Wayne, Pa. - InvestorForce.com will cut its ties to what remains of its consulting business and divest the remnants of Asset Strategy Consulting, a firm it acquired barely 10 months ago.
Three InvestorForce principals will form Angeles Investment Advisors LLC, an independent consulting firm based in Los Angeles that will serve the remaining institutional consulting clients.
Terms of the deal were not disclosed. InvestorForce will have no ownership interest in the new firm, which will be wholly owned by Leslie B. Kautz, Howard D. Perlow and Michael Rosen. All three were formerly partners at Asset Strategy Consulting.
InvestorForce, which was formed early last year, acquired Los Angeles-based Asset Strategy Consulting LLC in March. Asset Strategy had about 45 employees at the time, of which about 35 made the transition to InvestorForce. About 20 are still at InvestorForce.
Lawrence E. Davanzo, formerly managing director of Asset Strategy, is the last senior member of the consulting firm still at InvestorForce.
At the time of the acquisition, Asset Strategy had around 50 clients. Angeles now will serve the 20 remaining clients, and will use InvestorForce's web-based search engine as its primary search database.
Angeles Investment Advisors will offer traditional investment consulting services, "including acting as a fiduciary," said Jim Morrissey, InvestorForce's president and chief executive officer. Angeles will deliver its services "by leveraging InvestorForce's Internet technology platform."
He envisions Angeles as a prototype for how consultants should use InvestorForce's data, analytics and search capabilities. "It's safe to say that we will provide the foundation of their technology platform," he said, although Angles will be free to tap other manager databases as well.
Since late last year, several former Asset Strategy partners who had become InvestorForce employees have left the company, including Jeff Winton, director of sales and client services. Former employees of Asset Strategy who have left in recent months include Andrew Rasmussen, manager and research director, who resigned to join money manager Dimensional Fund Advisors Inc., Santa Monica, Calif., and Peter Gunder, head of InvestorForce's insurance consulting practice, who left last year to join consultant Summit Strategies Group, St. Louis. Jon Williams, who helped build its the consulting marketing and sales practice, also has resigned but has not yet taken another job.
Mr. Morrissey said the former employees "wanted to be consultants and that's not the direction we are heading." He said the "skill sets" at InvestorForce center largely on technology, sales and marketing.
But one former InvestorForce official, who did not want to be named, said, "There has been a steady trickle of people leaving over the last several months. What people don't know is that it is not a bed of roses.
"They need to take a really close look at the business plan and the revenue model. They have money coming in but it is all pro-forma. The last business plan was that they would make most of their revenue from Search Exchange (the InvestorForce online search engine) and that may have been sound for middle-market money managers without a distribution channel, but they don't have a good response from large money managers. They have good tools, good analytics and a sound search process, but large plan sponsors are not responding because of the fee structure and fiduciary concerns."
Mr. Morrissey said divesting the consulting operation does not represent a capitulation to critics from the consulting community.
"Because of the direction of our business in the last year, we are trying to be more focused on the technology and being an open platform to the industry and away from providing advice," he said. "It was never part of our model to expand into giving advice."
Mr. Davanzo, executive vice president at InvestorForce, said divesting Asset Strategy Consulting 10 months after its acquisition "is consistent with what we planned from day one. It was never the intent to acquire Asset Strategy to be in the consulting business."
Almost from the beginning, InvestorForce has been the target of consultants, money managers and plan sponsors over its shifting business strategies and in particular its revenue model, which includes charging money managers a fee of 5% of the first year's revenue if they are hired through InvestorForce's online search engine.
Divesting the remnants of Asset Strategy will have no impact on the InvestorForce search process or pricing model, said a spokesman.
InvestorForce officials have been sensitive to criticism, Mr. Davanzo said, but "we feel the momentum is shifting in the consulting community. They are increasingly interested in how to leverage the InvestorForce technology and are becoming more aware that we are contributors, not competitors."
Mr. Morrissey said more than 50 consulting firms have agreed to participate in a series of e-training sessions being hosted by the firm to familiarize them with its institutional portal and manager search process.
But one consultant, who wished to remain unidentified, said InvestorForce's divesting its remaining consulting functions is "nothing major" and means "they are just taking a different approach." He said setting up Angeles using former InvestorForce employees is a transparent step to encourage consultants to adopt the InvestorForce model.
"All they are trying to do is create a catalyst for using their platform," said the consultant. n