The New York-based roll-up buys Brownlie & Braden Advisors LLC no asset-based fees, no photos of principals and a big-time second-entity sister firm

July 24, 2017 — 11:48 PM UTC by Brooke Southall

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Brooke's Note: One of the questions sources asked when Stone Point bought Focus Financial in lieu of an IPO was what it would do now that the man really in charge was Chuck Davis, the highly prominent private equity guy and amigo of KKR.  See: Stone Point and KKR buy Focus Financial for $2 billion by employing massive leverage. Perhaps this first post-Chuck Focus deal provides a big clue -- given that it oozes private equity. Of course, private equity investors are like mushroom farmers in preferring fairly pitch black working conditions and disclosures. We got plenty of that windowless atmosphere here. None of my usual sources, thus far, have responded to requests for thoughts on this deal or its protagonists. Luckily there is an ADV II that suggests -- along with some prepared remark in the release -- the dynamics that got two sets of dealmakers to the table. So maybe that is why Stone Point saw value in Focus Financial where others did not -- a way to link up private equity investors with firms whose clienteles are loaded with accredited investors. When brokers left Wall Street to become RIAs, they left the investment banks behind along with their value as placers of high-margin product. Now perhaps Rudy Adolf will bring it all back together -- profits and all -- as an ecosystem of finance, investments and financial advice.

In what may be a sign of things to come in a post-sale world, Focus Financial Partners LLC stealthily reported the purchase of one of two financial firms co-owned and co-founded by Smith A. Brownlie III and James E. Braden. 

In its first substantive deal since selling out to Stone Point Capital LLC, the New York based roll-up acquired Brownlie & Braden Advisors LLC, a Dallas- based RIA that manages $2.3 billion, according to Focus and $1.9 billion, according to the SEC ADV. See: Focus Financial's 'extraordinary' purchase of $16B-AUM SCS Capital and what Stone Point -- both buyer and seller in the deal -- may do to juice its investment.

A previous version of this artcle noted the oddity of the Brownlie & Braden ADV listing zero assets. On July 26, a reader left a comment with a link to an ADV under the name Hanover HillCrest Holdings. The ADV says that the firm has only 22 accounts. Since most clients have multiple accounts, it speaks to how this firm truly serves a very small clutch of ultra high net worth clients.

Focus put out a short press release on its website that was not carried on PR Newswire, the usual conduit for such news. Neither the roll-up nor the RIA replied to requests for comment from RIABiz or other publications. 

"In the second decade of our growth we expect the number of our deals to continue to increase as we pursue additional partnerships with the highest-caliber firms in the industry,” said Rudy Adolf, CEO of Focus Financial, in the release.

No mention was made in the deal announcement of Cotton Creek Capital, a Dallas-based private equity firm that buys small companies with between $5 million and $15 million of cash flow, which is solely controlled by the two owners of the RIA. 

Addressing conflict

Brownlie & Braden Advisors will at times make investing recommendations in this private equity to wealth management clients, according to Brownlie & Braden's ADV 2.

"To address this conflict, the Firm provides full and fair disclosure to its clients. Additionally, the Firm’s officers are mindful of the fiduciary duties they owe to all of their advisory clients," the ADV 2 reads.

Braden is an active private equity investor and serves as a managing director and a principal of Cotton Creek Capital Management LLC and Cotton Creek Capital Management II LLC, which serves as the general partners of various private equity funds advised by Cotton Creek. 

Brownlie, 59 and Braden, 58, keep impeccably low profiles given that Google failed to source a photograph of either man, an almost unheard of phenomenon when it comes prominent people circa 2017.

Early days

The two entrepreneurs got their starts together at Peat Marwick, now KPMG, and broke out on their own in 1997. Through their RIA, they continue to dispense advice in the way of a Big Five accounting consultant with clients being charged as much as $600 per hour, much of it billed in upfront retainers, according to the ADV 2. See: Why relying too heavily on a divorce attorney can be a bad financial planning move by clients.

The firm also lists services more akin to an investment bank or consulting firm including: life insurance, due diligence, interim company management and board representation.

Indeed, in a prepared remark, Smith Brownlie spoke of Focus Financial in transactional terms. "Focus emerged as the ideal fit, particularly given the firm’s significant financial strength, M&A capabilities and in-depth knowledge of our work,” it said. “With access to capital and a range of value-added services, we are excited to work with Focus to continue to serve our clients and grow our business.” See: Why Focus Financial is risking it all -- including the advantages of privacy and private stock -- for a successful IPO.

Access to capital

Brownlie is a member of the American Institute of Certified Public Accountants and of the Texas Society of Certified Public Accountants. See: In benevolent invasion, CPAs-turned-RIAs make statement with sheer numbers in Vegas.

He is past chairman of the board of directors and current member of the Fort Worth Business & Estate Council, UT Southwestern Medical Center Estate Planning Council and the North Texas Chapter of the National Committee on Planned Giving. Brownlie has also served on the Estate Planning and Planned Giving Advisory Boards for Baylor University. He was an Anderson Clayton Fund Scholarship recipient and received his Bachelor of Business Administration degree from Baylor University.

Braden, a Certified Public Accountant, has worked with Lincoln Property Co., a national real estate developer based in Dallas. He currently serves on the board of managers of Terrace Energy LLC and is a member of the board of directors of Waste Partners Environmental Inc. and previously served as the chairman of the board of directors of Graco Holding Inc. Additionally, Braden manages BKB Capital Ltd., a private investment vehicle. See: How Neal Simon parlayed a hoity-toity family office RIA into a $5 billion serial buyer in two years by letting the whale swallow him first.



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Stephen Winks said:

July 25, 2017 — 3:48 PM UTC

70 years ago there was high connectivity between capital formation/investment banking and brokerage/investments. There need not be a conflict of interest yet the conflict exists. With the brokerage industry commanding 40% of the investors earnings of their retirement savings in the form of brokerage fees, commissions and administrative cost, Focus risks losing the advantages of an RIA business model and the consumer protections afforded by a fiduciary relationship. SCW
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Fact checker said:

July 26, 2017 — 6:55 PM UTC

Looks like they did a name change as part of the acquisition, which may have screwed up your search for the Form ADV, it's right here, showing $1.9B https://www.adviserinfo.sec.gov/IAPD/content/ViewForm/crd_iapd_stream_pdf.aspx?ORG_PK=129675 Looks like they did a name change to "HANOVER HILLCREST HOLDINGS, LLC" as part of the transaction with Focus.
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brooke southall said:

July 26, 2017 — 7:10 PM UTC

Fact checker, Thank you. Brooke

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