Focus Financial Partners, which recently completed a $50 million recapitalization to meet debt obligations and revive its business of buying interests in wealth management firms, confirmed today that it has made LLBH Private Wealth Management a full partner firm. As a partner, LLBH gets a combination of cash and equity units in Focus in exchange for giving the parent company a preferential interest in a portion of its annual revenue.
Focus Financial Partners, which recently completed a $50 million recapitalization to meet debt obligations and revive its business of buying interests in wealth management firms, confirmed today that it has made LLBH Private Wealth Management a full partner firm. As a partner, LLBH gets a combination of cash and equity units in Focus in exchange for giving the parent company a preferential interest in a portion of its annual revenue.
LLBH is a Westport, Conn.-based registered investment adviser formed by former Merrill Lynch brokers in the fall of 2008. As previously reported in InvestmentNews, New York-based Focus receives an option to buy new RIA firms that join its “Connections” program. LLBH is thus far the only firm to have participated in the program.
Focus has interests in 18 advisory firms, ranging from third-party pension plan administrators to asset managers and tax planners. Hampered by capital issues, the firm spent most of the past 18 months helping its “partners” make subacquisitions to expand their practices. In a press release issued Monday, it said that LLBH will now “get assistance in recruiting new talent and access to capital to complete sub-acquisitions.”
“LLBH was a terrific start for the program," said Ruediger “Rudy” Adolf, chief executive of Focus. “We have a scalable and very attractive program for the right type of brokers who understand the power of the RIA model.”
Focus last month announced the addition of Joel Isaacson & Co., a financial planner in New York City, as a partner firm last month. It also recently obtained $50 million in growth capital from Polaris Venture Partners and Summit Partners, and renegotiated its bank line with a group led by Bank of America.
Focus, known generically as a roll-up firm, was sued in Delaware Chancery Court last month by Progressive Financial Strategies LLC, the parent of one of its first partner firms, StrategicPoint Investment Advisors. Progressive alleges that Focus refuses to provide it with information on the value of its equity units in the parent firm so it can determine if older partners are being inequitably diluted when newly issued units are awarded to outside investors, new RIA partners and Focus’ management.
“One of the hallmarks of Focus’ model is nobody has to do a deal with us,” Mr. Adolf said. “[Partners] are paid some proportion in cash and some proportion in stock, and unless they believe in the power of our own currency, it wouldn’t made sense.”
He declined to discuss specifics of Progressive's charges, noting that Focus is responding through filings with the Delaware court, but said of the lawsuit: “We have never lost any sleep over this.”
