Where Have All the Boutiques Gone?

Where have all the boutiques gone, long time passing?
Where have all the boutiques gone, long time ago?
Where have all the boutiques gone?
The banks have picked them every one.
When will they ever learn?
When will they ever learn?
– Inspired by “Where Have All the Flowers Gone?” by Pete Seeger

In 2018 we published an article entitled “Bigger is not Always Better”, showcasing the many advantages of being a client of an investment management “boutique”. Those benefits, among others, include “dedication to clients, better performance (particularly in down markets), less bureaucracy, crisper decision-making, more motivation and less complacency.” The timing of the article closely followed TD buying Greystone Investment Management. Since then, many more “small”, once independently managed, firms have fallen into the clutches of larger organizations such as banks, institutional money managers and mutual fund companies. Their marquee names – often eponymous with their founding members – all but disappeared, and after just a few years, the remnants became unrecognizable.

I came to Nexus in 2014 with 19 years of investment manager research experience. That mental “manager due diligence checklist” that I developed over that time has never left me, and probably never will. I put it into practice all the time, reflecting on activities at Nexus. So far, so good, eight-and-a-half years in.

On this checklist are a bunch of “success factors”, some of which are referred to in the industry as the four “Ps”: People, Philosophy, Process, Performance. To this, I add the four “Cs”: Control, Co-Investment, Culture, Clarity (i.e. transparency). When something goes awry within just one of these factors, alarm bells go off. Most notably, a change in Control is a Danger, Will Robinson kind of signal. ⁽¹⁾

At Nexus, not only are we long-term investment managers, we’re also long-term business managers. We are planners at heart, and forward-looking thought leadership is in the management’s DNA. To that end, Nexus entered a partnership in 2020 with Focus Financial Partners. The shareholders sold their interest in the business in exchange for cash, a significant ongoing share of its profits, and the exclusive right to continue managing it. To both parties this is a win-win, that was inspired by the success of Focus’s partnership model over what now stretches to 17 years. Harvard Business School even did a case study on Focus and this model in 2014. This is the important part: the operating Control of the business (Nexus) is contracted, effectively in perpetuity, to a new entity (NXT) established by employees of Nexus. No one can swoop in and buy NXT. We will operate independently indefinitely. NXT combines both “old” and “new” generations, thereby solving the succession quagmire that so often undermines small firms. You see the future leadership everywhere – in the halls of the office, in meetings, writing blogs, attending conferences, and speaking at events. And that future is so bright, “you’re gonna need shades.”⁽²⁾

Many firms have a combination of some of these success factors. But rarely do they have them all. The short of it is that Nexus checks all the boxes, which is what makes this firm so special. If you’d like to find out more about us and how we provide financial peace of mind to our clients, and experience all the benefits a true “boutique” firm has to offer, please contact us.