December 11, 2023

Dynasty Financial Partners is using a recent acquisition to fund its M&A work in the wealth management industry through a new investment bank — its own.

Dynasty Financial, a St. Petersburg-based firm providing support services to independent investment advisors, announces its establishment Dynasty Investment Bank on Monday. Harris Baltch, who heads the investment bank, said he and his partners are looking to build on their firm’s M&A success.

“It’s clear that the market needs objective advice,” Baltch said. “Because our industry is so fragmented and there is a large number of aging consultants looking to do something with their practice, there needs to be someone who serves RIAs in the middle market space. Dynasty brings a mission to be a true advocate for independent consultants.”

Dynasty Financial is perhaps best known primarily for the investment, marketing, compliance and other services it provides to the nearly 320 independent advisors that make up its network. But it has also long been in the mergers and acquisitions business, albeit mostly on the sidelines as an advisor and consultant. Before the investment bank was founded, its M&A team had handled 30 deals since 2018 and advised on deals with a combined value of $25 billion.

Now, partly thanks to funds from the recent sale of its stake to Boston’s Charles Scwab and Abry Partners, it will play front and center. Dynasty Financial in December dropped plans to raise capital through Selling Shares Through an IPOciting poor conditions on Wall Street and a lack of interest in new investments.

Instead, it sold its own minority stake to private equity firm Abry and Schwab for an undisclosed amount. A spokeswoman for Dynasty, Sally Cates, confirmed that proceeds from the sale would help fund the new investment bank, but declined to say how much.

Unlike commercial banks, which accept money from depositors and then lend it out at interest, investment banks provide financial services to corporations and other institutions. In addition to its M&A work, Dynasty Investment Bank will help set the value of the advisory business for sale, take a minority stake in or provide loans to the company, and advise on succession planning.

M&A has been on the rise in the investment advisory business in recent years.They went from just 60 deals in 2012 to 341 people in 2022according to boutique investment bank Echelon Partners.

Had There are recent signs of such a slowdown. But Baltch said there were many deals that were in the works, or never became public knowledge. He said he has no doubt that mergers and acquisitions will continue to be strong in the industry, especially as retiring advisers look for options to take over the business.

“The headwinds of aging advisors, the valuation gap for successors and higher interest rates, combined with the influx of different capital providers and multiple business models, will create a long road for consolidation over the next few years,” he said in the media. runway.” Released.

James McLaughlin, founder and chief executive of JH McLaughlin & Co., an advisory firm that works with wealth managers on acquisitions, said investment banks should make Dynasty less an advocate for buyers and sellers and more a “matchmaker” between them. “Companies trying to strike takeover deals. Dynasty is particularly well-positioned to fulfill such a role because of its deep ties to the industry and a workforce with investment banking experience, he said.

“With investment banking, you have to do due diligence, you have to develop logic around pricing,” McLaughlin said. “So it takes a lot of skill. But for most investment bankers, it really comes down to: Do ​​they have good relationships? That’s what makes them really successful.”

Many firms that help with deals know of an advisor who is looking to buy or sell a business, McLaughlin said.

“But do they have a match?” McLaughlin said. “Advisors really want to find people who have the most potential buyers or sellers.”

Chuck Failla, founder of Sovereign Financial Group in Stamford, Conn., said Dynasty’s investment bank could clash unless it can prove it’s looking outside the parent company’s network for acquisition prospects.

“But our industry is full of conflicts,” Faira said. “It’s just that when you get advice, when it ends up benefiting the person who gave it, you have to be aware of that.”

Dynasty’s recent M&A deals include helping its member DayMark Wealth Partners acquire Wealth management team with $450 million in client assets under management From Wells Fargo in February. Dynasty itself has struggled to raise funds in recent years.

Ahead of the planned IPO, Dynasty told the SEC in a statement Regulatory filing on August 24 As of the end of June, it had more than $8 million in cash and cash equivalents. It also said it planned to enter into a credit agreement that would give it access to a $50 million revolving credit facility. The debt will be secured by assets owned by Dynasty Financial Partners and its subsidiaries.

Baltch, who was head of mergers and acquisitions before taking over Dynasty’s investment bank, spent nearly a decade at UBS Investment Bank as executive director of its financial institutions group. others on his team He has worked for Goldman Sachs, Raymond James and other well-known companies.

Much of Dynasty’s previous M&A work has been done through its broker-dealer unit, Dynasty Securities, Baltch said. Like that entity, the new investment bank will be regulated by the Financial Industry Regulatory Authority, the broker-dealer industry’s self-regulatory body.

Peter Nesvold, a partner at Republic Capital Group and an expert on transactions at wealth management firms, said setting up an investment bank may be part of an effort to ensure Dynasty complies with FINRA when it comes to fees and expense management. FINRA) regulations. But more importantly, it sent a message to the public.

“There are some signaling and marketing advantages here,” Nesvold said. “They say they’re offering a more comprehensive financial platform. They started out as a network of independent brokers for the big telcos, and now they’re transitioning to a turnkey RIA platform.”

Dynasty supports nearly 50 Internet firms, including Geller Advisors in New York, Summit Trail Advisors in Chicago, and Americana Partners in Houston. The firm’s website lists $68 billion in assets under management, a figure Baltch says is closer to $80 billion.