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Industry Spotlight > RIAs

Dynasty Rolls Out New Loan Program for RIAs

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Dynasty President and CEO Shirl Penney. Dynasty President and CEO Shirl Penney.

Dynasty Financial Partners says it is rolling out a new financing program for advisors going independent.  

The RIA services group says its Freedom Note will give qualified advisors who join its network an eight-year “forgivable loan” based on a percentage of their yearly fees and commissions. This amount will have to be repaid with a portion of the RIA’s revenue; once it is, the advisors will own all of the RIA’s equity and can continue to work via a partnership with Dynasty.

For instance, advisors can elect to receive 100% of their trailing-12-month revenues. During the loan period, they will receive 65% of this production, and 35% of it will go to Dynasty for loan interest, principal servicing and access to the network’s middle- and back-office services.

It’s similar to forgivable note structure [now offered by some wirehouses] in that it’s paid one-eighth … per year, and if the advisor sold their RIA — let’s say at the end of year five — they would owe only three-eighths of the note at that period,” said Dynasty President and CEO Shirl Penney.

In other words, Penney explained, “It’s a loan to the RIA and the principal, so they take the money out (if they want to) and pay it back via cash flow from the business.” This makes it more tax-efficient in its treatment of upfront proceeds, he adds.  

In late 2017, Dynasty introduced a minority-equity program through which it would buy a minority stake of an RIA via a revenue participation note; advisors would be paid in cash, which they could use for acquisitions or other uses. Close to a dozen Dynasty firms participated in the program in 2018, it says.

The firm’s latest news comes about two weeks after it launched a platform to support independent advisory firms with private M&A transactions.  

With some wirehouse or other deals, “As a note is forgiven, it’s actually being paid back too, but the advisor has to pay income tax on it, as they are an employee getting compensation from an employer,” according to Penney.  

“This is a loan from a service provider to a business — far better for advisors,” he explained; plus, at the end of eight years, the advisors will own all the equity in the RIA and capture all their net income at that time.

“The Dynasty Freedom Note represents another example of our drive to innovate in order to meet the evolving needs of the industry …,” according to Penney. “With $8 billion in new client assets having been added to the Dynasty platform over the past two months alone, it is clear to us that the movement to independence is as strong as ever.”


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