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Kestra aims to best ‘one-size-fits-all’ competitors after advisors buy in

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About 120 Kestra Financial advisors bought into the firm after one of the largest deals of the year in wealth management.

Advisors purchased $23 million worth of shares following the June acquisition of a majority stake in the independent broker-dealer by global private equity firm Warburg Pincus, according to Kestra CEO James Poer. The sum breaks down to about $192,000 per advisor.

In an interview with Financial Planning, Poer declined to provide specific figures on the amount Warburg paid for its stake or the level of investment by executives. However, Poer describes himself as a “very deep investor” and says other management team members are as well.

“I don't mean equity grants,” he says. “I mean, cut a check of personal money, a large personal check. And that is something that I take great pride and appreciation in across our executive team. It's our business as much as it's anyone else's, and we run it that way.”

The recapitalization of the Austin, Texas-based Kestra reportedly set its value at 8 to 10 times its EBITDA — or as much as $800 million. The firm has 2,500 advisors across Kestra, IBD subsidiary H. Beck and wirehouse breakaway hybrid RIA firm Kestra Private Wealth Services.

Kestra also purchased a trust company that it has since renamed Arden Trust Company and started an M&A, succession and consulting firm this summer called Bluespring Wealth Partners. The new firm has already acquired three practices with $1.35 billion in combined client assets.

PE-backed firms are vying for a greater foothold at the top of the sector against publicly traded IBDs, insurance company BDs and privately held firms with longtime owners. Kestra eschews the approach of other firms that fold subsidiaries into a network or another unified brand.

Kestra has its primary IBD for the “large successful ensembles” and H. Beck for “that community-based advisor that's far more mass affluent-focused,” Poer says. And it’s adapting Arden’s trust services in a “value-focused, cost-effective way” across the organization, he says.

James Poer Kestra Financial

“We don't believe that one firm can serve every financial advisor, we definitively don't believe that; we believe in crafting a value proposition that focuses on a segment of the market,” Poer says. “We love the idea of going up against the one-size-fits-all competitor.”

The firm’s rivals are also facilitating succession-plan M&A deals, but Bluespring has set an impressive pace since launching. Advisor Steve Engro sold Austin and Dallas-based Beacon Financial Group — which has $800 million in client assets — to Bluespring for its third acquisition.

“At this time in our firm’s history, it’s critical to fully align with a strategic partner who can ensure we’re well-positioned for the years to come,” Engro said in a statement. He added that the deal will enable Beacon “to serve our clients and their heirs” for decades into the future.

The parties didn’t disclose financial terms, but Bluespring buys at least 51% stakes in firms with $1 million or more in EBITDA. The fact that Bluespring doesn’t require advisors to be affiliated with Kestra is a “substantial differentiator of ours in the marketplace,” Poer says.

He notes that there are around 50% fewer publicly traded firms today than there were 20 years ago. Poer views private equity firms as filling the void in financial services and other industries, citing new entrants such as Warburg joining earlier ones tapping into wealth management.

“What a lot of people refer to as fee compression in our industry — she who sits closest to the client has the safest sort of stream of revenue in that value stack,” Poer says. “And so the actual wealth management channel is especially attractive because there's less pressure around fees and the ability to articulate clear value.”

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