Garrison Financial Corp. of Fayetteville, a holding company for Garrison Financial Advisors Inc., last week purchased Garner Asset Management Co., also of Fayetteville, for an undisclosed sum.
Garner Asset Management, a Securities and Exchange Commission-registered investment adviser, separately manages about 75 accounts worth $158 million.
GFA has registered with the SEC, but has not yet reported its assets. However, the heirs of F.S. “Sheridan” Garrison — including Tom Garrison, his two brothers and their families — have accumulated stock options, trusts, real estate and other holdings estimated to be worth between $200 million and $300 million. Garrison confirmed that spread.
Garner Asset Management now operates as the high-end arm of the umbrella corporation and a sister company to GFA. The deal, Garner Asset Management President Rebecca Garner said, is more of a merger of expertise than hard assets.
Garner’s team still manages its original accounts and there will be no change in the way Garner Asset does business with existing clients, she said.
Garner Asset’s portfolio is primarily made up of noncustodial, discretionary accounts, meaning the firm might not physically possess a client’s holdings but that it has the authority to invest them.
The difference is Garner Asset expects to pick up some additional business through GFA.
GFA is a fee-based financial advisory firm targeting small businesses and individuals with a net worth of at least $2 million.
Garner, Tom Garrison and Brian Vaughn, president of Garrison Financial Advisors, said the companies will operate as a family investments office-for-hire, where a family’s assets can be managed from one entity that provides everything from consolidated financial statements to financial planning and tax filings.
In recent years, wire houses such as Merrill Lynch have developed holistic wealth management services, but those are almost always tied to proprietary products. GFA will operate with an open architecture and be independent of any specific products, the local trio said.
The resulting company, its leaders said, is a full-service wealth management firm the likes of which have not previously been seen in northwest Arkansas.
Family Business
Garrison, chairman and CEO of GFA, is the retired president and CEO of FedEx Freight East Inc — the current incarnation of the Harrison company his father built as American Freight-ways Corp.
Garner, an indirect stockholder in the new corporation, remains president and chief investment officer of Garner Asset. She has become executive vice president and CIO for GFA and the holding company. She’s also on the corporation’s board of directors.
Garner’s longtime right-hand-man, Glenn Atkins, will serve as chief operating officer for both Garner Asset and GFA. Vaughn, a certified public accountant, is GFA’s president and chief financial officer.
GFA opened quietly on June 1, 2004, as a “family” office, literally. Its purpose until February was to manage the Garrison family’s assets. But even more expansions are already in the works.
The team plans by year’s end to open a wealth management office in Southlake, Texas, an affluent suburb of Fort Worth. Another office for Las Vegas is on the drawing board for 2006.
The group has a 15-year plan that dots offices across the country, but the initial push will be to the west. Their long-term aim is to make an IPO by 2014. The firm hopes to be in 20 cities by that time, Vaughn said, which would give GFA enough capital to circle back around for the eastern portion of the U.S.
“If you look at the demographics and the fastest growing cities, for some reason they’re west of the Mississippi. You always carve out Florida and Atlanta, but pretty much that’s our focus — new wealth,” Vaughn said.
Garrison points out that the firm will be flexible and that its plans may deviate as opportunities arise.
The team said stock options granted by employers such as J.B. Hunt Transportation Inc. of Lowell, Tyson Foods Inc. of Springdale and Wal-Mart Stores Inc. of Bentonville have created a generation of new wealth in northwest Arkansas.
Many of those employees get inundated with information and very little advice, the trio said, so the firm will make a specialty of new wealth and stock option advice.
“That’s our expertise, not just our market,” Garner said.
The Phone Call
Garner said she was having lunch with friends in Dallas on a Friday in mid-January when Fayetteville lawyer Greg Jones called her and said an investor was interested in buying her firm. She reluctantly agreed to meet the party without knowing who they were based solely on Jones’ reputation, she said.
The following Monday, Garrison and Vaughn met Garner at her office. In a short time, an agreement was struck.
“I kept throwing water on the deal,” she said.
But as they continued to talk, she came to see that the two companies would be a good fit with “zero overlap” and could provide some useful services to a wider range of clients.
“You know, we were pretty deep in technical expertise with the exception of the investment advisory services,” Vaughn said. “When we looked at (Garner Asset’s) résumés and what they accomplished, it was a perfect fit.
“The credibility that Rebecca brings, and the team brings, you get in-depth experience to leading a investment advisory firm of a billion dollars in management — like she’s done in the past — you get reporting, you get the compliance …. We now have expertise in each of the disciplines of financial planning.”
Vaughn joined Garrison from a job as a tax partner with Ernst & Young in Washington, D.C., where he worked in the national financial counseling practice to develop tax solutions for high-net-worth individuals. He eventually helped design a wealth management product for the firm, but that has since been abandoned due to regulations coming out of the Sarbanes-Oxley Act of 2002.
“This is an opportunity to continue a vision of having a personal CFO/CIO service together, where all the pieces are communicating with the others,” Vaughn said.
“When we stepped into looking at Tom’s situation, he had these multiple service providers. No one had been able to execute a simple, consolidated financial statement for him,” Vaughn said.
GFA, under the model Vaughn developed at Ernst & Young, was able to pull together information on multiple investments and from multiple brokerage firms and present it to the Garrison family, along with cash flow summaries and snapshots of how their wealth was progressing. Now the firm can take the same services to the public, Vaughn said.
“Once you have the system in place and the expertise, it’s scalable,” he said. “It is scalable because a lot of our overhead is basically cost-savings to the Garrison family.”
GFA won’t sell products like life insurance or a specific family of funds, the group said.
Performance Pick
Garner Asset Management declines to reveal its performance history.
“The minute you have great numbers, the minute you put it out there in the public’s eye, you have a bad quarter,” Garner said. “It happens every time.”
Besides, she said, some clients may only request a moderate monthly return while protecting their principle.
Vaughn said, “In our due diligence, which I can talk about, we benchmarked Rebecca’s fixed-income expertise against some of the managers that we’re currently using for the Garrisons — she exceeded it. She was in the top quartile.”
Vaugh said Kerry Watkins-Bradley, senior vice president of individual investments services at Garner Asset, had outstanding performance as well.
But beyond performance, both parties agree that the cultural fit between the two firms is eerily perfect. Personalities and business models just jibed, they said.
Garner said she would never have agreed to the merger if it had been any other way.
“When we really decided to do this, I said, ‘Brian, if you leave me, I will hunt you down,'” she said.
Garrison Redux
On the second story of the Garrison Building on Dickson Street, the site that was once home to the Blue Parrot bar, a casual-Friday crew of 20-somethings scurry back and forth amid a flurry of file folders and leftover drywall dust from a recent remodeling.
The company employs a total of 21, including the principals and interns. Many are recent graduates or current students of the University of Arkansas, which is a literal stone’s throw from the office’s second-story patio.
Tom Garrison’s office overlooks the historic George’s Majestic Lounge. The room is dotted with modest mementoes from a 20-year career in the trucking industry and his desk is slightly cluttered, topped with a couple of books by outdoor photographer Tim Ernst.
Garrison joined American Freightways in 1982 as treasurer. He became a board member in 1985 and led various operations throughout the company during his time there. He was promoted to president in June 1998 and assumed the additional position of CEO in June 1999.
American Freightways sold to FedEx Corp. of Memphis on Feb. 9, 2001, for about $1.2 billion, an estimated 61 percent premium over the company’s stock value at the time.
According to FedEx’s proxy statements, Sheridan Garrison, Tom Garrison’s father, owned about 5.6 million shares in August 2001.
That number fell to about 2.5 million shares in August of 2003, and the 2004 proxy statement said, “Mr. [Sheridan] Garrison’s estate has the right to exercise the balance of his stock options when they vest in January 2005.”
In January 2004, the Northwest Arkansas Business Journal reported that sales and transfers had reduced that number to about 1.7 million shares, worth about $117 million at the time, and that sales of stock by Sheridan Garrison in 2003 amounted to about $28.7 million.
In May, Sheridan Garrison was found dead in a four-acre pond in Boone County. He had been diagnosed with Parkinson’s disease, a progressive neurological disorder that affects motor skills and it is believed that he drowned while fishing.
Tom Garrison retired as the president and CEO of FedEx Freight East on Nov. 30, 2002. He said the move reflected a burn-out factor and his 20-year anniversary with the company more than it did a culture shock between himself and FedEx, though he admits there were some minor differences of opinion.
“About my first three months off, I sat around and watched the ‘Beverly Hillbillies,'” he joked. “I didn’t hardly do a thing and really enjoyed it for a while. But it got old after a couple of months.”
An accountant by training, Tom Garrison proceeded to delve into private equity for a while, then realized that wasn’t his bag. He feels he’s a better manager and leader, he said, and the service of the family office based on Vaughn’s vision seemed like a great opportunity.
His brothers are Will Garrison of Fayetteville and Daniel Garrison of Colleyville, Texas.
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