Rush 'Rusty' Benton is back in the deal game -- wielding the checkbook and credibility of $85-billion CAPTRUST
The godfather of RIA roll-ups is heading up CAPTRUST's little-known $2.5-billion private-wealth division with plans for hoovering advisors into a non-autonomous framework
Glad to read Rusty/Rush is back!
The roll-up model needs a “friendly” large balance sheet! The only two roll-ups that have that in my opinion are AMG and CAPTRUST.
I sure hope Captrust did their homework. Wealthtrust had $20m in senior debt, plus $60M in mezz debt from Falcon and an equity investment from Circle Peak. The recap converted the debt to common and wiped out all equity holders (advisors). All that madness for 10M in EBITDA, a black eye for the RIA consolidation space and several advisors around the country completely spurrned. Welcome back Rusty.
Elmer Rich III
So the goal here is to get scale for sunk costs at CapTrust?
Appreciate the preceding comment. Our experience is that the ROI on this kind of acquisition is a 3-5-10 year time frame but funded spreadsheets “don’t go out that far.” Generally, for a financially driven deal the max time frame is 3 yrs.
Also, the best return comes form growth, but if the operational goal is scale for existing systems — that’s generally counter growth, since the scale goal is always less investment, i.e., more profit.
CapTrust may be the breakout firm that makes a multi-generational leap in supporting the depth and breadth of counsel required for fiduciary standing. If they do, exponential growth in multiples of $85 billion is possible—thus the need for Rusty Benton. They have the scale, footprint, intellectual capital and the latitude to execute which has held back brokerage firms and RIA rollups.Brokers and advisors alike are looking for “just add water” approach to expert fiduciary standing. The missing links are (a) expert authenticated prudent investment process based of objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters which makes fiduciary standing safe to acknowledge, (b) advanced technology that supports transparency, continuous comprehensive counsel, and more modern approaches to portfolio construction which streamlines cost required for fiduciary standing, (c) work flow management tied to a functional division of labor (Advisor, CAO, CIO) which makes advice scalable, easy to execute and manage as a lower cost, high margin business at the advisor level, (d) conflict of interest management which assures the trust and confidence of the investing public.
Importantly Cap Trust has the capability to actually resolve the well known limitations of a brokerage format in supporting advisory services and professional standing and the consumer’s best interest (in accord with fiduciary duties) presently not being addressed in the industry.
Yes, there is the question that one has to be a broker/dealer to serve some market segments like the DC market, but that is easily resolved as the old protocol is rendered obsolete counter fiduciary duty, required of plan sponsors, triggering unwanted fiduciary liability.
This resulting innovation facilitates exponential growth and a multi-generational leap in products, services, technology and pricing which without question are counter to the investors best interest.
Doing the right thing will not likely come from product companies, the future is in process and technology that facilitate an unprecedented level of counsel at a fraction of the cost. As Edwards Deming tried to explain to Detroit to no avail, “if you can’t explain what you do in terms of process, then you don’t know what you are doing.” This sort of innovation is comming to the financial services industry and comes from firms like CapTrust who view disruptive innovation as a means for exponential growth.
As Harvard’s Clayton Christensen observes, “the biggest mistake established institutions make when looking at innovation, is viewing innovation in the context of their existing business model, when a new business model is in order. CapTrust may be the new business model.
Very few firms are able to comply with the new reporting requirements, 12(b)1 fees are not here for the long run, something has to give and it is firms like CapTrust which will come up with a solution. It’s the American way.