Steward Companions World Advisory is establishing a brand new division with the acquisition of Freedom Road Companions from Raymond James. The 7-year-old agency has 38 workers—together with 28 advisors—17 places and $3.2 billion in managed belongings.
Dubbed the Freedom Road Division, the channel will comprise all companies introduced in underneath Steward’s brand-new acquisition mannequin. With one exception, Steward has solely added new advisors by recruitment, rising the agency from $50 million to round $28 billion within the decade since its founding. (The one exception was the agency’s buy of Umpqua Investments in 2021, a transfer that introduced brokerage companies in-house.)
Freedom Road will type the muse of the brand new division, which shall be operated by the agency’s administration crew alongside Steward and supply a vacation spot for advisors in want of a succession answer. Most, if not all, Freedom Road advisors will be a part of Steward as fairness companions and workers when the deal closes earlier than the top of the 12 months, however one or two might choose to hitch underneath Steward’s recruitment mannequin and affiliate as a substitute.
“Leveraging Steward Companions’ deep sources and experience within the wealth advisory house permits us to supply our purchasers with enhanced entry to the very highest stage of experience and repair, and in addition frees extra sources as we proceed to develop the enterprise as a brand new division of Steward Companions,” Freedom Road CEO Scott Danner stated in a press release.
“The addition of Freedom Road Companions as the muse of our new Freedom Road Division creates a brand new precious, high-growth enterprise section at Steward Companions the place now we have had excessive demand from advisors and wealth administration companies contemplating a transition from their present conditions,” added Steward President and COO Hy Saporta.
Steward is moving into the M&A sport to fulfill that demand and seize different progress alternatives the agency sees available in the market, CEO Jim Gold instructed WealthManagement.com. He famous the variety of unbiased RIAs—about 15,000—and stated many are reaching a degree the place additional progress turns into troublesome and promoting is smart to realize the advantages of partnership and scale.
“We even have advisors we’re speaking to who simply don’t need to be homeowners anymore and get again to operating their enterprise,” he stated. “After which, you’ve gotten the RIA and wirehouse breakaways that now need to promote—which is a brand new dynamic. Particularly from the wirehouses, as a result of the wirehouse offers, on common, you are speaking one- or two-times income and that is sometimes paid someplace between 5 and 10 years after retirement.”
Steward’s transfer is smart as a result of “the good, sturdy breakaways do have the chance to view themselves as a future enterprise accomplice of a significant agency, and that might positively obtain their highest worth,” stated John Langston, founder and managing accomplice at industry-focused funding financial institution Republic Capital Group.
“There’s extra worth for the breakaway, however there’s additionally much more worth for the partnership as a result of their income is not rented and their asset retention and the potential that they’re going to keep on with the agency is a lot extra enticing to the skin investor,” he stated.
“All this stuff result in M&A,” Gold stated. “And I would like the expansion funnel to be as extensive as attainable; I need to have as many choices as attainable.”
Acquired companies are given the choice of co-branding, becoming a member of underneath Freedom Road or just transferring underneath the Steward identify. Gold stated full acquisitions are most popular however he’s open to different preparations in the proper conditions.
“We delight ourselves on flexibility and optionality, so we’re not going to attract any traces within the sand, however I feel our common premise goes to be that we need to purchase the entire thing,” he stated. “If there is a actually, actually nice alternative that may be a minority stake or a majority, however not an entire buy, we’ll definitely have a look at that and see if it is smart.
“In a minority scenario, there must be actually constructive and extenuating circumstances corresponding to company match or the flexibility to develop it along with one other group,” he added.
Steward at present has seven or eight potential acquisitions within the pipeline, in accordance with Gold, and has been fielding requests from present associates who need to ultimately transition their practices to the brand new division. With places throughout New England, the Mid-Atlantic, Southern and Northwest United States, the Freedom Road acquisition will assist to bolster regional growth efforts there, he stated.
Steward has had its finest recruiting 12 months ever in 2023, onboarding about $6 billion in belongings up to now, and Gold expects the brand new division will solely amplify that progress.
“This deal is a bit more than half of that,” he stated. “So then extrapolate that out 5 years.”
Majority owned by workers, Steward is minority-backed by Cynosure and The Pritzker Group. In late 2022, the agency acquired a $140 million credit score facility led by various funding agency Apogem Capital to assist recruitment and, now, acquisitions.