Joe Duran goes big on first-ever 'Rise' deal -- a $10-billion 'Schwab' RIA-- big enough that his business model just shifted with it

Andy Schwartz had grown disillusioned with private equity investors and national brand acquirers. In 2022, he declared a three-year moratorium at his RIA on the “distraction” of any discussions with them.

“It always ended up the same,” says the CEO of Bleakley Financial Group in Fairfield, N.J.

“It would have been great [liquidity] for my partners and myself [but not for advisors in the firm.]. Everyone else was money. We didn't need money, personally."

That is, until he met Joe Duran. 

It all led to today's news that Duran's Rise made its first capital placement as a startup firm – an unspecified minority investment – in Schwartz's RIA. 

“We wanted $1-billion to $5-billion [in assets], but this is double,” Duran says about zeroing in on Bleakley. “We know what ‘good’ looks like,” 

The Rise plan is to take the Fairfield, N.J.-based RIA, which has its presence concentrated more in the Northeast and Midwest, and build out its presence and brand West and South.

“Now we aren't fighting with one hand tied behind our back,” says Schwartz, who adds that having equity to offer already has sparked conversation with advisors with books of business of $500 million or more.

Falling short

It began with an impromptu conversation earlier this year between Duran and the parent of one of his daughter's volleyball teammates, who happened to be a friend of Schwartz's.

Duran had met with dozens of RIAs with assets of between $1-billion and $5-billion but had found them to lack key qualities, a nonstarter for a national push using his firm's capital.

“Sub-$5 billion was basically impossible,” says the co-founder and CEO of RIse Growth Partners. 

The smaller firms suffered from a lack of leadership, strategy, scalability, organic growth and a unified culture. Many of the firms were simply small roll-ups that had never integrated their acquisitions.

Sea change

What was interesting is that Duran ended up having to change his business model to do this deal.

His model called for six investments in RIAs with $1 billion to $5 billion, but this one is $10 billion, and he's anticipating he'll 'concentrate his bets down to three.

“It’s a much better business model to go after larger and fewer firms," says Mike Wunderli, managing partner of Echelon Partners in Manhattan Beach, Calif.  

"One billion to five-billion firms can’t really compete with their larger counterparts for acquisitions. And it takes too long to grow them organically to get to scale,” he adds, via email. 

Regaining an edge

Bleakley was already growing smartly without Rise riding shotgun. For 10 years leading up to 2015, it was Northwestern Mutual's largest wealth management practice.

It broke away with about $3 billion of AUM to become an affiliate of Private Advisor Group in 2015, which was then largely an LPL OSJ based in Morristown, N.J. 

Most of Bleakley's assets are now in custody with Schwab Advisor Services but still a healthy $4 billion at LPL, including $3.6 billion advisory and $400 million of brokerage assets.

It then began to operate under the Bleakley brand.

The advisors and the four principals were all 1099 contractors. Upon closing the Rise deal, the four principals are now W-2 employees, and the salary model will be an option going forward for advisors.

Still, Bleakley, which succeeded by recruiting from various brokerage channels, particularly Northwestern Mutual, found it was losing its edge in some cases. 

What Bleakley's owners like about Rise is more than the capital it has to invest. It has built out a staff of 15-plus individuals, including Terri Kallsen, Schwab's former head of retail. See: Joe Duran's second RIA act is rocking with eight staff, four co-founders and a conspicuously anti-United Capital concept that will flip RIA stakes 'eventually' as a minority investor

Competing 

The plan is likely to change – pending a survey of clients – then the ‘Bleakley’ brand will begin to be marketed in earnest. 

To date, Bleakley has spent virtually zero on branding. It spent $7,000 in 2023, most of it to support a playbill at a local New Jersey theater.

What it couldn't offer in a recruiting package was firm equity – something that the Rise deal will help it to introduce.

“It’s very hard to compete as a buyer in this market, and you need as many tools as possible at your disposal. And if cash is the power drill of acquisition tools, equity is the chainsaw,” Wunderli says. 

Aggressive deal

Duran launched Rise Growth Partners in Sept. 2023, and said the company would take 30% stakes in RIAs with $750 million to $5 billion in client assets under management. 

Duran, 56, Rise's co-founder and CEO, will now invest in more like three or four total RIAs to adjust for this larger play and  shift his philosophy that RIAs with fewer than $5 billion are not typically geared for a push to become a “national brand.”

In February, Rise secured a $250 million commitment from private equity firm Charlesbank Capital Partners to fund its M&A activity. See: Charlesbank bets bank on Joe Duran -- 'very risky' by private equity standards -- but the 'Rise' model, capital amid scarcity and a 'Joe' factor have observers high on its prospects

Schwartz may have been in a position to ink a favorable deal because it had a motivated investor.

"I think Rise really needed to get a deal done, and thus, was probably willing to get aggressive on valuation. And I’m sure Joe can be very convincing when he wants to be,” Wunderli says.  

Schwartz was recruited by Northwestern right out of college and respects the training to this day.

“We learned how to ask questions,” he says.