DeVoe Departs Schwab to Form Advisor M&A Consulting Firm

Will provide strategic consulting and valuations, and arrange financing for mergers and acquisitions

Dave DeVoe, the long-time managing director of strategic business development at Charles Schwab’s RIA custody unit, has left Schwab Advisor Services to form DeVoe & Co., which will provide strategic and M&A consulting services to the advisor community, from “soup to nuts,” including valuation services and arranging financing for advisor M&A deals. 

In an interview with AdvisorOne on Monday, the day his San Francisco-based company formally launched, DeVoe (left) said that advisors are entering a natural phase of consolidation, with the demographics of the advisor community—notably its average age of 54—helping to “nudge some people toward the exits.” Many advisors exhibit a poor readiness for succession planning, saying “it’s an important gap that many advisors need to close” and noting that only 40% of all advisors have succession plans at all, while many of those plans are not comprehensive. 

DeVoe said that advisors are growing more sophisticated in their M&A activities, with many such mergers and acquisitions taking place for strategic reasons, using M&A to accomplish business goals outside of just growth. 

As an example, he cites his first client, a California-based advisory firm that is considering two possible acquisitions—one of a firm with $125 million in AUM, and another with $250 million in AUM. In addition to adding significant assets, he noted that the first acquisition would increase the acquiring firm’s ability to manage assets internally, while the second acquisition would provide them with a hybrid platform to accommodate both fee- and commission-based advisors. 

With his Schwab background and having worked on business strategy at American Express before joining Schwab, DeVoe said “the lens I look through” at M&A is a strategic one. In his work with advisors, he says he will begin by asking the prospective buyer, or seller, to “step away from the transaction, talk through the personal and business goals, and then talk about the strategic goals” that any transaction could achieve. 

While at the moment DeVoe & Co. consists of DeVoe himself and administrative support, he said he has contracted with an investment

banker (who formerly ran an RIA firm) who has already financed 15 such advisor M&As, and he hopes to add full-time personnel in 2012. He’s looking to release some research he’s conducted in early 2012 on the space; he said he also expects there to be some new, significant players in the advisor M&A space soon. 

As for how he will be compensated for his efforts, DeVoe said that if an external transaction is involved, he will receive a mix of monthly retainer fee and a “success fee, generally in the 3% range” of the transaction. An internal transaction would include a project fee “in the $30,000 range.” Fees for valuation would be separate, ranging from $3,000 for a “simple and quick” valuation, to a “more robust” valuation for $7,000, while a comprehensive valuation would cost $15,000. Over the long run, DeVoe hopes to use his expertise to create more scalable services for smaller advisory firms. 

He’s also aware that his services—“providing the strategic context, creating the plan, identifying the prospects, navigating the deal structure process, and financing”—won’t necessarily end with the transaction itself. Once the transaction is completed, his firm will help with the communications to staff and clients, helping to merge the organizations, changing “the org structure and aligning and incenting people as appropriate.”

He expressed appreciation of Schwab and the time he spent there—“It’s clearly a great company and it’s been great working with advisors, but Schwab limits what we could do with these firms, for good reason; they don’t want to do investment banking or valuations”—so the new firm will allow him to provide the complete range of services for advisors, using the knowledge he gained from “speaking with 300-plus advisors on their transactions” while at Schwab.

DeVoe spent nine years at Schwab, with eight years leading its advisor M&A operations. (Over time, DeVoe served as a source for several AdvisorOne news pieces, wrote several articles for Investment Advisor magazine and contributed blogs to AdvisorOne.)

Speaking of DeVoe, Schwab Advisor Services' Susan Forman told AdvisorOne in an interview Monday "we wish him well," and that Nick Georgis of Schwab will serve as a "spokesperson in the short term" on M&A. Moreover, Schwab will "stick to our strategy" of reporting quarterly on the state of RIA mergers and acquisitions. Referring to Bernie Clark of Schwab's notion of an 'ecosystem' of companies growing up around the RIA space and serving those companies, Forman said DeVoe's new company could well be "another example of that evolving ecosystem."

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