Article Originally Published: Financial Planning
The transaction merging Buckingham Strategic Wealth into The Colony Group under the private equity-fortified umbrella of Focus Financial Partners understandably drew headlines last May.
Focus had gone private in a deal with Clayton, Dubilier & Rice about nine months earlier, valuing the New York-based registered investment advisory firm aggregator at north of $7 billion. After that (and the departures of longtime Focus CEO Rudy Adolf and the other co-founders, Rajini Kodialam and Leonard Chang, in 2023), the rollup of Buckingham into Colony reflected a new approach: merging the 90 Focus-owned RIAs into a series of a few giant “hubs” rather than a dispersed network of independent partners in the conglomerate.
Focus described the deal combining the $70 billion in client assets under management or administration with St. Louis-based Buckingham and its turnkey asset management business, Buckingham Strategic Partners, into Boston-based Colony as “transformational.” In a later interview with FA Magazine, the new CEO of Focus, former Colony CEO Michael Nathanson, said the firm strived to be “the leading fiduciary advice platform in the country.”
For RIAs, though, the deal represented only the latest in a continuing series of M&A deals of dizzying size and volume that raise questions about whether the consolidation into mega-firms rivaling the scale of the brokerages runs counter to putting clients’ best interest first. In other words, RIAs are trying to figure out where the industry’s gospel of accelerating growth runs headlong into the supposedly sacred responsibilities of financial planners.
The mega-RIAs argue their dominance ultimately serves the clients through lower costs and efficient operations. Others point out the sheer pace of change folding small businesses into giant brands that generate billion-dollar valuations and the potential conflicts of interest and clunky procedures resembling those of, well, big financial firms. In fact, client attorneys say many RIAs use legal maneuvers against customer complaints that tilt arbitration in the firms’ favor to a greater extent than in the cases leveled against Wall Street brokerages.
All of which is prompting conversations across the profession. They’re taking place among the smaller RIAs who see potential opportunities alongside the crushing reality of competing with the giants, in the galaxy-brain panels of major industry conferences with some leading voices in the profession expressing ambivalence and around the membership of organizations seeking to enforce tougher fiduciary guidelines than those of the Securities and Exchange Commission.
In the case of the Buckingham-Colony deal, the National Association of Personal Financial Advisors, one of the most stringent and respected upholders of the fiduciary duty in the profession, voided the membership of more than 100 of Buckingham’s planners. Upon completion of the deal, the planners will be employed by a firm that sells insurance; therefore, they will no longer be eligible for NAPFA membership.
