RIA Consolidators Going After Wirehouse Reps
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RIA holding companies are opening their arms to welcome wirehouse advisors. Not just garden variety reps, but the cream of the crop: those who have significant assets under management and heavily fee-based books.
Focus Financial, a two-year old RIA holding company run by Rudy Adolf, announced Tuesday that it had cut its first deal with a team of wirehouse advisors. Westport, Conn.-based LLBH Group Private Wealth Management, a billion dollar team from Merrill Lynch, joined Focus and 97 percent of its clients have committed to transfer their assets. More partnerships with wirehouse teams are in the works, says Adolf, under the banner of a new service called Focus Connections that the firm has rolled out. “The typical profile of a Focus Connections firm is an entrepreneurially-minded broker or team with a business model that is primarily fee-based, and serves an established and growing client base with a minimum of $400 million in assets.” (Focus typically pays new partner firms a combination of cash and stock in exchange for 40 to 60 percent of the RIA's future cash flow, with a fixed minimum paid going to Focus.)
In a separate release, RIA holding company United Capital today announced that it had acquired three investment advisory shops: Maul Capital Management, Integrated Financial Management, and Trevethan Capital Partners. Trevethan is moving from full service brokerage firm Oppenheimer. Together the three advisory firms have a collective $740 million in assets under management and revenues of over $4.3 million.
Over the past half decade, advisory holding companies like Focus Financial Partners, United Capital and WealthTrust have been in the business of acquiring full or partial ownership in existing independent investment advisory firms. But with the wirehouses in turmoil, and with some wirehouse advisors considering independence as a result, these RIA holding companies have developed a newfound interest in wirehouse reps. They typically offer consulting services and some back-office support to help these corner-office brokers become fiduciary investment advisors who basically run their own shops. In exchange, they may take a cut of the profits.
Everyone in the RIA world wants a piece of this so-called breakaway broker business and they are getting the message out: RIA consolidator CEOs seem to take every opportunity to declare that the wirehouse model is bankrupt and that an exodus from Wall Street firms is imminent.
United Capital CEO Joe Duran couldn’t help but mention in the firm’s release that one of United Capital’s RIA firms has also just nabbed a $60 million retail client from a “leading wirehouse.” Duran notes, “When a $60 million dollar retail client is leaving ahead of their adviser, you realize that a seismic shift in the industry away from the wirehouse model is occurring. Clients do not trust the wirehouse names and frankly neither do the advisers anymore.”
