Focus Financial to Get $216M Boost From Centerbridge

The new investment is the latest in a series of private equity moves impacting the wealth management industry

Focus Financial Partners said Monday that the private equity firm Centerbridge Capital Partners would be investing $216 million in the partnership, which includes 25 independent wealth management firms.

The arrangement should close in the third quarter, with Focus partners and management retaining a majority of their ownership in the company. Focus Financial Partners’ investors, Summit Partners and Polaris Ventures, will continue as shareholders. 

Rudy Adolf“The independent RIA industry is a growing, $3.2 trillion market that continues to attract fiduciary-minded wealth managers," said Rudy Adolf (left), founder and CEO of Focus, in a press release. "As a market leader, Focus is excited about Centerbridge’s investment in the company as it further validates our model and the growth potential of our company and the industry as a whole.”

“This investment adds to our deep pool of available capital as we continue to work closely with our partner firms to support their own growth initiatives,” Adolf said. “Most importantly, Centerbridge’s investment creates liquidity for many of our shareholders at an attractive return.”

Founded in 2006 with $3.5 billion in client assets, New York-based Focus has been expanding at a fast clip by adding veteran RIA and ex-wirehouse teams. In the past 12 months, according to the partnership, Focus wrapped up 10 transactions and boosted client assets by $14 billion.

The group’s independent advisors and their practices now have some $62 billion in client assets and more than $250 million in yearly revenue.

“Consistent with other investments Centerbridge has made in market-leading businesses and industry consolidators across various industries, Focus has a strong track record, first-class management team, and a well-developed infrastructure which position it for further expansion,” said Matthew Kabaker, senior managing director at Centerbridge, in a statement. “We are pleased to have the opportunity to partner with Focus management, its partner firms, and existing capital providers, Summit Partners and Polaris Ventures, in the next stage of their growth.”

New York-based Centerbridge Partners has roughly $20 billion in capital under management as of May 2013. Its business focuses on private equity and credit investments.

"As one of the 2006 founding partner firms in Focus, I have continuously benefited from the Focus platform," says Bob Kresek, principal and wealth advisor at Buckingham Asset Management in Cupertino, Calif, in a press release. "Focus enabled me to dramatically grow my original business, Founders Financial Network, culminating in our merger with Buckingham."

Private-equity investors have been busy investing in the wealth management field in recent years. Last month, for instance, independent broker-dealer First Allied said it was being bought by a group led by the real estate investor Nicholas Schorsch.

“We looked at First Allied’s business specifically for what it offers RCAP Holdings, not for distribution of product,” said Schorsch, chairman and CEO of RCAP, in an interview.

“First Allied is not a top-10 distribution source for us. They only sell three products for us,” he added. “This is the RCAP partnership investing in an industry we believe in."

Experts like Philip Palaveev, CEO of the Ensemble Practice, an advisory-practice consulting firm based in Seattle, says such investments should continue.

“Financial planning is a young but maturing industry, and that is why we see the institutional ownership increasing, including private equity—which is a subset of institutional capital,” Palaveev said in an interview.

“The industry is seen as growing and highly lucrative. The interest of private equity is a signal that this is an industry of opportunity,” he said. “That’s good news — nothing else.”

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