Emigrant Bank takes sole ownership of RIA consolidator Fiduciary Network

Privately held, family-owned bank completed deal to acquire remaining 25% stake it didn't already own in network that includes Evensky & Katz/Foldes Financial and Regent Atlantic

Nov 21, 2018 @ 1:29 pm

By Ryan W. Neal

Emigrant Bank is now the sole owner of Fiduciary Network, a Dallas-based consolidator of registered investment advisers.

The privately held, family-owned bank completed a deal to acquire the remaining 25% stake it did not already own in Fiduciary Network from former CEO Mark Hurley and other members of the management team.

Terms of the deal were not disclosed. Karl Heckenberg, a current member of Fiduciary Network's board of directors, will assume leadership of the company.

Fiduciary Network's operating agreement provided Emigrant with a right of first refusal to acquire the 25% or sell its existing 75% in the event of an outside buyer. The company elected to buy "because we feel so strongly about the future of the Fiduciary Network and it's affiliates," Mr. Heckenberg wrote in an email. "You could say we put our money where our mouth is."

Fiduciary Network did not respond to a request for comment.

(More: Fiduciary Network posts a 'for sale' sign)

According to Silver Lane Advisors, an investment bank that facilitated the deal, Emigrant has already invested $155 million toward supporting the 17 member firms of Fiduciary Network, which collectively manage $40 billion in client assets.

Emigrant is looking to invest more and taking full control will make that easier, Silver Lane managing partner Liz Nesvold said.

"A more seamless governance permits them a lot more flexibility in how they deploy that capital," she said.

Emigrant could look to expand Fiduciary Network by broadening the type of firms it partners with. Recently, Fiduciary Network has not been an active acquirer, and Mr. Hurley has been at odds with Emigrant's leadership.

"Now that Fiduciary Network is wholly owned by a subsidiary of Emigrant Bank, perhaps the only change that we might consider is broadening the mandate modestly to other types of financial services firms given the depth of expertise across Emigrant's various operating companies," Mr. Hackenberg wrote.

However, he does not anticipate Emigrant will deviate too far from the model Fiduciary Network already employs. To continue providing business guidance and capital, it's important to keep the number of affiliate firms to "a manageable level," Mr. Hackenberg wrote.

When Mr. Hurley founded Fiduciary Network in 2007, it was one of the first platforms to provide turnkey succession planning by offering financing to younger advisers looking to buy out senior-level ownership. As such, the business owns a partial stake in each adviser, including Regent Atlantic, Brouwer & Janachowski, Evensky & Katz/Foldes Financial, Legacy Wealth Management, Sand Hill Global Advisors and Radnor Financial Advisors.

The transaction will have no effect on the firms, according to a press release from Silver Lane.

"Emigrant is not a 'control' partner that wants to get in people's knitting," Ms. Nesvold said. "They're really a financing solution for whatever needs a firm in this space might have."

Banks are clearly interested in expanding their presence in the wealth management and financial advice space. Citizens Financial acquired Clarfeld Financial Advisors, a firm with $7.5 billion in AUM, earlier this month.

Now that wounds have healed from the financial crisis, banks are plotting strategic growth plans and see the recurring fees of wealth management as an attractive revenue stream, Ms. Nesvold said. Many banks offer some wealth management, but an acquisition can help jump-start the strategy.

"Banks are back," Ms. Nesvold said, adding that this is the fourth bank-led transaction Silver Lane has worked on this year. "Organic growth is wonderful, but sometimes it helps propel a bank if they take a more meaningful stake and plant a flag."

Even with increased volatility in markets, Ms. Nesvold believes the environment will remain favorable for advisory firms looking to sell and banks looking to buy.


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