Dynasty Financial Partners plans to come out swinging in 2014.

The New York-based platform outsourcer and service provider for large wealth management firms is beefing up its business development team, vowing to become much more aggressive in going after new clients. It also moved to a new office in Manhattan overlooking Central Park, doubling its square footage.

Dynasty, which is marking its third anniversary this month, is adding two senior-level executives to its top management team: HighTower Advisors veteran Rebeca Knauss, who will be vice president for transition and advisor services, and Goldman Sachs alumnus Jim DiPisa as vice president for investments. The firm also plans to introduce Dynasty Desktop, a new integrated technology platform for advisors, according to Dynasty CEO Shirl Penney. Pricing hasn’t been determined yet, but Penney does expect the new software to become part of Dynasty’s core services, which include reporting, portfolio management and manager research.


This month’s hiring of Ed Friedman, a top executive at HighTower for three years, to  boost business development will be followed by at least two more “senior business development professionals,” Penney says.

“Historically, we have not done a great job at business development,” Penney says. “We were not proactive, or made out-going calls. Half of our advisors came from inquiries; 40% came from strategic referrals and 10% came from recruiters.”

In 2014, Dynasty will step up its recruiting efforts for its target market – advisory firms with more than $300 million in assets under management coming from either the RIA, IDB or wirehouse channel. “We’re going to create the bandwidth and go after firms in our target market with more of a sniper rifle than a shot gun approach,” Penney says.

According to Penney, Dynasty waited until now to recruit more aggressively because the firm wanted to make sure it had worked out operational kinks before hiring a sales staff. But industry observers point to Dynasty’s history of  optimistic – and unfulfilled – growth projections and note that the firm may now need to play catch-up. “For their model to survive, they need velocity of assets, particularly as they have built a Taj Mahal and now need flow to make it work,” says industry consultant Tim Welsh, president of Larkspur, Calif.-based Nexus Strategy.


Indeed, when Dynasty launched, executives projected $150 billion in assets and 150 advisors on its platform by 2016. Last year, the firm had a total of 14 firms with 40 advisors and $13 billion in assets, and Penney said he hoped to add 16 new firms to the roster in 2013. Dynasty is finishing the year with six new firms for a total of $19 billion in assets among 20 firms, with a total of 60 advisors.

To date, five firms have committed to join Dynasty in 2014, Penney says. He’s expecting to add $10 billion in assets in 2014, and would like the firm to reach $100 billion “as quickly as possible.” To hit that goal by 2016, “a lot would have to go right,” Penney acknowledges. “I’m more comfortable saying we’ll reach it in five years.”

Capitalization of the firms’ considerable operating expenses continues to come from employees and the firm’s board, Penney says. He wouldn’t say if Dynasty is profitable, but asserts that “the business is in a very strong financial position.”


Although Dynasty may have fallen short of its target this year, it did strengthen its product offerings, adding insurance and alternatives to its menu. Depending on its size, client firms can expect to pay between 15 and 20 basis points of gross revenue for Dynasty’s services, Penney says. The firm also brought in hedge fund expert Michael Moriarty as director of investment platform and Citibank veteran Tom Petrone to head capital markets, liaison with Wall Street and oversee third-party relationships with investment banks.

Dynasty’s decision to add expertise, new proprietary technology and more services, as well as ramping up its pursuit of new clients, will give it an edge in scale and pricing power, Penney claims. As a middleman, Dynasty makes its money on the re-sale margin of the services it buys at bulk rate from vendors like Envestnet or Black Diamond.

Schwab veteran and M&A expert David DeVoe believes Dynasty is on the right path. “As you build a business, you want to ensure you don't get ahead of your skis,”  says DeVoe, who runs a consulting business in San Francisco. “A management team that first invests in building out the service offering, next ensures that it is an institutional-grade platform and then ramps up the sales team, is managing the business methodically.”

According to RIA industry consultant John Furey, principal of Advisor Growth Strategies in Phoenix, Dynasty will “gain momentum” because the  outsourcing concept the firm pioneered “has proved out.” Dynasty has established its “brand, recruited several high-end teams and have retained all their advisors,” Furey says. “What makes them unique in their category is advisors are free to leave, so they have to earn the business every day.”


To be sure, wealth management advisory firms have plenty of options for their business in addition to Dynasty.

They can go it alone, and keep their technology and back-office support in house. They can work with their custodian, or with another third party provider such as Fortigent or HighTower, or align with an aggregator like Focus Financial Partners or United Capital.

Penney says competition is a sign of a healthy market and  that there is “room for many more than those [already] in the space. A potential winner over the next 10 to 15 years may not even be on the playing field now.” Not surprisingly, he expects Dynasty’s model to prevail in the near-term. Breakaways will continue at a steady pace, he says, “tuck-ins” of smaller teams and firms into larger RIAs will increase, as will the demand for more transition and succession planning as advisors age. Dynasty will eventually offer an equity syndicate program and may work with regional banks and trust companies looking to build out their wealth management capabilities.

“I’ll bet they do well,” says Tiburon Strategic Advisors managing partner Chip Roame, citing Dynasty’s top executives and technology partners as key assets. “[Chairman] Todd Thomson has a lot of financing credibility, and I think Shirl Penny has a lot of street credibility,” Roame says. “They run on the Envestnet platform, which I think has become the industry standard, and they enhance it with additional research and other resources.”

Industry consultant Jamie McLaughlin, who specializes in the high-net-worth and ultrahigh-net-worth market, agrees. “Dynasty has clearly achieved proof of adoption measured by agreements with outside providers and, of course, by their roster of advisory firms,” McLaughlin says. “The demand for what they're providing is, arguably, unlimited if they allow firms to buy on a truly a la carte basis.”

Read more: