Dynasty Financial Partners taps $50 million from Wall Street as IPO market craters

Dynasty Financial Partners tapped Wall Street, but not in the way it ultimately hopes to.

The firm obtained $50 million in new financing from a group of banks including RBC Capital Markets and Morgan Stanley, a move that bolsters its coffers as it ponders an eventual public offering amid strife with one of its partner advisory practices.

Dynasty said Sept. 27 that it would use the credit line to maintain and grow the technology, intellectual capital, integrations and other capabilities it uses to support the registered investment advisory practices (RIAs) at the core of its business. It said it would also use the money for "other strategic investments" in those partner firms. 

"This new facility provides us with significant dry powder to continue to drive growth in the business and further enhance our service offering," Dynasty's Chief Financial Officer Justin Weinkle said in a statement. 

Joining RBC as lead arrangers of the revolving credit line, which can be tapped and replenished at any time, are J.P. Morgan and UMB Bank of Kansas City, Missouri. Citibank and Goldman Sachs are also part of the syndicate.

Based in St. Petersburg, Florida, Dynasty is an alliance of 48 RIAs that collectively manage $72 billion in investor assets. The firm provides technology, investment management, capital for acquisitions, back-office functions and consulting to independent advisors and to those advisors who are leaving wirehouses and smaller brokerages to go independent. It takes small equity stakes in some of its network firms.

The credit line signals that Dynasty is pursuing "capital optionality" after it pushed back its initial public offering to wait until markets regain their footing, said Brandon Kawal, a principal at Phoenix-based Advisor Growth Strategies, a consulting and advisory firm for  independent practices. 

Dan Seivert, the CEO of Echelon Partners, an investment bank for advisory firms in Manhattan Beach, California, called the effort to tap Wall Street "a smart move to just be able take advantage of growth opportunities if they come across something. They could be using it for growth — it may not be a cash crunch."

Dynasty first filed to go public last January; since then, the IPO market has spiraled into the worst in more than two decades amid persistent inflation, higher interest rates and uncertainty about the economy. Last month, the firm updated its filing, which includes a lucrative tax arrangement that could benefit at least some of its partner firms. 

Brian Hamburger, the founder, president and CEO of MarketCounsel Consulting, a business and regulatory compliance firm for independent advisors, and a close friend of Dynasty president and CEO Shirl Penney, said he had "no information" on the new timing of Dynasty's IPO. Dynasty spokesperson Sally Cates declined to comment.

A fight
Dynasty is in the midst of a fight with one of its network firms, Regent Peak Wealth Advisors in Atlanta, according to a report earlier this month from trade publication Citywire. Regent Peak, which manages $575 million in client assets and which Dynasty helped launch more than three years ago, wants to end its relationship with Dynasty, the publication reported, citing anonymous sources.

A spokesperson for Regent Peak's founding principal and managing director, Craig Robson, said he had no comment on the rift. Dynasty's Cates declined to comment. Robson formed his firm with Dynasty's help after more than a decade at Merrill Lynch.

Separately, a principal at a Dynasty-supported firm faces a legal fight with Wells Fargo over his move with seven former advisors and staff at the Wall Street bank to leave with $1.2 billion in client assets and form an independent advisory practice. Wells Fargo sued Steven Satter, a former senior in-house lawyer, on Sept. 20 in an Ohio federal court. The 17-page complaint alleges that Satter and his former Wells Fargo colleagues "plotted to take significant business" away to establish DayMark Wealth Partners, located several miles from a Wells Fargo office in Kenwood, Ohio.

Court papers show that Satter's role over 18 years at Wells Fargo centered on representing and advising the bank on financial advisor hiring practices, raiding claims, fiduciary duty claims, and non-solicitation and other contractual obligations governing advisors. The bank accuses Satter of civil conspiracy, breach of contract and interfering with employment contracts, among other things.