Mintz Levin Unloads Financial Advisory Arm

Fourteen years after getting into the wealth management business, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo is getting out. 

In a move it suggested was aimed at helping Mintz Levin Financial Advisors achieve its ambitions to grow, the Boston-based Am Law 200 firm said it is selling the affiliate to The Colony Group—one of some two dozen wealth management firms owned by Focus Financial Partners—for an undisclosed sum.

“MLFA was looking to both expand the services it offers and to ensure long-term continuity for its clients,” Mintz Levin managing member Robert Bodian said in a statement provided to The Am Law Daily Monday by a firm spokeswoman. “Merging with The Colony Group provided the opportunity to accomplish both of those goals. The firm was supportive of the transaction, and we wish MLFA continued success.”

The unit being acquired by Colony, which was founded by Robert Glovsky, Cary Geller, and the firm in 1998, managed $1.04 billion in assets for nearly 375 clients and employed 17 people as of a November filing with the Securities and Exchange Commission. The combined entity, which will operate under the Colony name and move into its Boston headquarters, has approximately $2.5 billion in client assets under management, according to the May 30 joint press release announcing the deal. Most of Mintz Levin Financial’s clients are high-net-worth individuals with between $1 million and $30 million in assets, according to the release.

In conjunction with the sale, Glovsky—the son of Mintz Levin name partner William Glovsky—and Geller are cutting their ties to the law firm and joining Colony’s executive management team. Neither returned requests for comment Monday, but in an interview with Investment News, Glovsky said the idea of combining operations with Colony, where he said he has had friends for 15 years, was attractive in part because it offered Mintz Levin Financial employees the chance to become partners, a status Glovsky and Geller will both take. As of now, U.S. ethics rules in all jurisdictions outside of Washington, D.C., bar law firm employees who aren’t lawyers from taking equity stakes in law firms.

Financial advisory affiliates are common among Boston-based law firms. The trend dates to the nineteenth century, when merchants heading to sea would entrust lawyers with overseeing their financial affairs, according to a 2010 Boston Globe article. Boston-area firms have also historically taken advantage of a special state charter that allows them to provide trust services and manage money without registering with the SEC, according to legal consultant Kent Zimmermann of the Zeughauser Group.

Hale and Dorr (a predecessor firm to Wilmer Cutler Pickering Hale and Dorr) and Nutter McClennen & Fish were among the first major law firms to create SEC–registered investment businesses, Zimmermann says. Other Am Law 100 and Second Hundred firms that provide similar services include Choate Hall & Stewart and Nixon Peabody. (A handful of other firms, including Ropes & Gray and Chapman & Cutler, offer some financial advice to private services clients without having a separate entity set up for that purpose.)

“I think they can be lucrative and successful businesses for law firms,” says Zimmermann. “And they can be a natural brand extension; a natural way to provide additional valuable service to clients that you already have.”

The potential for law firms to provide financial advice is lucrative enough to have sprouted a host of consulting shops aimed specifically at helping lawyers start wealth management businesses. One company providing such services, Concord Asset Management, starts its advertising pitch online by saying: “Top Boston law firms do it . . . and you certainly should consider doing it.”

Firms that have established financial advisory arms have often done so as a way of adding value to their trusts and estates practices, because the high-net-worth individuals that turn to lawyers for guidance in one area are often interested in advice in the other. In recent years, however, some large law firms have deemphasized trusts and estates work amid a drive for international growth. In 2010, for instance, Wilson Sonsini Goodrich & Rosati oversaw the transition of a six-attorney group to Hopkins Carley, and in April 2011, Weil, Gotshal & Manges closed its trust and estates practice when the firm’s entire seven-attorney team left for McDermott Will & Emery, citing Weil’s move away from individual-client representation as the reason for their departure.

Carol Harrington, the Chicago-based head of McDermott’s private client practice, says her firm has never considered branching into the financial advisory realm. Doing so, she says, raises conflicts questions, such as how to objectively refer a client to a trustee for their funds if you could recommend yourself:  “You have to be careful about not using your position of trust to influence your client.” (Harrington says she will, on rare occasions, serve as a trustee if a client insists on it.)