Key Takeaways
- • Led by Rob Francais, CEO of Aspiriant Wealth Management, around 20 employee-owned RIAs with at least $3 billion in AUM have held two "summit" meetings in the past year and plan a third in February in Scottsdale, Ariz., according to Barron's.
- • Francais aims to launch a formal not-for-profit alliance of employee-owned firms in July, envisioned as a trade group or professional standards body that could also facilitate mergers.
- • Ownership succession is the central challenge, as soaring RIA valuations make internal buyouts prohibitively expensive for younger employees.
- • Moneta, a $50 billion-asset employee-owned firm, argues it generates enough free cash flow to reinvest without outside capital, while acknowledging the details of private-equity offers, such as growth targets and cash versus equity mix, matter greatly.
- • Outside-capital proponents such as Savant Wealth and Modera Wealth cite access to growth capital and succession funding, and Snowden Lane bought back 40% of its private-equity stake last year.
Summary
About 20 employee-owned registered investment advisers managing at least $3 billion in assets are coordinating to remain 100% employee owned despite sizable private-equity offers, according to Barron's. The group, led by Rob Francais, CEO of Los Angeles-based Aspiriant Wealth Management, has held two summit meetings in the past year and plans a third in February in Scottsdale, Ariz. Francais hopes to launch a formal alliance in July, which he describes as a not-for-profit resembling a professional standards board or trade group. He said the goal is to "be stewards for the fiduciary standard and strengthen and advance the employee-owned model."
Scale is a persistent problem for employee-owned firms, and the alliance is intended to help like-minded firms get to know one another and merge where it makes sense. Owners of Greenspring Advisors in Towson, Md., and Wealthstream Advisors in New York City used the first gathering, held in Park City, Utah, last summer, to finalize a merger completed several months later.
Ownership succession is the biggest challenge. John Furey, managing partner of Advisor Growth Strategies, said that "the law of absolute numbers makes it very difficult for the math to pencil out," noting that RIA valuations are far higher than in the past, rates are rising, and AI-driven productivity gains will push valuations higher still. Executives nonetheless say determining an internal discount is manageable and not an existential threat.
The case for outside capital remains strong. Tom Orecchio, CEO of Modera Wealth Management, said private-equity investor TRIA provided capital for acquisitions, talent and retiring shareholders' stock sales. Brent Brodeski, CEO of Savant Wealth Management, called minority investors Cynosure and Kelso "outstanding partners." He argued that full employee ownership can limit access to growth capital and force steep equity discounts for the next generation.
Employee-owned executives push back on that view. Eric Kittner, chief executive of St. Louis-based Moneta, a $50 billion-asset firm with 9,000 clients and 65 employees, said the firm generates enough free cash flow to reinvest as needed and warned that the "devil is in the details" of private-equity offers, including growth targets, cash proportion and the value of the buyer's equity. Francais also noted that RIAs grew rapidly over 30 years "without a lot of outside capital, but with a tremendous amount of human capital." He cautioned that private-equity investors typically hold stakes for five to seven years and may impose demands that become a liability.
Rob Mooney, CEO of Snowden Lane, countered that outside investors share the goal of serving clients and employees. Snowden Lane bought back 40% of its private-equity investor's stake last year, leaving employees with half the firm.
Executives see the next year as an inflection point. Furey said the odds of 100% employee-owned firms remaining viable enterprise competitors over five years are "extremely low," predicting that all enterprise firms will eventually have a capital partner. Simone Gehner, chief compliance officer and shareholder at TCI Wealth Advisors, described the summits as a source of community and optimism, while Brandon Kawal of Advisor Growth Strategies said a full change-of-control sale is not the only option for firms planning ahead.
The risk remains that high private-equity multiples prove hard to refuse. Gehner acknowledged that "it's easy to get blindsided by the multiples," and Kittner noted his firm's equity has appreciated for more than a decade. Francais, who is writing a book on employee ownership, said private equity "isn't the villain of the story" and that employee-owned firms must join forces to achieve scale.
Scale is a persistent problem for employee-owned firms, and the alliance is intended to help like-minded firms get to know one another and merge where it makes sense. Owners of Greenspring Advisors in Towson, Md., and Wealthstream Advisors in New York City used the first gathering, held in Park City, Utah, last summer, to finalize a merger completed several months later.
Ownership succession is the biggest challenge. John Furey, managing partner of Advisor Growth Strategies, said that "the law of absolute numbers makes it very difficult for the math to pencil out," noting that RIA valuations are far higher than in the past, rates are rising, and AI-driven productivity gains will push valuations higher still. Executives nonetheless say determining an internal discount is manageable and not an existential threat.
The case for outside capital remains strong. Tom Orecchio, CEO of Modera Wealth Management, said private-equity investor TRIA provided capital for acquisitions, talent and retiring shareholders' stock sales. Brent Brodeski, CEO of Savant Wealth Management, called minority investors Cynosure and Kelso "outstanding partners." He argued that full employee ownership can limit access to growth capital and force steep equity discounts for the next generation.
Employee-owned executives push back on that view. Eric Kittner, chief executive of St. Louis-based Moneta, a $50 billion-asset firm with 9,000 clients and 65 employees, said the firm generates enough free cash flow to reinvest as needed and warned that the "devil is in the details" of private-equity offers, including growth targets, cash proportion and the value of the buyer's equity. Francais also noted that RIAs grew rapidly over 30 years "without a lot of outside capital, but with a tremendous amount of human capital." He cautioned that private-equity investors typically hold stakes for five to seven years and may impose demands that become a liability.
Rob Mooney, CEO of Snowden Lane, countered that outside investors share the goal of serving clients and employees. Snowden Lane bought back 40% of its private-equity investor's stake last year, leaving employees with half the firm.
Executives see the next year as an inflection point. Furey said the odds of 100% employee-owned firms remaining viable enterprise competitors over five years are "extremely low," predicting that all enterprise firms will eventually have a capital partner. Simone Gehner, chief compliance officer and shareholder at TCI Wealth Advisors, described the summits as a source of community and optimism, while Brandon Kawal of Advisor Growth Strategies said a full change-of-control sale is not the only option for firms planning ahead.
The risk remains that high private-equity multiples prove hard to refuse. Gehner acknowledged that "it's easy to get blindsided by the multiples," and Kittner noted his firm's equity has appreciated for more than a decade. Francais, who is writing a book on employee ownership, said private equity "isn't the villain of the story" and that employee-owned firms must join forces to achieve scale.
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