Dynasty Financial Partners is using a recently acquired war chest to fund its mergers and acquisitions work in the wealth management industry via a new investment bank — its own.
Dynasty Financial, a St. Petersburg-based company that provides support services to independent investment advisors, announced the formation of
"It's very clear there's a need for objective advice in the marketplace," Baltch said. "With our very fragmented industry and the large number of aging advisors who are looking to do something with their businesses, there needs to be someone in the middle-market space serving RIAs. What Dynasty is bringing is its mission of being a true advocate for independent advisors."
Dynasty Financial may primarily be known for the investing, marketing, compliance and other services it offers to the nearly 320 independent advisors who make up its network. But it has also long been in the mergers and acquisition business, though primarily on the sidelines as a consultant and advisor. Before the formation of the investment bank, its M&A team had worked on 30 deals since 2018 and provided advice on $25 billion worth of transactions in total.
Now, relying in part on money from a recent sale of stakes in itself to Charles Scwab and Abry Partners in Boston, it will play a front and center role. Dynasty Financial backed away in December from plans to raise capital by
Instead, it sold minority stakes in itself to the private equity firm Abry and Schwab for an undisclosed amount. Sally Cates, a spokesperson for Dynasty, confirmed money from that sale will help finance the new investment bank but declined to say how much.
Unlike commercial banks that accept depositors' money and then lend it out with interest, investment banks provide financial services to corporations and other institutions. Besides M&A work, Dynasty Investment Bank will help set a value on advisory businesses that are up for sale, take minority ownership positions in firms or provide them with loans and provide advice on succession planning.
M&A has been on a skyward trajectory in the investment advisory business in recent years. They went from a mere 60 deals in 2012 to
There have been
"The headwinds of aging advisors, the valuation gap of succession and a higher interest rate combined with the influx of different capital providers and a multitude of business models will create a long runway for consolidation in the years to come," he said in a press release.
James McLaughlin, the founder and CEO of the J. H. McLaughlin & Co. consulting firm, which works with wealth managers on acquisitions, said the investment bank should enable Dynasty to act less as an advocate of buyers and sellers and more of a "matchmaker" between firms that are trying to strike an acquisition deal. He said Dynasty is in a particularly good position for performing that sort of role because of its deep ties to the industry and its bench of employees with experience in investment banking.
"With investment banking, you have to do the due diligence, and you have to create the logic around the pricing," McLaughlin said. "So it requires a lot of skills. But with most investment bankers, it really comes down to: Do they have good relationships? That's why they are really successful."
McLaughlin said a lot of firms that help with transactions will know of an advisor who's looking to buy or sell a business.
"But do they have a counterpart?" McLaughlin said. "Advisors really want to find the people who have the biggest range of potential buyers or sellers."
Conflict?
Chuck Failla, the founder of Sovereign Financial Group in Stamford, Connecticut, said Dynasty's investment bank could have a conflict unless it can show that it's looking outside its parent firm's network for M&A prospects.
"But there are conflicts everywhere in our industry," Failla said. "It's just that when you are getting advice and when the advice can ultimately benefit the person giving that advice, you have to be aware of that."
Dynasty's recent M&A deals include helping its member DayMark Wealth Partners acquire
In the lead-up to the planned IPO, Dynasty told the Securities and Exchange Commission in an
Baltch, who was the head of Dynasty's M&A division before taking over its investment bank, spent nearly a decade at UBS Investment Bank serving as an executive director in its financial institutions group.
Baltch said a lot of Dynasty Financial's previous M&A work was done through its broker-dealer arm, Dynasty Securities. Like that entity, the new investment bank will be overseen by the Financial Industry Regulatory Authority, the broker-dealer industry's self-regulator.
Peter Nesvold, a partner at Republic Capital Group, also a specialist in deals for wealth management firms, said that setting up an investment bank was probably in part meant to ensure Dynasty stayed in line with FINRA regulations on fees and fee management. But even more than that, it's sending a message to the public.
"There are some signaling and marketing benefits here," Nesvold said. "They're saying they're offering more of a holistic financial platform. They started as a network for breakaway brokers from big wirehouses and now they are turning into more of a turnkey RIA platform."
Dynasty provides support to nearly 50 network firms, including Geller Advisors in New York, Summit Trail Advisors in Chicago and Americana Partners in Houston. The firm's website lists $68 billion in assets under management, a figure that Baltch said has since grown closer to $80 billion.
