Tyler Vernon, Managing Principal, Merit Financial Advisors

Tyler Vernon, managing principal at Merit Financial Advisors, spoke with Invest: about leveraging technology to monitor trends and craft personalized investment strategies. “AI is being utilized to increase profitability, speed, and efficiency,” Vernon said.

Merit has grown rapidly via strategic acquisitions. What are the biggest opportunities and challenges when integrating a newly acquired firm into Merit’s culture and systems?
The biggest issue is bringing a founder, who is used to making their own decisions for the last 20-30 years, into our ecosystem as a partner. It is a different mindset to work alongside multiple partners as opposed to being the sole owner making whatever decisions they want. As a result, it’s important to ensure we are aligned on culture and decision-making processes. The whole idea is to create a “1+1=3” situation. There are many wealth management firms all over Palm Beach County that could be between $250 million and $1 billion of assets under management. They all have investment units and a compliance person. The main pillars of a great partnership are bringing all of those services in-house, bringing them to firms, partnering with them to give clients access to more services, and giving shareholders the ability to grow their wealth more significantly.

As part of the firm’s investment committee, how do you balance global market strategy with tailoring portfolios for individual client goals?
At the top level, every client needs a customized portfolio according to their risk and goals. An older person who gets very upset with any kind of gyration in markets will have a different outlook than somebody who is younger and further from retirement. The risk level in the portfolio is of utmost importance. Portfolios with more risk in them are when we start to get more specific and tailor opportunities. If somebody can’t afford any type of volatility, the solutions will be somewhat limited to options that are safe and predictable. There are several opportunities in the marketplace involving private credit, reducing taxes, AI themes, and private companies. Making sure clients are in the correct risk level is very important. If somebody can take a little bit more risk and has a substantial portfolio, we can get more interesting opportunities.

How do you define the “client experience” at Merit, and what specific steps do you take to ensure clients in your region feel differentiated from the competition?
Everybody talks about having the best investment platform, great service, and financial planning. These are the pillars that make up the hygiene of the business. You have to do it. What makes Merit unique is how we are getting into those areas. Everybody feels that they are an individual client, not just a member. We do that by customizing the portfolios we deliver to clients. We understand their risk and tax posture. We use AI to leverage our time, and it takes us less time to run a lot of our onboarding system. AI is used to help with estate planning and tax planning. We are able to deliver more services to clients because we’ve latched onto AI, leveraging our advisers’ time to deliver more for the same fees investors would be paying anywhere else. We are on the forefront of some very interesting investment solutions that deliver returns and eliminate taxes for wealthy families. Some of these strategies are new to the marketplace. We’ve partnered with several CPAs around Palm Beach who have brought us in to deliver these solutions to their tax clients.

Many firms talk about being fiduciaries and putting clients first. What practical behaviors or processes at Merit reinforce that commitment beyond the promise?
The fiduciary standard is a legal responsibility. We are regulated by the SEC and they do audits on our firm and practices. At all times, we are operating at the highest level of fiduciary responsibility. A lot of our competition does not have that legal level of responsibility. It’s part of our culture. Our mission is to enhance the lives of those we serve, which starts with our clients and ends with our employees. Our advisory base is over 130 strong, so it’s not a huge adviser base where we’re worried about somebody not delivering our culture and services. We have compliance and partner checks when it comes to delivering advice to clients.

What technology or operational innovation do you believe will most impact your region in the next two to three years?
AI is being utilized in many different aspects of the business, including investment strategies. We’re all going to be impacted by this. Business owners, although it may not be good for the local economy, will not have to hire as many people because AI will be doing more work for us. What the investment strategies can now do will have a major impact on families relocating. We’re seeing investment strategies that can significantly reduce both taxes on ordinary income and capital gains taxes. Many of these strategies use AI to find patterns in bond stock, currency, and commodity markets. AI is being utilized to increase profitability, speed, and efficiency. The investment vehicles and approaches being utilized, by the right firms, will result in significant tax savings as a result of AI being integrated into their portfolio management.

What advice do you give to an advisory firm owner who is evaluating a partner or acquirer for the first time?
Many people get enamored with the numbers, looking at how much their firm is worth. Having been in business for a while, culture is just as important. You want employees and owners who will stay on for a few years. When issues come up, you need to be able to sit at the table with these firms and create solutions. You want employees to be able to learn, grow, and develop. Will the firm cut staff, or invest in the business to help it grow? You need to ask the right questions. We help educate founders to ensure the fit is right, and in some cases we aren’t the right firm. We let them know up front, because the last thing we want is for a partner to come out on the other side of a transaction with a different result than expected.

The financial advisory industry is facing generational wealth transfer, regulatory shifts, and market volatility. How do you prepare your teams and clients for these challenges?
We have more information coming at us faster. Investing in the technologies to give clients advice in the areas they are concerned about helps us find solutions. We’re getting more clients asking for solutions for their aging parents who may need nursing homes, and we brought on a partner to help clients get started finding the right healthcare. We have others dealing with healthcare issues, such as shopping the healthcare marketplace or Medicare. We now have a partner that can do that shopping for our clients and deliver solutions. It’s about staying on the forefront of where clients have questions and being able to specifically and accurately deliver solutions.