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Focus Financial Partners adds five more affiliates

Thomas Coyle

9 October 2007

Two-year-old wealth-firm aggregator far exceeds its own growth predictions. Focus Financial Partners has acquired five more affiliates. The additions give the RIA holding company a network of 14 partner firms with more than $25 billion in client assets, putting it well ahead of the growth it -- and its private-equity backer Summit Partners -- foresaw at launch in January 2006.

Back then, as Focus was coming out of the gate with four partner firms and combined client assets of $3.5 billion, CEO Ruediger Adolf said the plan was to hit the $25-billion mark within five years; in part through organic growth but chiefly by bringing its affiliate total to between 30 and 50 firms.

"We're clearly ahead of schedule," Adolf says now. "We got recognition earlier, and so were able to attract a broader selection of firms with significant scale than we originally thought we would."

Kevin Mohan, a general partner of Boston-based Summit, describes Focus' progress to date as "fantastic."

Summit controls an investment fund of about $9 billion. It made a $35-million investment in Focus late in 2005, and hinted that it would commit more to the venture as needed. So far, however, Focus has been able to fund further growth with traditional-source lending.

Catalyst

" in the growth of Focus as an entity."

Rapidity

For Mike Glor, principal and founding partner of new Focus affiliate GW & Wade, the attraction to Focus boils down to its understanding that "this business is about personal relationships."

It also helped that the transition to affiliation with Focus was seamless for his clients, adds Glor. "We made a point to call all our clients beforehand," he says. "It was nice to be able to reassure them that the transaction would be invisible to them."

There are other RIA aggregators out there, says Peter Rockefeller, a managing director New York-based investment bank Berkshire Capital, but Focus is probably the most aggressive. Adolf "has grown the company on a very rapid timetable," he says.

Other companies in the game include Boston Private and WealthTrust. Firms like insurance-brokerage holding company National Financial Partners and asset-manager networks such as Affiliated Managers Group, Asset Management Finance and Convergent Capital Management have similar missions even where wealth management is more of a sideline than a raison d'etre.

New age

At bottom, Focus and these other firms are trying to get pieces of a $37.2-trillion global wealth-management market that has more than doubled since the mid 1990s. If anything the rate of personal-wealth growth seems likely to accelerate in coming years as baby boomers enter their peak accumulation years or sell businesses, exercise options and divest from pension vehicles in preparation for retirement.

Boston-based research firm Celent sees a 24% jump in the population of North Americans with at least $250,000 in liquid assets to 37.7 million by 2010 from 30.4 million in 2006. Another research firm, Tiburon, Calif.-based Tiburon Strategic Advisors, predicts that investable assets held by U.S. consumers will rise to around $30 trillion by 2010 from less that $20 trillion in 2004.

Though a tide like that is likely to lift a lot of boats, Focus is betting that independent investment advisories will benefit particularly. "Independent RIAs manage 15% of personal wealth" in the U.S., he says. "They should be managing 50%."

To support this view Adolf points to data from Boston-based Cerulli that shows assets under management by independent RIAs increasing from $286 billion in 1997 to $750 billion in 2005. Citing Tiburon research, he also notes that RIAs increased assets under management at a faster rate than discount brokers, wirehouses, mutual funds, banks and insurance companies between 1995 and 2004.

"This is the beginning of the age of the independent," says Adolf. "Wealthy individuals are realizing that they're better served by an RIA than a sales person." -FWR

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