Dynasty Financial Partners Will Become Minority Investor in RIAs

CEO Shirl Penney explains why his company will begin acquiring stakes in wealth management firms.

Shirl Penney, CEO of Dynasty Financial Partners (Michael Nagle/Bloomberg)

Shirl Penney, CEO of Dynasty Financial Partners

(Michael Nagle/Bloomberg)

One of the largest service providers to RIAs wants to be a permanent investor in some going forward.

Dynasty Financial Partners, which provides back and middle office support to roughly 50 independent RIAs managing about $60 billion, said Tuesday it plans to begin using its own balance sheet to purchase minority stakes in members of its network. The opportunity for RIAs to sell part of their business to Dynasty rounds out the capital solutions it already offers, including traditional debt financing and revenue participation notes.

The impetus for the new offering was the same as the dozens of other services Dynasty has added since its 2010 founding: RIAs were asking about it, Dynasty President and CEO Shirl Penney, told RIA Intel.

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Current capital markets mean valuations for RIAs are favorable and tax changes could be looming. “The tea leaves seem to suggest” that capital gains taxes are going to rise, moving more RIA owners to explore a sale, Penney said.

RIA owners already part of Dynasty’s network are seeking liquidity for themselves or to invest in their businesses. For example, some owners might sell a minority stake in their RIA for the cash, while another might use the money to buy another Dynasty firm. That is a “natural succession plan,” partly because Dynasty is already supporting RIAs in its network the same way.

But other wealth managers might be interested in a deal, too. Advisory practices seeking to establish their own firms — like the so-called breakaway brokers that seek Dynasty’s help — might also be willing to sell part of their business. For that reason, Penney said the new offering will also attract new business to Dynasty.

Potential sellers are also eager to work with a company they are familiar with and have a current or planned business relationship with already. Otherwise, RIA owners are left to find investment bankers or attempt to evaluate and negotiate with buyers they aren’t as familiar with, like private equity firms.

Unlike some, such as Focus Financial, Dynasty has no interest in ever owning more than a minority stake in any RIA.

“This is a significantly different alignment,” Penney said. “We fundamentally believe that bad things happen when you turn an entrepreneur into an employee.”

Dynasty, which began a hiring spree early this year in anticipation of growth delayed by the Covid-19 pandemic, also added a new board member to help support the new investments it plans to make in RIAs.

Rebecca Zeitels Alcalay, vice president at GF Investments, the New York-based single-family office of the Glick family, joined the board. She previously worked at Temasek, a Singapore sovereign wealth fund, Oak Hill Capital Partners, and Blackstone.

GF Investments was an early investor in Dynasty and Alcalay has had “significant input” in the design of Dynasty’s capital solutions group, and other business decisions. Penney said he is “super impressed with her professionalism, acumen and the way she thinks about direct investments,” and was a natural addition as Dynasty looks to invest in RIAs.

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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