At the Future Proof Citywide conference in Miami this week, registered investment advisors interested in growing or evolving their firms heard a common reframe: beware of options that may threaten your independence.
Several firms carried that message, some as new as a year old, touting minority investments offering support without onerous terms. Those included Joe Duran’s newest venture, Rise Growth Partners and Elevation Point, launched in 2024. Summit Financial, which launched its Growth Partners program in 2021, was also present, as were minority private equity investors, including newer player Constellation Wealth and legacy investor Emigrant Partners.
Duran spoke on a panel alongside the founder of Rise’s first minority investment partner, Andy Schwartz of Bleakley Financial Group.
“They don’t tell us what to do; it’s more about talking to us about how we can improve,” Schwartz told the audience. “Believe it or not, Joe has opinions, certainly, but the reality is that they let us run our business. They’re here to advise; if it makes sense to us, great, but if it doesn’t, it doesn’t.”
Duran, who sold his United Capital to Goldman Sachs in 2019, positioned Rise Growth as a new option for RIAs in the $1 billion to $5 billion AUM range looking to grow, whose other options would likely include taking on debt or selling to one of the mega-RIAs and risk giving up equity upside.
“If you’re in your 30s, 40s or 50s and have plans to be an exponential grower, you need to have money that doesn’t give up your upside and that you don’t give up control,” Duran said. “The reality is that most of the really good RIAs have a very strong opinion about why they are in the business and what they want to do with their clients and how they want to treat their advisors.”
He cautioned advisors to consider capital options or joining a mega-RIA with caution, touting the advantages of having people with expertise in your corner.
“I know that everyone thinks about multiple, but if you are taking a minority stake investor, the multiple is not as important as what they do for you,” he said. “If it’s dead capital on your balance sheet, and they are telling you who you can and can’t hire and what you can and can’t spend on, which we never do, then you are determining your entire outcome.”
Kim Kovalski, managing director with M&A advisory MarshBerry, said on the sidelines of the conference that “there are more [RIA] firms than ever that wish to remain independent but seek capital for a variety of reasons—to fund acquisitions, scale the business, recruit advisors or provide liquidity to shareholders. This has led to a growing number of RIAs exploring minority investments from investors seeking to acquire 20% to 40% ownership stakes in firms.”
Kovalski, however, is quick to note that the devil is in the details, even when it comes to minority stakes.
“RIA owners need to understand that by taking on minority capital, they are effectively partnering with the capital provider for many years and will face certain restrictions and expectations,” she said.
She characterized such investment as “one of the most important” decisions a firm can make. “Therefore, they need to fully understand all of the options available to them and the terms of the transaction before committing to a particular party.”
Bradford Smithy, in an interview ahead of a panel session later that day, noted that Elevation Point was founded with the ethos of providing capital and expertise to further a firm’s uniqueness, not dampen it.
“We’re not interested in operating their business; we want to be a partner,” said Smithy, who is a founding partner and head of wealth management at Elevation Point. “If we own, say, 20% of a person’s business, there is no end game in it but for them to grow more efficiently and faster.”
Smithy positions the firm as a model that sits between total independence and the other side of wirehouse independent offerings.
“It appeals to a lot, but it doesn’t appeal to everybody as a lot of people don’t want to sell a piece of their business early on,” he said. “But what we are finding is that people are becoming much more open to it when they realize that selling a minority stake isn’t selling control.”
In the Elevation Point model, a firm has the right to buy back its stake at a defined multiple, Smithy said. On the other hand, if Elevation were to roll up and sell, the firm could join the deal. If they wanted out, then Elevation Point would have the right of first refusal to purchase that stake.
Smithy also noted that the investment is set up so that most of the initial stake is treated as long-term capital gains or half the taxes an advisor might pay if they were using a loan. Meanwhile, Elevation Point can lend expertise and support for branding and marketing.
He said the firm had initially been targeting $3 billion in AUM but is already at more than $3.4 billion, with a strong pipeline shaping up for 2025.
For Duran’s part, he said Rise Growth is on track for $1 billion in AUM in the first quarter of 2025, with a plan to stay on track to half a billion to $2 billion in subsequent quarters.
He also said, despite a few exceptions, many of the consolidators are moving the RIA space back toward the place from which much of it had emerged: the wirehouse model.
“I would just suggest that the mega-firms right now who are dictating the terms of the industry, frankly, look just like the wirehouses who have no distinct, beautiful thing they are doing,” he told the audience. “I want the independent advisors to compete and beat their asses. Honestly, to me, it’s embarrassing how little good, good things are being done on a global scale.”