Four years ago, the employees and managers of Cleary Gull Inc., a Milwaukee investment bank and wealth management advisory company, bought the firm back from Royal Bank of Canada. Their gambit is turning out to be one of the shrewdest business moves in Wisconsin history. Since the 2002 buyback, Cleary Gull has grown from 33 to 57 employees. Its assets under advisement have risen from $600 million to $3.7 billion, and the company’s strategic growth plan, developed in 2004, calls for it to double its revenues by 2010. To accommodate that growth, Cleary Gull is redeveloping and expanding its offices at 100 E. Wisconsin Ave. in downtown Milwaukee. The renovation and expansion will be completed by Sept. 1, when Cleary Gull’s offices will be enlarged from 17,000 square feet to more than 23,000 square feet.
Over the past several months, the western half of the 24th floor of the office building at Water Street and Wisconsin Avenue has been gutted and remodeled. Employees will be moving into the renovated area in the next several weeks, when construction crews start renovations on the eastern half of that floor. When the 24th floor is completed, crews will move to Cleary Gull’s space on the 25th floor to complete the expansion and renovations. Cleary Gull officials declined to disclose the costs of the project, because they are part of its renegotiated five-year lease. Although it may have been less expensive to move to a suburban business park, other factors made downtown Milwaukee more attractive as the company’s base, said Michael Cleary, chairman and chief executive officer.
"It’s a good, central location for our employees," Cleary said. "And our clients are all over (the country), and we have easy access to the airport. The amenities downtown are better. It’s a little more expensive, but it’s always worked for us. Why mess with a successful formula?" Cleary Gull was founded in 1987 by Cleary and several partners. The company’s focus was research, sales and trading for institutions. Investment banking and wealth management were added in the 1990s. In 1998, Cleary Gull was acquired by Tucker Anthony Sutro, a Boston-based financial service company. Subsequently, Tucker Anthony Sutro was acquired by the Royal Bank of Canada – Dain Rauscher in 2001. Shortly after Tucker Anthony’s acquisition, the principals at Cleary Gull decided they wanted to buy the company back, said Robert Warner, senior vice president.
"We worked for the Royal Bank for about five months," Warner said. "We wanted to be independent again. We went to RBC with the idea of buying the company back. Our business model doesn’t fit with the traditional brokerage platform."
Cleary Gull’s entrepreneurial tendencies and a desire for independence by its management made it difficult to work for another, larger employer, Cleary said. "I discovered that we’re not good employees," he said. "We tried it several times."
When the company was re-purchased, its management decided to focus exclusively on wealth management and investment banking. Today, Cleary Gull’s board of directors is comprised of Cleary, Ronald Miller, Warner, Maureen Oster and John Peterson.
Cleary Gull’s business model, which allows principals, managers and employees to have input and make decisions, enables the firm to operate more like a small business than a practice, Warner said. That model is different than many other money managers and works best when the firm is independent. "Our overriding desire was to own and control our own destiny for ourselves, our clients and employees," Warner said. "We have a stake in the business and each other."
Merger boosts growth
Cleary Gull merged with MBO Advisors in 2003 to create a new firm called MBO Cleary Advisors Inc., an institutional investment advisory business. The merger was one of the factors that has helped grow Cleary Gull’s number of employees and raise the amount of money it has under advisement. "It brought about $1.78 billion in assets under advisory," Cleary said. Cleary Gull is divided into four service areas – client services, an investment research engine, an institutional consulting group and an investment bank.
The client service group serves high net worth individuals, families and a niche group of retiring airline pilots. The investment research engine serves the client service and institutional consulting groups. By having four different service areas, Cleary Gull’s business is well-diversified, Warner said, because it does not depend too heavily on one specific area. "We talk about diversifying our clients’ assets, but can point out to them that we have a well-diversified business model," he said. "We’re able to withstand outside influences and turbulences for the future." About two-thirds of the dollars Cleary Gull advises are from the institutional side. The remaining one-third is made up of high net worth individuals.
Targeted audience
Within its wealth management practice, Cleary Gull has a sub-section that targets retired and retiring airline pilots.
"With the group, we saw an opportunity to create a program that targets a market as part of our financial management (practice) for high net worth individuals," said Miller. "The pilot focus turned into a business unit." The poor financial condition of the airline industry has generated more business opportunities for Cleary Gull, because many pilots are retiring or taking early retirement incentive programs. "And they’re no longer willing to leave their money in the (airline) company," Miller said. "We hold seminars and go to the airlines. They know of Cleary Gull. We have a niche marketing effort, one that’s worked tremendously well. We own that niche market."
The Cleary Gull plan asks the pilots to take their money out of the airline-sponsored retirement plans when they retire. The funds are then placed in Cleary Gull-advised programs. The plans have been especially attractive for pilots because they’re protected from being raided by the airlines. Cleary Gull opened a satellite office in Dallas in December 2004 for its pilot advisement program. Many airlines are headquartered in or near Dallas, Miller said, making it an easy choice for a satellite office.
Investment banking
Cleary Gull’s investment banking practice has been booming, largely because many clients are anxious to complete the sale or recapitalization of businesses while the market is still receptive, Miller said. "In investment banking, we’re having a record year in every way," he said. "We’ve closed five transactions so far this year, and we should close 12 to 15 transactions by the end of the year. It’s a great time to sell a business. People are concerned about the economy in 2007 and 2008. We’re up about 100 percent, year-over-year, in our investment banking business."
The quantity of business Cleary Gull is doing in investment banking will help raise its local profile, Miller said. In 2002, when managers and employees bought the business back from RBC, there were about five people working in Cleary Gull’s investment banking division. There are now 11, and more will likely be needed, Miller said, because the company predicts that business to grow 30 to 50 percent within the next five years. Most of Cleary Gull’s customers do not live in southeast Wisconsin. However, the firm is taking steps to change that. Cleary Gull will begin targeted local marketing efforts in the late third or early fourth quarter of this year. The company does no marketing now for its financial management work with high net worth individuals. Instead, it relies on word-of-mouth referrals.
"We believe we fill a void for high net worth clients," Warner said. "We’re a little under the radar, and have a little bit more of a private feel." The marketing plan’s main purpose is to build more of a reputation with advisors and other financial managers in a position to recommend them to new clients. "Our focus this year is to be more of a household name with centers of influence," Cleary said. "You won’t see us on the side of a bus or anything like that."
Stir LLC, a Milwaukee-based public relations and advertising firm, is advising Cleary Gull on its marketing plan. The marketing plan will be introduced in the Milwaukee area, Cleary said, largely because the firm believes there are many high net worth individuals or families the firm could serve. The plan will also be used in the Dallas market, Cleary said, but that won’t likely happen until late this year or early 2007. "We don’t think we are anywhere near the market penetration we could and should have," he said. "It’s a very competitive market, but we want to be sure people know who we are and what we do and that we’re on their short list."
Much of Cleary Gull’s success is due to its specialization, said Peter Sommerhauser, a partner with Godfrey & Kahn S.C., a Milwaukee law firm. Godfrey & Kahn has been advising Cleary Gull since the firm was started, he said. "They’re serving a niche in the market not a lot of other people are serving," he said. "And they’re bright, hard-working, competent people. When you combine those things, you’re pretty much assured of doing well." Meanwhile, the workforce at Cleary Gull continues to grow to meet the needs of the company’s clients.
"We’ve consistently added 10 to 15 percent per year to our head count, both in banking and money management," Cleary said. "We’re always in the market to hire good people – we’ll figure out where to slot them. That’s our competitive edge."
The company isn’t planning to add any new services to clients, but will modify its current best practices, Cleary said.
"We’re refining what we’re currently doing, expanding and growing that," he said. "We take the position that we’ll work with our clients’ other services like accountants, attorneys and tax advisors. We know what we know, and we know what we don’t know."
1987
The company is founded as Cleary, Gull, Reiland, McDevitt & Collopy, to provide research, sales and trading to institutions. Investment banking and wealth management are added in the 1990s.
1998
Cleary Gull is merged with Tucker Anthony Sutro, an investment firm.
2001
Cleary Gull’s parent company, Tucker Anthony Sutro, is acquired by Royal Bank of Canada.
2002
Management and employees re-purchase Cleary Gull from RBC and focus exclusively on investment banking and wealth management.
2003
Cleary Gull and MBO Advisors create a new investment advisor subsidiary, MBO Cleary Advisors Inc.
2006
Cleary Gull expands and renovates its downtown Milwaukee offices.
Cleary Gull Inc.
Address: 100 E. Wisconsin Ave., Suite 2400
Employees: 57
Industry: Wealth management, investment advisory and investment banking
Assets under advisement: about $3.7 billion
Web site: www.clearygull.com
