LOS ANGELES — The same changing regulatory landscape that spurred some regional financial advisory firms to merge with national enterprises has boosted the FA business as a whole, says the head of one firm that plans to remain independent.
Dodd-Frank has also propelled growth for financial advisory firms, said Adam Bauer, chief executive officer of Irvine, Calif.-based Fieldman, Rolapp & Associates.
The legislation resulted in many municipalities gaining an appreciation for what municipal advisors bring to the table, Bauer said.
Previously, an underwriter might act as both a financial advisor and the underwriter on a deal, but regulatory changes have made that less common, Bauer said.
The percentage of California school district deals that used a financial advisor grew from 20% in 2004 to 80% by late 2015, Bauer said.
Dodd-Frank increased the disclosure requirements for underwriters, Bauer said, which included notifying issuers that they weren't a financial advisor. As notices were distributed, many issuers decided they would like financial advisory services to be separate from the broker-dealer on a sale.
In 2004, an underwriter could tell issuers they had no need to hire an FA because they could provide financial advice as well as underwrite bonds, Bauer said. Now, if a broker-dealer doesn't want to underwrite, it can choose the role of FA, but they do not typically do both, he said.
The controversy over the issuance of capital appreciation bonds in California – and resultant legislation putting controls on how they could be issued in the state – also created more demand for independent advisors, Bauer said.
While some regional firms have merged into larger firms, Fieldman, Rolapp is growing.
The Irvine, Calif. based firm's first thrust is to open an office in Northern California to better serve clients there, Bauer said. It is looking to hire three to four people for that office.
It also wants to grow the firm into other states. The firm has worked on deals in Hawaii, North Dakota and Montana.
The firm has hired three new employees this year: Randy Libunao as assistant vice president; and Adrian Gonzalez and Chelsea Redmon, both as associates. Anna Sarabian was promoted to partner in February and Jason Chung was promoted to assistant vice president in May.
Bauer, who became a partner in 2008, was promoted to CEO in January.
The firm's inception dates back to the origin of financial advisory firms in the municipal bond industry.
Bill Fieldman founded the firm in 1964, but it went dormant in the late 1960s before relaunching in 1974 as William L. Fieldman & Associates.
Larry Rolapp joined the firm late in 1977 and was added as a name partner in 1980.
Fieldman, Rolapp was only one of two financial advisory firms focused on the municipal industry in 1977, Rolapp said.
The firm was a charter member of the National Association of Independent Public Financial Advisors, which is now known as the National Association of Municipal Advisors. Bill Fieldman, the founder who died in 1998, was the second president of NAIPFA in 1991.
The firm's original focus was on community facilities districts. As those deals could take a year to go to market, underwriters did not find them financially viable to focus on, Bauer said.
Rolapp said his background was in real estate and real estate investment so shifting to work for an FA firm focused on CFDs was a natural transition.
In the post Dodd-Frank era, there is a more formal process to advising, Bauer said.
There is more documenting, filing and written communication around compliance, he said.
The firm's pre-existing corporate culture and values positioned it well to thrive in the new regulatory environment, Bauer said.
"Fieldman has always acted like we had a fiduciary duty," Bauer said. "We have always put clients' needs first and made sure we had the expertise to advise on the deal, but now it is a requirement."
It did not change the firm's operations and approach to its business, Rolapp said, but it has added more regulatory requirements.
When you look at the MA industry, you do see a casebook for consolidation, Bauer said.
"On the underwriting side, you see declining fees and more regulation," Bauer said.
Fieldman, Rolapp has grown its business to 120 deals last year, compared to 40 or 50 a decade ago, Bauer said. It also has a par amount in the $3 million to $4 billion range.
"We view the number of transactions as more significant than the dollar volume, because we focus on small to middle-market clients," Rolapp said. "Our name doesn't usually appear on the billion-dollar deal the state does, but we have a large number of clients."
The firm wants clients to view them "as an extension of staff," Bauer said.
