H. Beck, Inc. (HBI) goes by several names, including Hibbard-Beck, Inc.; Estate Investment Company and Capital Financial Securities Corporation. It’s both a registered investment advisor and broker-dealer, and it acts as the home office to more than 700 advisors, according to its website. So as a retail client, you’d likely not have direct communication with the firm. Instead, your communications will be with your investment advisor representative (IAR) who receives support services from HBI.
With headquarters in Rockville, Maryland, HBI has more than $1.33 billion in assets under management (AUM). Most of these assets are on a non-discretionary basis.
H. Beck Background
H. Beck has been registered with the Securities and Exchange Commission (SEC) as an investment advisor since 1999. It is also a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investors Protection Corporation (SIPC).
The firm is is a wholly owned subsidiary of Kestra Financial, Inc., whose indirect parent holding company is majority owned by Kingfisher Holding, LP. Kingfisher, in turn, is owned by a group of private equity funds that are managed by Warburg Pincus LLC.
H. Beck Client Types and Minimum Account Sizes
As noted earlier, HBI does not work with clients directly. Instead, it supports IARs, who in turn work with individuals, high net worth individuals, corporate pension and profit-sharing plans, charitable institutions, foundations, endowments, corporations, retirement plans and other business entities. The bulk of individual clients do not have a high net worth.
If the firm has account minimums, it does not publish them.
Services Offered by H. Beck
HBI considers itself first and foremost a full-service introducing broker-dealer. As such, all of its IARs are also securities brokers and licensed insurance agents.
As advisors, they offer investment advisory services through advisor-managed accounts, selection of third-party investment advisors, wrap fee programs and qualified and non-qualified retirement plan services. They also offer financial planning.
When the IAR is the portfolio manager, there are four available HBI programs: Advisor Choice Asset Management Plus (ACAMP+), Choice Program, which is model based, the Portfolio Builder Program, which is through Envestnet’s platform, and the Envestnet Advisor as Portfolio Manager (APM) Program. Except for APM, all are wrap fee programs.
H. Beck Investing Philosophy
Generally, the firm takes a long-term approach to investing and uses fundamental analysis, which is based on the assumption that mispriced stocks will eventually reach a price that reflects their true worth. Some IARs and third-party money managers may also base their strategy on Modern Portfolio Theory.
IARs can provide guidance on mutual funds, exchange-traded funds, common and preferred stocks (exchange listed and over the counter), fixed income investments, municipal securities and U.S. government securities.
Fees Under H. Beck
The fee for financial planning is negotiable and can be a flat fee or on an hourly basis. If it’s on an hourly basis, the fee ranges from $50 to $500. It can’t exceed $10,000 for one financial plan unless authorized by HBI. The same goes if the plan is on flat-fee basis.
The annual fee for portfolio management is generally a percentage of the client’s AUM and follows a tiered schedule (meaning higher increments of assets are charged a lower percentage). For accounts in the ACAMP+ program, the management fee runs from 2.10% (for the first $250,000) to 1.10% (for any asset in excess of $5 million). For accounts in the Choice Program, there is an IAR fee and a program fee. Combined, they run from 2.25% (for the first $250,000) to 1.06% (for any assets in excess of $5 million).
In the APM program, fees are collected by the platform, the manager, the advisor and the custodian. The platform fee ranges from 0.09% to 0.30% and the combined manager and advisor fee cannot exceed 2.5%.
Third-party investment advisors will have their own fee schedule. But generally, accounts that are referred to a third-party money manager will be charged a fee by HBI that will not exceed 3.0%.
What to Watch Out For
As a subsidiary of a large holding company, HBI has many affiliations, which can present potential conflicts of interest. Similarly, IARs who have multiple roles (brokers and insurance agents) may have conflicts of interest. When you receive recommendations from your IAR, be sure you know what they are based on and whether and how the advisor and firm may benefit from your following them. As a fiduciary, your advisor is obligated to tell you.
In its most recent SEC filings, HBI reported seven legal or disciplinary actions that occurred or were resolved in the last 10 years. Two involved individual associates. Regarding the five that involved the firm itself, fines ranged from $9,500 to $425,000. In the most recent action, which was resolved in November 2018, the firm was censured, fined $400,000 and required to review and update its training and supervisory systems in connection with the sale of multi-share class variable annuities. FINRA also found the firm to have failed to enforce written supervisory procedures for the use and review of consolidated reports issued to clients by its IARs.
All information was accurate as of the writing of this article.
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