When a billion-dollar practice wanted to leave Wells Fargo Advisors Financial Network, the firm’s custodian, First Clearing, suggested a Focus Financial Partners RIA that also uses its services. The M&A deal illustrates the trend toward succession-planning moves as advisors get older, as well as an unusual step taken by a giant custodian to avoid losing the assets — in this case, going so far as to introduce the departing advisor to an outside firm.
Collins Investment Group, a Bethesda, Maryland-based practice with four advisors and $1 billion in client assets, merged into XML Financial Group, the firms
Robert Collins, a four-decade industry veteran who had run his independent practice for 13 years, was interested both in XML’s custody relationship with First Clearing and in the broker-dealer XML owns, which it purchased in 2019, Collins and Bernstein said. The deal will allow Collins to transition to retirement over the next five to 10 years. First Clearing executives had suggested Rockville-based XML after Collins declined to move forward with eight other candidates he considered on their recommendation in his first year of due diligence, he said.
“I’ve been in this First Clearing, Wells world for years — this is unheard of in the industry,” Collins said of the placement effort by First Clearing after he informed the custodian of his decision to leave Wells Fargo’s independent arm to seek a succession deal. “The assets stay in place,” Collins added. “Ultimately, they really wanted to help me out because I’ve been engaged with senior management for years on this subject. It was right for my clients, it was right for my team and it was right for me and my family.”
Representatives for Wells Fargo Advisors didn’t respond to requests for comment on the move.
The company’s assistance with Collins’ exit from its affiliated ranks reminded recruiter Mark Elzweig of the growing M&A consulting and capital resources that independent firms provide to their practices. However, Elzweig has never heard of such aid as part of a deal moving an affiliated practice to an external BD and RIA. He called it a “savvy move” for Wells Fargo.
“There's always a lot of acrimony and ugliness when advisors want to go elsewhere,” Elzweig said. “This is interesting because it shows that the FiNet advisors, just like the advisors in the RIA channel at Wells, are truly independent.”
Following the deal, XML topped $3 billion in client assets and 40 employees, roughly half of them advisors, across offices in three states. In addition to First Clearing, it also uses Fidelity’s custodian. XML had about $550 million in client assets when Focus acquired the firm in October 2016, according to Bernstein.
“Bob was looking to get out of the day-to-day and focus on new client relationships and succession plans,” Bernstein said, noting the broker-dealer and the “significant capital” that comes with being a Focus partner firm as compared to other options. “It was literally all of the different positives that these other firms may have had; we had it all bundled together.”
Focus, which is publicly traded with private equity firms Stone Point Capital and Kohlberg Kravis Roberts holding minority stakes, had 76 partner RIAs at the end of the second quarter, according to its
“To put it mildly, we have substantial momentum,” Chang said. “I don't think this is some short-term phenomenon. ... We are always looking for firms that are truly best of breed, that are trusted advisors to their client.”
