Year-old roll-up firm triples assets to $15B

NEW YORK — Focus Financial Partners LLC, barely a year old, purchased majority stakes in three more independent fiduciary wealth management firms last week — increasing its roster of firms to nine and tripling assets under management to $15 billion.
The acquisitions of The Buckingham Family of Financial Services, Sentinel Benefits Group Inc. and Quantum Capital Management Co. add a combined $10 billion in assets to New York-based Focus , which started off with just $3.5 billion last year.
Focus, supported by Summit Partners LP, a Boston-based private-equity and venture capital firm, remains on the prowl for acquisitions, said chief executive Rudy Adolf.
“We are looking for excellent [registered investment adviser] firms in an independent-fiduciary-wealth space, with an excellent record of service and compliance, [and] a strong business model [that] meet our financial criteria,” he said.
‘Resonates with RIAs’
The acquisitions have helped Focus storm toward the front of the pack.
“Focus has emerged as one of the most important players in the RIA industry within a very short period of time. Their business model resonates with RIAs because it benefits all parties involved, including the principals, the employees and the clients,” said David DeVoe, director of mergers and acquisitions for the strategic-client group at Schwab Institutional in San Francisco.
“Most successful holding companies share a common trait: They maintain — and celebrate — the independence of the RIA. Over the next decade, successful holding companies will likely change the landscape of the RIA industry,” Mr. DeVoe said.
The owner of one wealth management roll-up firm is a bit skeptical as to whether the Focus model will succeed, however.
“If you have money, you can throw mud against a wall and see if it will stick,” said Kenneth L. Fisher, chief executive of Fisher Investments in San Francisco, which is the parent of 11 firms with $35 billion in assets.
He also questioned whether Focus’ motive is to build a financial network or if it is just acting as a pure buyer; it is unclear what drew the acquired firms to Focus, Mr. Fisher said.
Mr. Adolf declined to comment on Mr. Fisher’s remarks.
The $7.7 billion Buckingham Family of Financial Services in St. Louis includes Buckingham Asset Management Inc., a fee-based wealth management firm, and BAM Advisor Services LLC, a specialized turnkey asset management provider offering an array of services to other investment advisory practices.
As a result of the deal, “the breadth of our clients’ needs and the things that we can do for them can go beyond the core investment strategy and are one part of a bigger puzzle,” said Mont Levy, chief operating officer of BAM Advisor Services.
Sentinel Benefits is a Wakefield, Mass.-based employee benefits and independent investment advisory firm with $2.3 billion in assets.
Quantum Capital Management of Corte Madera, Calif., is an asset and wealth management firm with $250 million in assets.
Succession planning
“The wealth management industry is in an attractive spot, and it is driven by demographic changes and the enormous wave of people retiring and passing down inheritance,” Mr. Adolf added. “We are very passionate about creating a quality standard in wealth management, and these transactions enforce that we are way on our way to achieving this goal.”
The deals are designed to maintain the culture and business model of partner firms, and Focus expects to work with partners and successors to ensure that there will be a new generation of partner firms to follow, Mr. Adolf said.
Although the firm doesn’t do exit transactions, it would consider merging businesses into existing partner firms, he said.
“We don’t have an absolute size limit and are looking for companies with a strong balance sheet structure,” Mr. Adolf said. “We are looking for high-quality planning firms that have established a track record of excellent client care, a healthy business model and have demonstrated success.”
Resnick Investment Advisors LLC, which manages $493 million in assets, joined Focus in June.
“I have a strong desire to be active in the business and grow the business as quickly as I have in the past,” said Martin Resnick, partner and managing director of Resnick Investment Advisors in Westport, Conn. “This is less about me exiting and more about doing a partial transition to keep the firm growing into the foreseeable future.”
‘Very aggressive steps’
Industry insiders are voicing interest as to how Focus will fit several breeds of advisory firms under one umbrella with the theme of fiduciary wealth management.
“Focus has made some very aggressive steps forward and has a very good partner backing them who has been very instrumental in their growth, and something is going to come of this situation,” said Elizabeth B. Nesvold, managing director and partner at Cambridge International Partners Inc. in New York. “It suggests that there are a lot of people who need to affect ownership succession, and this is one solution.”
Ms. Nesvold and Mr. DeVoe agree that successful holding companies hold the key to the changing landscape of the RIA industry going forward.
Those companies include Chicago-based Convergent Capital Management LLC, a holding company with 10 affiliates and $24 billion in assets. It is owned by City National Corp. of Beverly Hills, Calif.
Another firm, Circle Peak Capital LLC of New York, acquired WealthTrust Inc., a Nashville, Tenn.-based financial holding company that already owns 10 advisory firms with $6.4 billion in assets.