How Merrill lost a $1.5B advisor team to Sanctuary

How Merrill lost a $1.5B advisor team to Sanctuary
The Chappell Wealth Management group. (L to R): Brianna Warren, Spencer D. Carlson, Brent R. Chappell, Brad C. Chappell, Michael W. Mills, Chel Larkin and Jaymie Wendt.

Sanctuary Wealth

When Brent and Brad Chappell were planning to leave Merrill over a year ago, a consultant referred them to an old family friend: Vince Fertitta, the president of Sanctuary Wealth. 

“I’ve known them and I’ve known their dad for almost 20 years,” Fertitta said in an interview. 

Feritta is a former Merrill veteran executive himself, and he had fond memories of the Chappells’ father Rob, who retired as an advisor from Merrill after working there for decades. 

At that point, the brothers had already been conducting due diligence on options for over a year, Fertitta said. 

It was easy to reconnect. 

On Feb. 24, the Chappell brothers announced their seven-person team’s departure from Merrill Wealth Management, becoming the most productive wirehouse breakaway group to join Sanctuary Wealth since the hybrid registered investment advisor’s inception in 2018. With their addition, Sanctuary’s total assets under administration comes to $25 billion, a company spokesperson said in an email. 

The story of how the Chappell group left illustrates not only the threat to Merrill from hybrid RIAs like Sanctuary, which promise both support and independence for former top-tier wirehouse advisors, but also how financial advisor practices at broker dealers mature over time towards independence — in this case over multiple generations — and what it takes to reel them in. 

Vince Fertitta, the president of Sanctuary Wealth.

Sanctuary Wealth

In this case, the team, which managed $1.5 billion of client assets at Merrill and is based near Houston in The Woodlands, Texas, reported gross production of over $11 million annually, Fertitta said. 

It’s the 17th practice lured to Sanctuary to come from the state of Texas, out of 79 total affiliated firms — meaning one out of five Sanctuary firms is based in Texas, Fertitta’s longtime home base as a Merrill regional marketing executive. 

Formerly known as the Chappell Group at Merrill, the practice is rebranding as Chappell Wealth Management and will operate as a registered independent advisory firm, according to a Sanctuary spokesperson. The team includes managing partners Brent Chappell, Brad Chappell, Michael Mills and Spencer Carlson, as well as vice president and wealth management advisor Chel Larkin and senior client associates Jaymie Wendt and Brianna Warren. 

Brent Chappell, a certified financial planner and certified investment management analyst, began his career at Merrill in 2003. His younger brother Brad Chappell, who joined Merrill in 2006, is also a CIMA and a chartered retirement planning counselor. Mills is also a CFP with a background in private equity, and Carlson is a chartered financial analyst. 

The group’s former page on the Merrill website stated that the team helped “individuals, families and small businesses” with holistic financial planning, retirement, charitable giving and healthcare and home expense planning. 

The breakaway team’s new website retains most of these offerings but displays a shift towards more bespoke and sophisticated offerings, such as estate planning and tax strategy. It also adds insurance services. Chappell’s stated focus is “helping families simplify the complexities of their financial lives. We work to preserve and grow your wealth,” according to the new website. 

Adam Malamed, the new CEO of Sanctuary Wealth, said in a statement that the group’s “decision to align with Sanctuary reflects the broader strength of our pipeline and robust growth prospects.” 

Carving out a family legacy 
Fertitta met the Chappell family in 2004 on his first assignment in Houston as a Merrill Lynch marketing executive. He overlapped with them again over the years as he moved around in his work at Merrill. 

The Chappells’ father Rob Chappell was a top producer at Merrill in Fertitta’s division before passing on the reins to his sons in their office at The Woodlands, Fertitta said. 

He recalled the elder Chappell as “just a great human being, super client-focused, a pleasure to manage — someone that I still use as an example of how you can be a big producer and be a great person to work with.” 

The brothers had built on his success since then, bringing it to at least quadruple what it was in 2004, Fertitta said. 

Brad Chappell, the younger brother, is a former winner of Financial Planning’s Top 40 Brokers Under 40 awards in 2021 and 2020. Both brothers have also been named to top advisor lists published by Barron’s and Forbes in recent years. 

“They had confidence in their relationships with their clients,” Fertitta said of the Chappells’ decision to eventually leave Merrill. 

He added that clients “wanted more from them than what they were really able to deliver in an employee model where you’re restricted to the policies of the lowest common denominator.” So a move to another wirehouse or broker-dealer through the employee model wasn’t on the table. 

At Sanctuary, advisors can operate an independent advisory business but can also offer more services with Sanctuary’s broker-dealer such as “insurance, where it has a variable component, or certain alternative investments, or direct investments,” Fertitta said.  

The Chappell brothers also wanted to preserve the business as a legacy to pass down. 

Robert Chappell started the practice in 1984, according to the group’s website. Having begun his career as a financial advisor in 1981 at another firm, he moved to Merrill in 1984 and stayed there for the next two and a half decades, according to his BrokerCheck

“It was a family business, but they didn’t own it,” Fertitta said. “The company owned it. They wanted to unlock that and make it continue, when maybe their kids would join it.” 

The Chappells’ children are still young, Fertitta said. “I don’t think they’re planning to push their kids, but they’ll say with a smile, ‘it sure would be great if this family business continues someday.'” 

Jodie Papike, the president of industry recruiting firm Cross-Search, said in an interview that the move was not surprising.  

“I see that all the time, where the second generation or even a third generation in the business really have a desire to take the business towards independence — whether that be to an independent broker-dealer or to an RIA, or setting up their own firm,” Papike said. 

“The newer generation adviser in our industry today really has a mindset of full independence,” she added. “They want autonomy to run their business the way that they see fit. They want to have their office the way that they want it set up.”

Fertitta said financial advisors are entrepreneurial and always want to own their own practices. 

As a former financial advisor himself, he knows this firsthand. “I was a son on a father-son team at one point,” he said.  

But it wasn’t until in recent years that an industry sprang up to help advisors reach independence, with all its administrative burdens, he said.

Another hurdle: Firms often put up roadblocks designed to keep departing advisors from taking client assets and relationships. 

Helping the move
At broker-dealers like Merrill, which are self-custody and self-clearing, Fertitta said, the company technically “owns” the clients and when an advisor leaves, they have to transfer the clients’ assets which is a hassle. 

The clients’ assets are held in custody by the company, in other words. But at Sanctuary, which is multi-custodial, advisors own the client relationships and books, and can choose among several custodians to affiliate with. The Chappell group chose Pershing, which is owned by BNY Mellon — the largest custodian bank in the world.

“If we are not delivering on our promises, and we’re not offering value, they can fire us and they can stay with Pershing,” Fertitta said of the Chappell advisors. 

Not only do advisors who leave wirehouses have to compete with their former employer for custody over the clients’ assets, they also typically have to escape the golden handcuffs of their deferred compensation package, which contractually ties up a significant amount of their net worth that is only paid to them over time if they remain at the firm. 

Sanctuary helps advisors resolve that problem with some transition assistance, Fertitta said, although as a company that doesn’t own the client books, it doesn’t offer “big upfront.” 

“What we found is, that normally equates to somewhere 30 and 40% of their trailing 12-month production,” he said. “In our standard transition packages, we offer numbers in that range, just to make them whole. That gives them some liquidity and security.” 

Wirehouses and major regional and boutique firms have been known to dangle recruiting payouts of over 300% of trailing 12-month revenue, by contrast, although it’s usually in the form of a loan. 

Although he could not disclose the exact sum given to the Chappell group, Fertitta confirmed it was within Sanctuary’s usual range — making it likely somewhere between around $3.3 million to $4.4 million, and given the group’s star status, possibly on the higher end of that.  

Sanctuary also finances startup costs, such as real estate, computers, furniture and marketing, with a zero-percent interest loan on such purchases, Fertitta said. 

“It’s just a short-term loan while they get on their feet, because it takes a few months to move a sizable business.” 

Fertitta said advisors only get recruited to Sanctuary, which he billed as an “elite network of like-minded, successful advisors who were bold enough to step out and start their own company,” by invitation. 

Once they join, Sanctuary caters to them in the same way that top advisors cater to their high net worth and ultrahigh net worth clients with “white-glove services.” It also gives them a chance to learn from other advisors in the Sanctuary network — all of which, Fertitta said, differentiates Sanctuary on the growing market for firms offering supported independence. 

The Chappell advisors may also have been concerned about conflicts of interest that arose in their work at Merrill, where advisors are strongly encouraged to cross-sell banking products as a driver of revenue for parent company Bank of America. 

The Chappell website pointedly states that they are “true fiduciaries” and offer “objective advice,” “tailored planning” and “expansive solutions” with “no corporate-driven agendas,” in an evident sales pitch to their former Merrill clients. 

“When we saw that by partnering with Sanctuary, we would have a choice of custodians with all the freedom and flexibility of best-in-class resources, wrapped up in a structure that largely eliminates conflicts of interest, we just knew this was the right place,” Brent Chappell said in the press release

Merrill, reached for comment on this story, declined to respond.