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The St. Petersburg, Fla.-based firm has already staked 12 advisor practices through its Practice Capital Solutions Program, and has about 100 more in talks, said Emma Boston, senior vice president, succession and capital.
“What has been truly surprising is the amount of interest that we have heard from advisors,” Boston said during a panel discussion at the conference. “I give credit to you all for all of your feedback and partnership to collaborate and create something together with us.”
Raymond James’ capital solutions program offers three options: debt financing, a minority stake of about 10% to 30%, or a 100% equity stake.
Boston said on the sidelines of the conference that the most common request is for a noncontrolling minority investment that will allow the advisor to retain independence, while funding either succession needs or growth objectives.
“The majority want minority so they can stay independent,” Boston said. "It is a smaller use case for full acquisition.”
The first firm to enter the program, Birmingham Investment Group, said during the panel session that it wanted to raise capital partly to recover acquisition costs from recent acquisitions, as well as to set up an equity-sharing program for its younger advisors.
“We were concerned about the transition to our [Generation] 2s and G-3s,” he said. “It was important to us that we had a conduit to let them get us out of the way.”
Whatley said Boston and Raymond James worked with the firm to create different share classes for their next generation of advisors to ease them into ownership.
“It’s a gradual process,” he said. “But it gives us time to evaluate them, too … we want to make sure we put everyone in a position to succeed.”
Raymond James is competing with a variety of capital-raising options available to financial advisors in the market. Those range from selling to a private equity-controlled firm to getting a noncontrolling minority investment from industry-focused banks or other RIAs.
On the main stage of the conference, Private Client Group President Tash Elwyn highlighted the Practice Capital Solutions program to the more than 2,000 financial advisors in attendance.
“Obviously, there are many benefits [of the capital program], with the most notable that it’s a firm and a name that you already know, you trust and that’s going to provide tremendous continuity, not only to your business, but to your clients,” he said.
On the sidelines of the conference, he added that demand had been strong since the firm announced the program.
Elwyn compared the capital program to the flood of private equity in the IBD and RIA space.
“As you look at what’s happened across the industry over the last five to 10 years, there’s been X-amount of aggregation, but you’ve yet to see the exits,” he said. “Advisors are rightfully concerned about the implications of that, most importantly to their clients, but then in addition to the businesses they built, the legacy of those businesses, what happens to their successors.”
David Keator of advisory Keator Group said he leveraged the program for long-term succession planning with his children. They were the third generation to join the firm founded by Keator’s mother in 1979.
Keator said that they all felt they could “easily sell the business.” But they were looking for a partnership that would help his children eventually take control.
“As a dad, I didn’t want to indenture my children into a situation that I wasn’t sure of,” he said. “After a lot of thought, and a lot of looking around, candidly, we came back to this is where we want to be, and the kids said yes, this is also where we want to be.”