Fidelity’s Partnership with Merchant Investment Management
On June 10th, Fidelity Clearing & Custody Solutions and Merchant Investment Management announced a new partnership to increase wealth managers’ access to capital for acquisitions and growth initiates. The deal opens up a sizable new sales channel for Merchant, and in return, Fidelity’s behemoth platform tacks on a few additional selling points to entice M&A-minded RIAs.
No. But Goldman’s United Capital Buy Suggests the Consolidation Winds are Shifting
If there is one consistent story in these RIA rollups, it’s that building them takes longer than anybody expects. Duran worked on building United Capital for nearly 15 years. Some things require scale that cannot be acquired in one lifetime, however, and that’s where the CEO of Goldman Sachs, David Solomon, saw an opportunity.
A Few Reflections on the 2019 Berkshire Hathaway Shareholder Letter
In a world where non-stop financial commentary is as commonplace as it is tedious, one man’s market insights get an unusual amount of attention: Warren Buffett’s annual shareholder letter. Buffett is an ironic icon of the investment management industry. He’s made his fortune from active investment management, but regularly articulates his skepticism of the same. He’s doubtlessly inspired more people to found RIAs than any other individual, yet his firm, Berkshire Hathaway, is not an RIA. And his annual treatise on the performance of his company is full of common-sense wisdom that, based on Berkshire’s track record, is anything but common.
John Bogle’s Legacy Endures with the Prominence of Passive Investing
This week we say goodbye to perhaps the greatest advocate of passive investing. John Bogle’s contributions to indexing strategies and ETF investing have had huge impacts on both active and passive management, which we’ll address in this week’s post.
Management Claims Their Model is Recession Proof; Unfortunately, it isn’t Analyst Proof.
Last week was turbulent for equities around the globe, but Focus Financial (Nasdaq: FOCS) was hit particularly hard. Less than five months since IPO, Focus closed Friday at $27.45, decidedly below where the offering priced at $33, and not much more than half the share price achieved less than three months ago.
Partner-Level Conflicts at Firms of All Sizes Continue to Fragment the Industry
The recent controversy surrounding Ric Edelman’s cease-and-desist letter to his former partner, David Bach, is another reminder of how difficult it can be to sustain wealth management partnerships despite their (sometimes) obvious advantages. This week’s post will explore the sources of these disputes and what you can do to avoid them.
After watching the price of trading drop for decades, it wasn’t so surprising when J.P. Morgan announced that it would offer free online trading for certain investors last month, but when $2.5 trillion manager Fidelity Investments announced they were going to be offering two “free” index funds, the industry rocked on its heels. Is this the next leg down for pricing of investment management, a publicity stunt by Fidelity, or something else altogether?
Now that Focus is public, we have a new channel with which to study and benchmark the industry. We have lots of questions, but for this post we’ll just look at the implications of the Focus valuation that is consequent from the IPO.
Most of the sector’s recent press has focused on M&A trends and the SEC’s proposed advice rule, so we’ve highlighted some of the more salient pieces on these topics and a few others that are making news in the industry.
Last week we offered up some observations on Focus Financial’s S-1, and as we continue to study the filings, it occurred to me that they say as much about the current state of the RIA industry as to they do about Focus itself.
Focus Financial’s IPO Filings
Money, being what it is, never sleeps. It also never goes on vacation. I was, however, about to spend ten days away from the office with my older daughter in Scotland and England when Focus Financial (finally) filed for a public offering. One of the most anticipated events in the wealth management industry, the pendency of the Focus IPO didn’t cancel my trip, but I knew that my vacation was going to be at least punctuated by reading the S-1 along with my peers’ commentaries. I’ve now read the 275-page document a few times, and while it’s not your typical beach novel, the Focus prospectus is required summer reading for anyone in the RIA community.
Advice Rule Likely Successor to Recently Vacated Fiduciary Rule
Recent judicial decisions have all but nullified the DOL’s proposed regulation, and the SEC’s Advice Rule appears poised to be the likely successor. This post explores the recent turns in this ongoing saga and what it might mean for your firm.
Most of the sector’s recent press has focused on the SEC’s proposed advice rule. We’ve highlighted some of the more salient pieces on the proposed rule, as well as articles on a few other topics that have been making news in the industry.
This whitepaper is a compilation of thoughts we have gathered in the early days of this new tax regime. We present what we think are the major issues that RIA partners should consider.
There is an argument to be made that the 2017 Tax Cut and Jobs Act is bullish for RIA M&A, but there is also a counter-argument. In this week’s post, we address both.
The Tax Cuts and Jobs Act (TCJA) introduces the Qualified Business Income (QBI) deduction as a partial offset to the bill’s reduction in the relative tax efficiency of pass through entities (S corporations, limited liability companies, and partnerships) versus C corporations. Still, many RIAs will not be eligible for the deduction, and those that do will have a lot to keep in mind as it pertains to reasonable compensation levels and investment income. We’ll try to sort it all out for you in this week’s post.
Most of the sector’s recent press has focused on the tax bill’s impact on RIAs, so in addition to our own writings on the matter, we’ve highlighted some of the more salient pieces we’ve come across regarding the tax bill as it relates to the asset management sector.
The Tax Cuts and Jobs Act has really shaken up the underlying economics of investment management firms and, with that, the value of those firms. As a consequence, many owners of RIAs have inaccurate ideas of what their firms are worth, and, worse than that, they have outmoded shareholder agreements suggesting the willingness to transact at inaccurate valuations.
For this week’s post, we’re offering the slides and recording from our recent webinar on the tax bill’s impact on the investment management community. On balance, we believe most RIAs are better off as a consequence of the legislation, but there are nuances to the “win.”
We covered much of what we think the new tax bill will mean to RIA valuations in last week’s blogpost – and it’s mostly good news. The “rest of the story” involves the bill’s impact on shareholder returns for RIAs structured as tax pass-thru entities (S corporations, LLCs, Partnerships), for which the news is not so buoyant.
The tax bill is bullish for the RIA community. Focused on the implications of the tax bill for investment management firm valuations, there’s much to consider as discussed in this week’s post.
Most of the sector’s recent press has focused on broker protocol, so we’ve highlighted some of the more salient pieces as a preface to our take on the matter in next week’s post.
A Long Journey to an Uncertain Destination
As part of the analyst community that closely follows developments in the investment management industry, we were disappointed (but not surprised) that Focus Financial Partners pulled their S-1, again, and found a private equity recap partner instead of going public. Picking up on last week’s blog theme, Focus likes to tout their strategy of building an international network of efficiently connected wealth management firms as an “unfair advantage”, but it appears that their real capability is finding capital when necessary to avoid a public offering. Stone Point Capital and KKR bought 70% of the company, enabling prior private equity partners, affiliates who had sold their firms to Focus in exchange for stock, and employees with equity compensation to monetize their positions while Focus remains private.
RIA Central Investment Forum Follow-up
Last week, Matt Crow and I presented at RIA Institute’s 3rd Annual RIA Central Investment Forum, and this question was asked to the crowd of 70+ industry participants in attendance. Only about half the audience raised a hand. This comes after another delay last week, further extending the rule, now set to go into effect June 9th. Even most of those at the conference who thought it would eventually become law thought this deadline was too ambitious. So why the delay?