Does Focus CEO's exit signal new phase in the firm's consolidation?

Michael Nathanson's exit as CEO of Focus Financial Partners is part of the serial acquirer's ongoing internal reorganization. It's also a sign of how difficult that undertaking is, industry experts said.

Late last week Focus announced that Nathanson would step down next year from the role he has held since April 2024. Succeeding him at the top of Focus beginning Feb. 1 will be Adam Birenbaum, who now holds the titles of president and CEO of the subsidiary RIA Focus Partners Wealth.

Nathan's departure follows a lengthy period of internal consolidation for Focus, a New York firm with $520 billion under management. Starting in 2023, Focus began a reorganization that would eventually result in its 90 partner firms — almost all of them originally added through acquisitions — having the option to join one of five specially designated internal "hubs." Nathanson last year then oversaw a rebranding plan giving each of those divisions a new name reflecting their connection to Focus.

Consolidation long overdue, but still not complete?

Jamie McLaughlin, a Darien, Connecticut-based consultant to the wealth management industry, said the change at the firm's top is another step in the internal consolidation. He said the reorganization was long overdue and clearly remains a priority for Focus' private equity owner, Clayton, Dubilier & Rice, which took Focus private in 2023.

"In this business, if you're rolling up and consolidating firms, the only way you can do it is with the intentionality of clear integration," McLaughlin said. "If all you're doing is stitching together semi-independent firms, the results will be suboptimal."

RIA acquirers like Focus Financial often tout their ability to provide the independent advisors who join them with a gamut of services — cybersecurity, asset management, compliance and marketing assistance, among others — rivaling those found at large Wall Street institutions. In return, aggregators often improve the profit margins of the firms they've acquired by eliminating their individual human resources departments and other administrative offices and consolidating those functions in a central location.

Tim Welsh, the president and founder of the wealth management consultant Nexus Strategy, said Focus' current organization into five hubs shows how hard it is to make a single unit out of a firm pieced together from many separate acquisitions over the course of years. In establishing its five internal hubs, Focus has left it to the individual firms it's acquired to decide if they want to join.

Welsh said many of those partner firms remain in the hands of entrepreneurial types with a strong leaning toward independence.

"It's still not very efficient, and you are not getting the economies of scale you would have if you had just one HR manager, one compliance department, one marketing department," Welsh said. 

"That's the way to do it. But it's hard to do when you have a bunch of fragmented, but outstanding, businesses."

The five Focus hubs and two similar paths to CEO

Focus' five hubs are:

• Focus Partners Wealth; 
• Kovitz, a Focus Partners Firm; 
• SCS Financial, Focus Partners Family Office and OCIO; 
• Gelfand, Rennert & Feldman, Focus Partners Business Management; and 
• Cardinal Point, Focus Partners Canada.

Each has its own field of expertise. Gelfand, Rennert & Feldman, for instance, specializes in business management, and Cardinal Point in working across the Canadian-U.S. border.

Both Nathanson's and Birenbaum's paths to their current positions were through firms initially acquired by Focus and later merged to form Focus Partners Wealth, which has roughly $140 billion under management on its own. Nathanson was the CEO of The Colony Group, a specialist in working with high net worth clients that Focus bought in 2012. And Birenbaum was the CEO of Buckingham Wealth Partners, which was bought by Focus in 2007. The Colony Group and Buckingham Wealth were merged to form Focus Wealth Partners in May 2024, shortly after Nathanson became the top executive at Focus Financial.

In its announcement of Nathanson's plans to step down, Focus said the CEO had himself "designed" the transition plan. When Birenbaum succeeds him next year, Nathanson will take on the title of chairman and retain a seat on Focus's board of directors.

"It has been my privilege to lead and guide Focus through the most recent phase of its evolution," Nathanson said in a statement. "Now that a strong foundation and clear strategy is in place, after consideration with the Board, we determined that Adam is uniquely positioned to lead the organization through the next phase of its growth."

Focus Financial Partners was founded in 2004 by the entrepreneurs Rudy Adolf, Rajini Kodialam and Leonard Chang in 2004. All three left the firm around the time of its sale to Clayton, Dubilier & Rice. Before being taken private by CDR, Focus had been a publicly traded company for roughly five years. Before that, it was briefly held by a group of private owners led by the firms KKR and Stone Point Capital.