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Industry Spotlight > RIAs

Focus Financial Files for ‘Confidential’ IPO: Report

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The “confidential” initial public offering by Focus Financial Partners, a rollup firm in the wealth management space that competes with HighTower and United Capital, “marks the first IPO by a financial advisor aggregator,” says Chip Roame, CEO of Tiburon Strategic Advisors.

“HighTower was poised to go public but seemed to pull back from such plans earlier this year,” Roame told ThinkAdvisor in a Monday email message.

The Wall Street Journal reported the news on Monday, citing “people familiar with the matter.”

The WSJ reported that the Focus IPO could be valued at $1 billion, and that Focus was working with Bank of America and Goldman Sachs on the offering and may seek to list by the end of the year. ThinkAdvisor could not independently confirm Focus’ plans.

“Focus has previously discussed an IPO and was rumored to be drafting an S-1 last year,” Roame says, referring to the Securities and Exchange Commission filing required for an IPO, “so this is not a huge surprise.”

Firms that meet certain revenue criteria can file a confidential IPO under the Jumpstart Our Business Startups (JOBS) Act.

David DeVoe, managing partner of DeVoe & Co., a San Francisco-based consultancy that serves wealth managers, adds that Focus “was one of the first consolidators that essentially celebrated the independence of the advisory firm. Their model provides the management team of an RIA with full independence of how they run their firm, choose their investments, and brand their company.” Focus essentially says, “keep doing what you are doing, just send us a check for a percentage of your profits.” 

Other consolidators, DeVoe continues, “like HighTower or United Capital seek to standardize processes, centralize functions and leverage a national brand.”

An IPO by Focus “would provide retail investors with the best ‘pure play’ investment in the independent RIA space,” DeVoe says. “With ownership stakes in more than 50 RIAs, the publicly traded firm would provide investors with equity in a basket of independent firms with a variety of business models.”

The RIA model, adds Roame, “is booming, and I suspect we will see several more of these financial advisor aggregators.”

Roame also believes that the impending Department of Labor fiduciary rule, which becomes effective in April, will force more advisors to “reposition themselves” as fee-based.

“When a wirehouse FA or independent BD rep moves more to fee-based, they have less need to stay with their broker-dealer,” Roame says. “Due to disclosures … more consumers will become aware of the differences, and select the RIA model.”

DOL’s rule will lead to more growth for the RIA channel at the expense of both the wirehouse and IBD channels, Roame argues.

“There will be more firms that seek to aggregate RIAs because the model will grow, and there will be more big RIA firms.”


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