Focus Financial is expanding its presence in the Southeast by adding a 45-year-old RIA to its network of more than 30 firms.
The Fiduciary Group in Savannah, Ga., is "very much in the sweet spot for Focus," says Rudy Adolf, founder of the country's largest aggregator with more than 30 firms nationwide (plus one in the United Kingdom). "We are excited about the geography. We are very interested in the Southeast right now. We believe they will be able hopefully to grow with our help."
The deal is in part a succession planning play by CEO Malcolm Butler, whose father founded The Fiduciary Group on strict fiduciary principles almost half a century ago. The nine-person firm, which has $600 million in assets under management, provides investment management to about 400 clients, but financial planning to less than 25, according to its SEC Form ADV.
"We have all these clients who are so important to us," Butler says. "You've got to make sure you've got a structure in place so that if something happens to me or any of my principals that their investment management continues to take place without any hiccup."
In time, Butler says he expects to be able to put the firm's next generation of management in place either through a merger or buyout with another Focus firm or by accessing new talent that he can groom to succeed him, he says.
Just last month, two other Focus firms concluded a deal: The Colony Group, with $3 billion in AUM, acquired the smaller CapGroup Advisors, with $308 million in AUM.
Adolf and Butler declined to disclose the terms of the deal, but Adolf says that in return for its investments, Focus typically takes 30% to 50% of its partner firms' free cash flow in "permanent" contracts.
If Butler's firm -- or any firm in the Focus network -- wanted to do a deal with a firm outside of the Focus network or break its contract with the aggregator, that would be up to negotiation, Adolf says.
"It's basically a decision we would make together," he says. "The business we have built is a permanent partnership between all the members of our group."
Both Adolf and Butler also say that Focus invests in its firms and helps them grow, partly by connecting them with other Focus firms that can provide consulting help.
"I like to think of [Focus as] a value-added investor in the firm who brings all sorts of resources that I'm not sure we could afford to pay for independently," Butler says.
One priority for The Fiduciary Group, he says, is expanding its financial planning services. With Focus' help, the firm might be able to outsource financial planning services to planners in another firm, Butler says.
"That's one of the areas that I'm eager to look into with some of the partner firms -- how we could improve that," he says.
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