$4.9B breakaway joins Focus

Focus Financial Partners has landed one of its biggest RIA firms yet with the addition of LVW Advisors, a move that also signals the wind-down of the institutional investment management consulting unit at Convergent Wealth Advisors LLC.

“I bought out my interest in Convergent to build a stand-alone business,” said Lori Van Dusen, founder of LVW Advisors, which announced its plans last week.

Convergent has “great people and great research, but our type of clients are different, so it was an amicable separation,” she said.

LVW, based in Pittsford, N.Y., manages about $4.9 billion in assets for high-net-worth and institutional investors, according to Focus Financial.

“I have a very strong vision of how to serve my clients, and I felt the way to do it was to build a platform around our clientele,” Ms. Van Dusen said. “I was not a standalone” at Convergent.

LVW’s separation, which includes eleven staff members, is the second recent big departure from Convergent Wealth.

On Sept. 29, an institutional team headed by George Dunn left Convergent Wealth for the global institutional consulting group of Bank of America Merrill Lynch.

The Dunn group reportedly manages $2.7 billion.

Convergent recruited Ms. Van Dusen and Mr. Dunn from Smith Barney Inc. in 2008. Together, they co-headed Convergent’s institutional consulting unit, in which advisers select money managers for institutional clients.

The lift-out from Smith Barney “was a marquee hire for Convergent,” said Jeff Spears, chief executive of Sanctuary Wealth Services LLC, a consulting firm. “It was a hire that was structured almost like an acquisition of their businesses [and] established a new business vertical [for Convergent] — the institutional consulting business.”

Steve Lockshin, Convergent’s founder and chief executive, has been “unbelievably successful” in pioneering the strategy of aggregating advisory firms, said Dennis Clark, a managing director at California Investment Trust, a money management firm that works with advisers.

“But there’s a reason independent advisers are independent — they don’t want to work for a large organization,” Mr. Clark said. “While the economics of [an acquisition] might look good, and the corporate issues might be dealt with, you can’t bat a thousand with that strategy.”

In a statement announcing the establishment of her firm, Ms. Van Dusen said that as an independent firm, LVW will be able to provide “clients with objective fiduciary guidance, free from the constraints of corporate ownership.”

Convergent is a majority-owned subsidiary of Convergent Capital Management LLC, a subsidiary of City National Corp.

Mr. Dunn, reached last week while traveling, declined to comment.

DIFFERING FIGURES

Convergent Wealth spokeswoman Laura Smith said that Mr. Dunn and Ms. Van Dusen together managed $4.7 billion, a number that doesn’t jibe with figures offered by Focus Financial Partners and Merrill. She couldn’t account for the higher asset figures cited by the two firms.

Either figure, at least on the surface, seems like a sizable slice of Convergent Wealth’s $14 billion in assets under management.

But Mr. Lockshin, who founded Convergent in 1994, said that the institutional unit didn’t generate a significant amount of revenue.

Investment management consulting has run into tougher competition and higher regulatory costs over the past three years, Mr. Spears said, “so I can assure you the profitability quotient changed for Convergent” since it brought Ms. Van Dusen and Mr. Dunn on board.

In any event, “the fee on that [institutional] business is minuscule,” Mr. Spears said.

Convergent will “continue to service select institutions,” with the majority of its clientele being wealthy individuals, Ms. Smith said, adding: “Our business remains very strong. We’re adding clients faster than ever before.”

Convergent’s loss of Ms. Van Dusen’s team could be Focus Financial’s gain.

Ruediger “Rudy” Adolf, founder and chief executive of Focus Financial, declined to calculate whether the LVW Advisors partnership is the biggest deal yet for his aggregator firm.

“It depends on how you look at size,” he said. “Lori advises and consults on about $5 billion, so this is obviously a very significant asset base.”

Focus Financial now has partnership stakes in 24 advisory firms that manage more than $45 billion in total. Focus partners with advisory firms, taking an ownership stake, and in return offers logistical support and operational expertise.

The LVW deal is the latest in what looks to be an accelerating string of deals for the aggregator.

Last month, Focus took a stake in two registered investment advisers, Hufford Financial Advisors LLC of Indianapolis, which manages about $900 million, primarily for dental practices; and Boston-based Colony Group LLC, which has $1.3 billion in assets. In January, Focus partnered with Pettinga Financial Advisors LLC, an Evansville, Ind., firm with $600 million in assets.

Email Dan Jamieson at [email protected]