The Diamond Podcast for Financial Advisors

Looking at M&A from the Seller’s Side of the Table

A conversation with Karl Heckenberg, President & CEO of Emigrant Partners. When New York Private Bank and Trust doubled-down on their control of Fiduciary Network in 2018, the wealth management industry took notice. Certainly, banks had been playing in the M&A field with RIA firms for years, but this was a different game altogether—because Fiduciary Network was actually an aggregator of RIA firms, not an RIA itself. In fact, Fiduciary Network was a pioneer in the industry, alongside Focus Financial Partners, providing a pathway for founders of independent firms to take some chips off the table, recycle equity to the next generation, solve for succession and develop strategic partnerships for M&A. To be sure, there were some naysayers on whether a bank such as New York Private Bank and Trust could successfully compete amongst other acquirers. But Howard Milstein, the chairman and chief officer, bet the bank on Karl Heckenberg. And a smart bet it’s proving to be because Karl, president and CEO of now Emigrant Partners, has taken the role seriously. He put the Fiduciary Network name aside and is building out a value proposition that’s rooted in providing growth capital and serving as an advice partner to independent firm owners. This value proposition, along with the well-established clout of the Milstein family, has carved a niche for Emigrant that few others can claim—and has earned the firm industry distinction as being representative of a “new breed of acquirers” in the RIA space. While the M&A market has enjoyed years of record-breaking deals, the impact of the COVID crisis has put some uncertainty into valuations and appetite. But as Karl shares, it’s not all bad news. Even in the midst of the pandemic, Emigrant completed 2 acquisitions: $14B Stratos Wealth Partners based in Ohio on April 1, and $3B RIA Parallel Advisors out of San Francisco on May 4th. In part 1 of this 2-part series on M&A, Karl shares the point of view from the acquirer’s side of the table, including: - What’s behind Emigrant’s growing success—and how the Milstein family plays into the firm’s value proposition. - What types of independent businesses are good investments for Emigrant—and how recent deals are representative of what the firm looks for. - How M&A is evolving along with the RIA space—and what he sees as the “next big things” acquirers and sellers should be watching for. - How he expects the COVID crisis will impact valuations going forward—and what changes he anticipates in deals and appetite as a result. - What key steps business owners should be taking to make their firms attractive to buyers—and how these same principles apply to prospective breakaways who are considering the leap to independence. Plus, Karl shares how the role of acquirers is changing: Firms like Emigrant are not solely about monetization—they are fast becoming advisory partners to young RIAs who are positioning their firms for growth. Stay tuned for the follow-up to this episode, in which the founder and CEO of Stratos Wealth Partners, Jeff Concepcion, will share the seller’s point of view, as well as inside baseball on his firm’s deal with Emigrant. So listen in and be sure to subscribe to be notified when the episode is released. About Karl Heckenberg: Karl is the President and CEO of Emigrant Partners and its affiliated company Fiduciary Network. In addition, he sits on the Board of Managers of the aforementioned companies. Karl has worked in financial services throughout his entire career and has previously worked for Merrill Lynch, A.G. Edwards & Sons, Wells Fargo and Charles Schwab. He also serves on the boards of Sarasota Private Trust Company, New York Private Trust Company and Cleveland Private Trust Company, and is Senior Executive Vice President of Emigrant Bank. Karl was raised in the Washington, D.C.

Looking at M&A from the Acquirer’s Side of the Table

Your 10-minute download on advisor movement—and what’s driving the uptick in activity. As the world goes through reopening, talk around advisor movement is amping up. And there’s good reason for this uptick: There’s been a considerable rise in recruiting activity. In this episode, Mindy answers the questions we’re hearing most often from advisors: - Why have there been so many moves recently? - What’s driving the movement and momentum? - Where are they going? - And, how are these moves being facilitated at a time when most employees are still working from home? Mindy also shares her advice on considering change—and the threshold question you should ask yourself before making the leap. It’s a quick listen that will fill-in the gaps and dispel the rumors on the current state of financial advisor recruiting.

A Big Picture Look at the State of Recruiting

Controlling My Destiny: Insights from a $300M UBS Breakaway

A conversation with Lori Siegel, Founding Partner of Centrix Wealth Partners. Certified Financial Planner Lori Siegel and her partner Robert Russo left UBS to form Centrix Wealth Partners in February of 2019. Despite things seeming “good enough” at UBS for a long time, Lori admitted that she didn’t know what she didn’t know and had a sense that the grass could be greener in a world where they could have more freedom and control. And after 6 months of due diligence, Lori and Robert chose to go independent with Raymond James Financial Services (RJFS). One year later, even with the COVID-19 crisis turning the world upside down, Lori says, “We’ve never looked back.” Because through it all, the ability to be in control of their destiny – and most importantly, how they take care of their clients – has allowed them to move through the crisis in a way that they and their clients are most comfortable with. So Lori joins the show to talk about life as a relatively new business owner, including: - The drivers behind the decision to leave UBS after 10 years—and how changes within the industry, and at UBS in particular, served as the “last straw.” - What she and her partner are able to do as independent business owners that they could not as employees of a wirehouse—and how the ability to market freely was an important factor. - The attraction of the RJFS independent broker dealer model—and what made it stand apart from other options they considered. - The power of independence when it comes to navigating a crisis—and how RJFS has supported them and their business. Lori’s perspective is an interesting one, as she candidly shares her experiences on the process of considering change and the value of business ownership—a story that many advisors can relate to. Lori Siegel: For more than 22 years, Lori has specialized in developing comprehensive wealth management plans for successful families, executives, business owners and widows. In addition to being a Certified Financial Planner™ professional and a Chartered Retirement Planning Counselor SM, she is a Certified Exit Planning Advisor who helps business owners prepare for the sale or transition of their companies. Lori speaks frequently on a variety of topics for organizations, associations and corporations. Lori was recognized as a 2017 and 2018 Forbes Top Women Advisor and as a Forbes Best-In-State Wealth Advisor for Texas in 2018 and 2019. Prior to joining Raymond James in 2019, Lori held positions at UBS Financial Services and Smith Barney. In support of her community, Lori is actively involved in the United Way Women’s Initiative and serves on the board of Girls Inc. in Houston. When she isn’t working and volunteering, Lori enjoys hanging out with her two Maltese dogs, Emmy and Oscar, as well as traveling and scuba diving with her husband, Jon. Many of their trips are to Los Angeles to visit their 25-year-old daughter, Alexis. Lori is also an avid fan of the Houston Astros specifically and college football generally. For more information about this episode, please visit: https://www.diamond-consultants.com/insights-from-300m-ubs-breakaway/

Life After Goldman Sachs: A Story of Extraordinary Success

A conversation with Justin Berman, Founder and CEO of $3B Berman Capital Advisors. Any advisor who chooses to leave the comfort, familiarity and support of a major firm for independence is nothing less than courageous. But it is especially brave when a Goldman Sachs advisor does so. Because Goldman advisors face the most onerous of post-employment restrictions: Garden Leave. And spending 60 to 90 days on the beach is a significant risk that many advisors are reluctant to take. That is, unless they had complete confidence in their client relationships and their own ability to thrive as an independent business owner. Even today it’s big news when a $1B+ team breaks away, but it’s even bigger news when they’re leaving the prestigious imprimatur of Goldman Sachs to do so. Yet advisors tell us that things are changing at the firm. So much so that in the last 3 years, we’ve seen more Private Wealth Advisor teams – 14 actually – managing a billion dollars or more change jerseys than in the previous 2 decades combined. So imagine a Goldman advisor making the leap 10 years ago—that is, to leave the firm and opt for independence at a time when the model wasn’t nearly as mainstream as it is today. Case in point, a decade ago Justin Berman was running a successful private wealth practice at Goldman Sachs, managing over a billion dollars in assets. But he felt things were changing, limiting his ability to serve his high net worth clients’ needs and continue to grow his business. So after almost 7 years with the firm, Justin opted to make the biggest leap of all and go independent, forming Atlanta-based Berman Capital Advisors. Now, with a decade of business ownership under his belt, Justin joins the show to share the pushes and pulls that drove his decision to make such a significant leap. He offers sage advice for any advisor considering a move whether to independence or otherwise, including: - Why he chose to build his own firm—and what motivated him to forego an outsized recruiting bonus. - How he managed through Garden Leave—and why, despite sitting out 60 days, 90% of his clients still followed. - How an advisor can compete against Goldman or any big bank—and how access to a wider range of talent, investments and technology unavailable on bank platforms is a genuine advantage. - What he learned was the most important message to communicate to clients about leaving Goldman—and how the separation of assets and custody played a key role in that conversation. As Justin candidly shares, it was the threshold question from his largest client that was most persuasive in his decision to leave Goldman, “Are we getting the very best advice? Are you really able to put your best foot forward to help our family achieve our financial goals without limitation?” And answering those questions is what he feels the decision to leave is really all about. For more information about this episode, plus related topics and resources, visit: https://www.diamond-consultants.com/life-after-goldman-sachs-extraordinary-success/

The Evolution of an RIA from Practice to Enterprise

A conversation with Tim Bello, Managing Partner, Merchant Investment Management. One of the key factors in the growth of the independent space is the burgeoning ecosystem that’s available to support those who make the leap—a virtual cottage industry that fills service and support gaps and creates new pathways for those who have a desire to grow their own enterprises. Merchant Investment Management is one such firm within the space that was built to provide an end-to-end continuum for both breakaways and established independent business owners—and serves as a testament to how much the ecosystem has truly grown. And Tim Bello, Managing Partner of Merchant, witnessed this growth firsthand, serving as an early-stage partner at Dynasty Financial Partners at a time when the RIA space was much less mature than it is today. In this episode, Tim shares his point of view on independent business ownership, including: - The gaps a firm like Merchant fills within the landscape—and how he sees their services as “opportunities” for both prospective breakaways and independent firm owners. - The advantages of taking on an equity partner—and how identifying the right partner is “more art than science.” - The real value of time—and why he sees it as one of the biggest things firms need to think about when considering growth. - Identifying the ways to achieve “responsible growth”—and how that impacts a firm’s ability to be “event ready.” Plus, Tim discusses, in depth, how to determine if your firm should become a buyer or a seller—and what threshold questions you need to answer in that decision-making process. It’s a conversation that shares a unique and informed perspective on the RIA space – the evolution of which Tim helped to architect early on – with keen insights on the future. Learn more about this episode and related resources at: https://www.diamond-consultants.com/the-evolution-of-an-ria-from-practice-to-enterprise/

Back to Basics on Leadership, Business Management and Succession

A conversation with Ben Harrison, Managing Director for Advisor Solutions, BNY Mellon | Pershing. Over the last few episodes, independent advisors have shared the challenges of managing both their businesses and client expectations. And while they’re are on the frontlines, it’s the custodians that are working in the background to provide the support these business owners need to build and grow successfully—regardless of the economic climate. So we turned to Ben Harrison, the Managing Director for Advisor Solutions at BNY Mellon’s Pershing, to get his take on the role a custodian plays in the lifecycle of an independent business. Having been with Pershing since 2006, Ben had a bird’s eye view of life during the financial crisis in 2008 and brings a unique point of view on what we’re experiencing now. Plus, he’s on deck to replace retiring industry icon Mark Tibergien as the head of Pershing’s RIA custody unit—a topic that he discusses at length. In this episode, Ben offers his perspective on independent business ownership, plus: - What a custodian like Pershing does to support its RIA clients—and the real value of that role to business owners in the current environment. - What he considers the most impactful lessons are from this crisis—and how he anticipates it will affect the space going forward. - What he learned from Mark Tibergien over the years—and how he expects those lessons will help him evolve the custody unit going forward. - What key principles every business owner should practice—and how these core fundamentals help to create an “enduring business.” - What he sees as the pros and cons of debt and equity financing—and the new in-flows of capital coming into the space that principals should be aware of. - Why wirehouse advisors should be thinking more about their long-term enterprise value—and how this thought-process leads to solving for business continuity and succession. Ben is stepping in at a truly unique time: Aside from being in the midst of an unprecedented global crisis, the “Race to Zero” amongst custodians and the Schwab/TD Ameritrade merger are still brewing in the background—each of which he shares more about. It’s an exciting conversation that addresses an industry that’s going through dramatic change—a true insider’s look at the business of financial advice from one of the leaders of wealth management’s top firms. For more information, and resources related to this episode, visit: https://www.diamond-consultants.com/leadership-business-management-succession-ben-harrison-pershing

The Most Misunderstood Broker Dealer in the Independent Space

A conversation with Bill Williams, Executive Vice President, Ameriprise Franchise Group. Independent broker dealers are often a go-to landing spot for advisors who desire greater control and freedom in how they serve their clients and grow their businesses, yet welcome the addition of community, support and service. And it’s often these latter 3 components which serve as key differentiators—and have proven to be critical benefits as advisors navigate their clients and businesses through the COVID-19 crisis. Yet in a landscape that offers over 100 different independent broker dealers (IBDs) to choose from, few have a history that can match that of Ameriprise. In over a century since its founding, the firm went through several acquisitions, multiple name changes and a variety of value propositions. But in the last decade, the firm made some dramatic shifts in recruiting practices, including significantly increasing transition packages which, along with improvements in infrastructure, support, technology and marketing, have resulted in great success. Today, Ameriprise has re-emerged and is stronger than ever, with a brand and business model that’s really resonating—evidenced by more than 10,000 financial advisors under its umbrella and annual revenue of more than $4.8 billion. And over the last several years it has consistently ranked as one of the top IBDs in the space. Bill Williams, the executive vice president of the Ameriprise Franchise Group, joins the show to share some background on what’s changed at the firm and what’s coming down the pike, including: - The upswing in recruiting over the past several years—and what he sees as the key factors that are contributing to the firm’s success. - The ability to join as an employee in their wirehouse-style model or as an independent contractor—and how the value propositions differ for each division. - The advantages of their unique two-division system—and how their model compares to other IBDs, hybrid RIAs and supported independence. - The changing profile of advisors who choose Ameriprise—and how they are now attracting advisors with much larger books than in past years. - The impact on enterprise value for businesses under a broker dealer umbrella—and how their process, driven by “transparency, transferability and liquidity,” has translated into sales at “3-to-5X gross revenue.” No doubt, it’s difficult to change perception, especially in an industry where the landscape has expanded so vastly in the last number of years. But Bill makes a great case for how Ameriprise has taken its brand and service offering upstream—and that move has paid off with an enormous surge in recruiting success. For more information, plus resources related to this episode, visit: https://www.diamond-consultants.com/the-most-misunderstood-broker-dealer-in-the-independent-space