Cambridge's Schwartz expands partnership program

Now offering financing for succession plans and acquisition to indy RIAs

Feb 5, 2015 @ 4:19 pm

By Bruce Kelly

+ Zoom

Cambridge Investment Research Inc., a leading independent broker-dealer, is expanding a current offering by a sister company that provides capital for succession planning and acquisitions to its affiliated advisers.

For the first time, the sister firm, a broker-dealer and registered investment adviser called Continuity Partners Group, will open its doors to fee-only advisers who are not registered with Cambridge Investment Research.

Continuity Partners has already seen success. It intends to announce today a formal agreement with Gould Asset Management, an independent RIA based in Claremont, Calif., with $438 million in assets under management. Details of the agreement were not disclosed.

Cambridge Investment Research has seen remarkably steady growth over the past dozen years and, with $650 million in total revenues in 2014, is one of the 10 largest independent broker-dealers in the industry.

The brainchild of Cambridge founder and CEO Eric Schwartz, Continuity Partners Group was launched in 2010 and has 168 Cambridge Investment Research advisers in the partnership. Since its launch in 2010, Continuity Partners, which annually takes up to a 12% a slice of its member firm's revenues, has made $10 million in loans to its partners, primarily for succession plans staged in tranches over a number of years and acquisitions of practices.

(More: Cambridge to have robo offering for advisers in 2016)

Unlike other RIA aggregators or “roll-ups,” Continuity Partners does not buy or own any of the equity from the firms that are partners. “We are particularly attracted to the mutual structure of Continuity Partners, which is owned by and operated for the benefit of its member advisory firms,” according to a statement by Don Gould, founder and president of Gould Asset Managements.

“It's an opportunity in the marketplace for advisers who don't want to hand ownership control” to any of the number of aggregators in the market, said Mr. Schwartz, who provided the initial seed money for Continuity Partners and is the largest shareholder. “The main issue is we don't have name recognition in the RIA space.”

The RIA aggregator or roll up space each year gets increasingly crowded. United Capital, HighTower Advisors and Focus Financial Partners are three of the most prominent.

How to fund succession planning and acquisitions is top of the mind for the RIA industry, said Jodie Papike, executive vice-president at Cross-Search, a third-party recruiting firm that focuses on the independent broker-dealer industry and has counted Cambridge Investment Research as a longtime client.

“It is a huge need, with so many advisers retiring the acquisitions are there,” said Ms. Papike. “It's just a matter of the firms getting the funding. The key question in this case is how much is an RIA willing to give up to be a part of this partnership?”

Mr. Schwartz declined to outline the specific details of the partnership program in order to avoid running afoul of securities regulations, which treats the program like a private placement. Those investments have strict rules against being widely advertised.

(More: Succession-planning program at Cambridge is bearing fruit)

“Until now, Continuity Partners Group was for Cambridge advisers,” Mr. Schwartz said. “They wanted their legacy to continue and, in many cases, to pass their practice on to junior partners and get funding to acquire some enterprises. They wanted the benefits of having larger scale without selling out to someone.”

The next question was who else could Continuity Partners Group offer services to, he said. “Fee only advisers were the obvious next choice,” he said. “An RIA has the exact same needs as the successful adviser at Cambridge.”

“We're not looking to own you, and we're not looking to roll you up,” he said. “We're looking to help you be more successful in growing your business and then transition it to the next generation of advisers and help them continue to grow it.”

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