let’s finish our careers together,’” he adds.
Captrust takes over most back-office functions of the acquired firms and oversees brand marketing. Normann’s company is now called Captrust Sanford.
When agreeing to partner with Captrust, investment advisers have options on how much cash they will receive versus equity in the Raleigh company. “I rolled my equity into Captrust, so instead of selling my business, I was buying into Captrust,” Normann says.
PE steps in
Captrust’s equity has surged in value in recent years, partly because two major private equity companies bought stakes, company officials say. When Chicago-based GTCR bought a quarter of Captrust’s equity in 2020, the company was valued at about $1.5 billion and oversaw about $390 billiont.
By September 2023, when Carlyle bought an undisclosed stake, the valuation was $3.7 billion, Captrust said. Assets had soared 80%, to $714 billion. Both GTCR and Carlye are committed to holding their Captrust shares for at least seven years while not seeking majority ownership, Miller says.
With dealmaking continuing and the stock market remaining robust, Captrust hit the $1 trillion mark this summer.
“Private equity is chasing the financial planning and retirement adviser market,” Barstein says. “Captrust didn’t need the money, but PE firms were knocking at the door, which allowed them to take some money off the table.”
Miller offers a more nuanced view, noting that Captrust saw great growth potential in wealth management but didn’t want to take on major debt to finance its acquisitions. Having strong financial partners is a win-win, he says. About a dozen potential investors were considered before Miller picked Carlyle because of its expertise in technology, leadership development and risk management.
“We see an amazing opportunity in the consolidation of our industry,” Hoyle says. “We made the decision that it would work as long as we found a really good partner and that it wasn’t all about the money or the valuation.”
Burr co-leads a group that has made dozens of investments in global financial companies, typically putting up $200 million to $2 billion, according to Carlyle’s website. He had numerous talks with Miller and Hoyle for more than two years before an agreement was signed.
“Our model is to invest in good companies and great management teams,” he says. “They’re all people businesses. I can own 95%, but I don’t control it. The assets go up and down the elevator every day,” referring to Captrust’s employees.
When it sought outside investment in 2020, Captrust expected strong growth because of the rising stock market and industry consolidation as baby boomer investment advisers look for a profitable exit. “We expected a lot of growth, but maybe not quite as much as we got,” Goldstein says. “It’s not all due to our credit. We’re very blessed to be in a great industry where people
like Jim and others are still interested in firms in this space.”
Shared equity
Loyalty to Captrust’s culture is aided by the company’s emphasis on making most of its staff part-owners of the business. Of the 1,550 employees, 976 had equity as of March 31, Miller says. Staffers of newly acquired firms are exceptions, but most employees have to work for Captrust for three years to qualify. “If you don’t have it after three years, it’s probably a signal that you aren’t in the right place,” he says.
Sharing equity widely is an unconventional financial model, Miller notes. Captrust’s stock has risen by 30% or more annually for the past five and 10 years, while the company could borrow money at 4% or so and pay cash for its acquisitions, he notes. Hence, its approach dilutes the stakes of existing owners.
“But when [employees] get an equity plan, this starts adding up,” he says. “And it’s usually their biggest asset, and then you’ve got them. They’re not going away and they’re very concerned about how the company’s performing and what they can do.”
Adds Goldstein, “We can show case after case where people took 50% equity and in a few years, the appreciation on the equity they took is more than what they sold their business for.”
While Miller, Goldstein and Hoyle are in their 50s or 60s, succession isn’t a major concern at Captrust, Barstein says. “It’s a deep bench, and they have plenty of good young people. It’s a system they have created.”
A keystone of that system are the company’s underlying values, rooted in those small towns. “It wasn’t Mayberry for crying out loud, but it was kind of close,” Hoyle says. “We do have an underdog mentality, or a chip on our shoulder. I know the three
of us have it. None of us went to Wall Street or to the Ivy League.
“To think of being the largest retirement adviser in the country, I mean that’s really an incredible outcome. I think it’s absolutely amazing.” ■
