Focus follows Dynasty into Canada as the three big aggregators toggle between organic and inorganic growth

April 17, 2015 — 6:20 PM UTC by Lisa Shidler

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Correction: A previous version of this article erroneously had a “Brooke’s Note* from me that stated that Randy Bullard had departed Cantor Fitzgerald. That is wrong and he remains a senior managing director in Cantor Fitzgerald’s ETF group. It also suggested that Cantor’s ETF business has faced difficulties, which Bullard challenges. He says it is a leading market maker. This correction comes with an apology not only because it was gotten wrong but I have crossed him up twice before. He has always corrected me thoroughly but with more grace than I deserved under the circumstances. He did not demand this apology, only that I do better with my facts in the future. I plan to be more than mindful of his suggestion.

Brooke’s Note: As Lisa Shidler was finishing up this article on roll-ups, InvestmentNews ran a piece about Cantor Fitzgerald’s challenges in roll-up land. I reached out to sources for broader perspective about why this promising roll-up unit isn’t closing many deals or keeping its roll-up leader, Stan Gregor. Gregor had, it seems, been commuting and telecommuting to New York from Charlotte, N.C. Since going to press Carol Nulman joined HighTower, Her firm, the Nulman Group of Providence, R.I. manages $500 million in client assets. Focus Financial added Short Hills, N.J.-based Classic Capital, which manages $250 million, through Buckingham Asset Mnagement. So this article’s headline might have had $2.75 billion had we waited a few more days.

Just when it seemed the nation’s biggest wealth management aggregators had settled into an organic growth course, the three major firms in the field — United Capital Financial Advisers, Focus Financial Partners LLC and HighTower Advisors — brought over a combined $2 billion in assets in three separate deals, all announced in the last week. See: How United Capital’s unconventional rolling up of a $2 billion RIA reveals how close the roll-up model is to extinction.

“Certainly these deals offer proof that none of these major players have intentions of backing away from direct acquisitions. If the right opportunities come along for them and the seller is willing, these deals will continue,” says Dan Inveen, principal at FA Insight.

New York-based Focus Financial Partners LLC crossed the northern border to fold in Montreal-based Dorchester Wealth Management, which manages about $850 million in Canadian dollars, which currently translates to about $691 million in U.S dollars. Terms of the deal were not disclosed. Focus Financial manages about $30 billion in discretionary assets. Dynasty Financial Partners previously announced an outsource deal in Canada. See: A $15-billion roll-up-like venture in Canada gets a US foothold with a Dynasty Financial deal — and vice-versa.

On the West Coast, Newport Beach, Calif.-based United Capital Financial Advisers is putting two new pins in the U.S. map by acquiring a pair of advisory firms with a collective $625 million in assets under management: CS Capital Management Inc. of Indianapolis and PRI Investments Inc. of Chapel Hill, N.C. United Capital has $13 billion in assets under management. See: How United Capital’s unconventional rolling up of a $2 billion RIA reveals how close the roll-up model is to extinction.

In Chicago, HighTower Advisors just signed on the Orange County, Calif.-based Bahnsen Group run by David L. Bahnsen and Brian T. Szytel, which manages $750 million in assets. Bahnsen marks the fourth deal Hightower has struck in 2015, generating a cumulative $1.5 billion in client assets. Earlier this year, HighTower increased a revolving credit facility obtained from BMO Harris Bank, PNC Bank and SunTrust Bank from $100 million to $150 million. HighTower’s assets at the end of 2014 stood at about $30 billion. In other Hightower news, the company just hired Chris Curtis to join the firm as executive vice president of finance and accounting. See: How Tony Robbins co-opted Elliot Weissbluth (and HighTower data) and vice-versa.

Dave DeVoe: For whatever reasons, some folks start to think they're slowing down, but they're not.
Dave DeVoe: For whatever reasons, some
folks start to think they’re slowing
down, but they’re not.

Juggling buckets

These deals signal that consolidators still have their foot on the gas when it comes to acquisitions, says David DeVoe, managing partner at DeVoe & Co. in San Francisco. Still, he says, they’ve cumulatively done fewer first-quarter deals than in years past. In 2015’s first quarter they completed 41% of total deals year-to-date compared to 70% in the first quarter of 2014. But DeVoe notes that it’s hard to compare such tiny slivers of time.

In all of 2014, consolidators were part of 47% of deals, up from 38% in 2013.

DeVoe sees the aggregators continuing a dual focus on inorganic and organic growth.

“I think there’s a natural life cycle a consolidator organization takes. I think in general they’ve been consistent in maintaining their growth trajectory and their movement. For whatever reasons, some folks start to think they’re slowing down, but they’re not. In the early business model, a consolidator grows 100% of growth from transactions but over time that model can evolve. They can continue to do deals and help their own firms make deals too.”

That view is borne out by United Capital founder Joe Duran, who says his firm will work to aggressively grow the firm on all fronts. United Capital is now at $120 million to $130 million in annual revenue, up from $100 million in revenue a year ago. See: Joe Duran explains United Capital’s 100% revenue growth to $100 million since 2012 and the firm’s complex plan to grow faster.

“I think everyone wants to put [growth] into neat buckets and it’s not that neat. You evolve and change and want to stay with a business plan that works and also expand it. People will be very surprised with some technology that we’re bringing out this year.” See: Why Joe Duran is dead wrong on 2015 marking the end of the Golden Era of the RIA.

Northern exposure

Dan Inveen: These deals offer proof that none of these major players have intentions of backing away from direct acquisitions.
Dan Inveen: These deals offer proof
that none of these major players
have intentions of backing away from
direct acquisitions.

While Duran focuses on expansion in the United States, DeVoe notes that the Focus deal with Dorchester Wealth Management makes it the only aggregator to expand beyond U.S. borders.

“Focus is clearly interested in coloring outside the lines of the U.S. map and the Canadian banks are demonstrating an interest in the American wealth management model. It’ll be interesting to see if the Canadian banks are interested in expanding the footprint to the U.S. and how the American model can apply to Canada,” he says. See: After a head-fake, Royal Bank of Canada shows it’s back (or never left) in the RIA game with two NextGen hires.

Dorchester Wealth Management works with affluent clients in Canada, the U.S. and international markets. Rudy Adolf, chief executive of Focus Financial, says he’s signed on a firm with a terrific management team.

“Canada is a bank-dominated market but also has a strong independent segment. There is no equivalent proposition to Focus available in Canada and with Dorchester we found an ideal partner for our market entry,” Adolf writes in an e-mail. See: Advisor spotlight: Following the snowbirds, Canadian firm expands south.

Canada rules

Regulations are as different as night and day in the two countries, Adolf acknowledges.

“ICPMs [ Investment Counsel and Portfolio Manager] are mainly regulated on a provincial level.” But Adolf says Focus is particularly well suited to the challenge.

“Our highly decentralized and entrepreneurial model can flexibly adjust to different market requirements. Dorchester is not a Focus office but rather an independent partner firm. We will use our resources to support Dorchester’s growth but also identify additional Focus partners.” See: A $15-billion roll-up-like venture in Canada gets a US foothold with a Dynasty Financial deal — and vice-versa.

Adolf says that 2015 is shaping up to be one of Focus’s busiest years.

“2014 has been a terrific year for Focus and first quarter 2015 has been our most busy start of any year …. The U.S. will continue to be our home market and present lots of opportunities, international expansion is an exciting additional growth avenue for Focus’ market leading business model.”


Mentioned in this article:

United Capital Financial Advisers
RIA Welcoming Breakaways
Top Executive: Joe Duran

Focus Financial Partners, LLC
Consolidator/Roll-up Firm
Top Executive: Rudy Adolf

FA Insight
Consulting Firm



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