Startup consolidator Arax seeks big growth with Pershing agreement

An independent brokerage and registered investment advisory firm that recently formed under new private equity-backed ownership will use BNY Mellon's Pershing for clearing and custody.

Ashton Thomas Securities is a wealth management firm that rebranded to its current name from Excel Securities & Associates after Arax Investment Partners purchased the firm in December and made it the hybrid broker-dealer arm of Ashton Thomas Private Wealth, an RIA that Arax acquired earlier in 2023. New York-based Arax launched in 2022 with an investment by RedBird Capital Partners and the appointment of former Alex. Brown CEO Haig Ariyan to lead the new firm. With a newly expanded structure after joining Arax and adding a billion-dollar team from Alex. Brown in January, Ashton Thomas gave Pershing a new custody client relationship, the firms said March 4.

"We're really excited about this partnership with Arax and the buildout that Haig is taking on in terms of forming a boutique to serve high-end advisors," Pershing Head of Wealth Solutions Ben Harrison said in an interview. "We see this as a need in the marketplace and a very substantial opportunity for advisors that are thinking about moving to the independent world but really wanting the backing of a robust platform behind them."

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Ariyan previously had a relationship with Excel as one of the wealth management firms that once received outsourced services from Alex. Brown, he noted. Pershing reintroduced him to the firm, which "happened to be in the right time in their life cycle to find a partner like Arax," Ariyan said in an interview. After picking up $1 billion in client assets with the acquisition of Excel and $2 billion more with the Stafford Schauer Private Wealth Team moving to Ashton Thomas, Arax has around 60 advisors in five offices managing nearly $7 billion in client assets. 

"We are early in our evolution, and that's actually an advantage to our partners," Ariyan said, defining potential recruits to Arax as wealth or asset management firms that "are complementary to each other" or "want to lift out from the national platforms."

Deep-pocketed startup consolidators like Arax are adding more potential landing spots for RIAs and breakaway teams to the mix as the independent channel keeps getting bigger and often more complex in structure through the ongoing consolidation. Last week, an agreement for a merger of Focus Financial Partners-owned GW & Wade into another giant firm with the same parent, The Colony Group, combined one company with $10.4 billion in client assets with another that already has $21.1 billion. That deal followed Focus itself going private last year. 

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Similar to Arax, the startup buyers tend to provide some equity in their firm as part of the transaction for new advisory practices selling a majority of their business, according to recruiter Mark Elzweig of Mark Elzweig Company.

"For a slice of advisors, it's a very attractive business model," Elzweig said. "You can monetize a piece of your practice by selling part of your cash flow and then, as a shareholder, you position yourself for a second monetization opportunity later on."

Some advisors may balk at newer names such as Arax or Ampersand Partners, another brokerage launched last year by ex-Wells Fargo and Edward Jones executives, if the incoming teams struggle to transfer their clients to upstart firms or get fewer discounts on vendor services than with the giants of the industry, according to recruiter Ron Edde of Millennium Career Advisors.

"These are people who are pretty well-established in the industry, and they're banking on their experience and probably even more their reputations to get people to follow them," Edde said.

Ariyan helped spearhead the sale and integration of Alex. Brown into Raymond James from its prior parent, Deutsche Bank, in 2016, and he was previously the head of wealth management in the Americas for the latter firm as well. Signed deals that haven't closed will add roughly 65 more advisors to Arax's existing ranks at Scottsdale, Arizona-based Ashton Thomas and four other firms, Ariyan noted. Roughly 85% of Arax's business will stem from advisory holdings at the partner RIAs rather than with brokerage accounts, but Pershing's expertise and resources on either side of the industry make the custodian a "key" collaborator with Arax, he said.

"It remains very important to us that all of our partners have a meaningful amount of equity and remain shareholders in our business together," Ariyan said. "This is where Pershing has proven to be one of the best operators in the custody and clearing space."

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Excel had used Pershing's services since 2002, according to FINRA BrokerCheck. The Ashton Thomas RIA counts Pershing as one of four custodial options alongside the clearing and custody arms of Fidelity Investments, Charles Schwab and Goldman Sachs, its disclosure to the Securities and Exchange Commission showed. The new relationship with the reconstituted Ashton Thomas under Arax will bring more assets to Pershing in the future. The shuttering of First Republic pushed Pershing's net new assets down 82% last year, but the firm scored a win at the beginning of 2024 through the renewal of its contract with Northwestern Mutual.

Ashton Thomas represents "a really important relationship for us and we're excited to support it and see it grow," Harrison said.

"Our vision is to be the most productive platform delivering a comprehensive set of solutions to power the future of wealth management," he said. "The depth and breadth of capability that an entrepreneurial business can get by leveraging our platform is really important from a scale perspective."