Focus Financial Partners is introducing a new back office services-focused acquisition model — and has already added four firms to the offering.
The KKR and Stone Point-backed RIA financier said late Tuesday and early Wednesday that its new venture, Connectus Wealth Advisers, has acquired Hunt Valley, Md.-based RIA Horan Capital Management, along with three Australian firms: Brady & Associates, Link Financial Services and Westwood Group.
Focus said that Connectus will provide affiliated advisors with access to technology, investment management, marketing assistance, compliance and accounting services.
‘Connectus complements Focus’ growing partnership and addresses an important strategic need in the independent wealth management market. Focus is at the forefront of the industry in providing innovative business and client solutions,’ said Rudy Adolf (pictured), Focus’ chief executive. ‘These resources enable our partner firms to meet the growing needs of their clients in an increasingly complex operating environment.’
For Focus, the launch of Connectus marks new territory for the New York-based company. Focus has traditionally been a pure financial backer of RIAs, providing capital and assistance with subacquisitions in exchange for a preferential position in its partner firms’ earnings.
However, Focus has been forced to fend off upstart dealmakers such as Canadian financial services company CI Financial and branded acquirers like Creative Planning and Captrust with RIA M&A interest at all-time highs.
Louis Diamond, an executive vice president at advisor recruiting and consulting firm Diamond Consultants, likened Connectus to the acquisition model of RIA aggregator Hightower. Hightower buys a portion of its firms’ earnings, allows them to retain their brand names and provides shared services, but places their assets on a single Form ADV it files with the Securities and Exchange Commission.
‘There’s plenty of firms that are good fits with Focus’ but are ‘not looking to give up full control of everything else,’ Diamond said.
Karl Heckenberg, CEO of rival RIA acquirers Emigrant Partners and Fiduciary Network, said that the new Focus business line ‘creates a huge conflict as it relates to the sourcing of sub-acquisitions for partner firms. It’s hard to imagine all good opportunities that they source don’t go directly to their own in-house RIA first.’
Heckenberg added: ‘I imagine it will allow them to go further down-market in terms of size,’ which is ‘a completely different message than what they built themselves upon,’ but may now be necessary given the increasing competition for acquiring large RIAs.
Horan, which is helmed by chief executive John Heinlein, is an investment management-focused firm with three advisors on staff that reported roughly $723 in assets under management in May. It is the 22nd firm to join Focus either as a subacquisition or new partner firm in 2020.
‘Becoming part of the Connectus partnership will enable my team and me to focus on our passion for investment management, which is at the core of the value we deliver to our clients,’ Heinlein said. ‘Leveraging Connectus’ shared resources to support our business will enable us to increase our operational efficiency and deepen our investment management and financial planning capabilities.’
The three Australian firms — Brady & Associates, Link Financial Services and Westwood Group — are based in Sydney, Caulfield North and Brisbane, respectively. Focus has eyed Australia as an international growth market and purchased three firms in the country over the past four years.
‘These transactions build on the expansion of Connectus in the United States and address an important strategic need in the Australian wealth management market,’ said Rajini Kodialam, Focus’ COO. ‘Connectus enhances the client-centric ethos of boutique wealth management firms through access to the centralized resources and capabilities of a global partner.’