United Capital holds tight to its purse strings

The firm has not dipped into its $30 million fundraising; early partners continue to hold on.
FEB 27, 2014
Four months after getting a multimillion-dollar infusion of cash from investors, the chief executive of United Capital Financial Partners Inc., says he has not spent a penny. United Capital, one of the largest so-called “strategic acquirers” in the independent financial advisory business, is among a host of firms that have entered 2014 with both the appetite and the balance sheet to acquire businesses. “This is a quality race, not a quantity race,” said the firm's chief executive, Joseph J. Duran. Last fall Sageview Capital, a private equity firm, invested $30 million in United Capital. Two other firms, Bessemer Venture Partners and Grail Partners, added another $8 million. At the time, Mr. Duran said he expected to use some of those resources to provide payouts to some early partners. But investors asked for less than expected from that liquidity offering, even though some equity stakes have tripled in value, Mr. Duran said this week. He said the company was able to finance the payouts requested by partners with money generated by operations. The company earned nearly $100 million in revenue last year. “The fact that it was undersubscribed speaks volumes to the confidence that those firms have in management and Joe,” said recruiter Ryan N. Shanks, chief executive of Finetooth Consulting. For the first time ever, acquisitions generated less than half of the company's asset growth last year, falling to about a third, Mr. Duran said. He said acquisitions will continue — he hopes to double that area of the business this year — but that new assets from existing clients and market appreciation will continue to account for a larger proportion of the firm's growth. From the end of 2012 to the end of 2013, United Capital built its wealth management business to approximately $9.44 billion, from $7.81 billion. The firm also has a pension-consulting arm that advises on about $9 billion. United Capital acquired four firms and hired five additional advisers in 2013, down from five firms and the same number of additional advisers in 2012. Since its founding in 2005, the company has been one of the biggest spenders in the independent space. The financial-planning-centric business, which is often compared to a franchise operation, largely hires brokers who generate $300,000 to $700,000 in annual revenue and also buys larger firms. Their client base is less focused on high-net-worth clients than other firms like HighTower Advisors. “People in the mass-affluent category need financial advice, and I think that's going to become more and more acute as they retire,” said venture capitalist Scott M. Stuart of Sageview Capital. “United Capital has developed a really great process, a really great brand.”

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