Fiduciary Network LLC has bought just under 15% of Soltis Investment Advisors, a fee-only wealth management and corporate retirement plan adviser in St. George, Utah, with about $800 million of assets under management.
The investment is the tenth completed by Fiduciary since it was founded in March 2007 by investment banker Mark Hurley with backing from Howard Milstein, the owner of Emigrant Savings Bank in New York.
It's the firm's first deal since it financed the April 2009 spinoff of Sand Hill Advisors LLC in Palo Alto, Calif., from Boston Private Financial Holdings Inc., but Mr. Hurley said he expects to complete two or three more transactions this year.
Soltis, which is about an hour's drive north of Las Vegas in the Utah's Red Rock region, was founded in 1993 by Lon E. Henderson, its president and chief executive. He and partner Hal G. Anderson, its chief financial officer, are deploying part of the cash from Fiduciary to buy out some of the interests of Hyrum Smith, a partner and original backer of the firm.
Mr. Smith is the former chairman and CEO of Franklin Covey Co., a training and consulting firm, and serves with Mr. Hurley on the board of the U.S. Army-affiliated Command and General Staff College Foundation.
Although Soltis's senior partners are far from retirement age, they also are selling some equity stakes to three younger advisers who have become partners in the firm with financing from Fiduciary. They include Kim Anderson, who joined the RIA ten years ago from General Motors Acceptance Corp. and oversees the retirement plan services business, and Tyler Wilkinson, who has been with Soltis since its founding and helps oversee wealth management services. Mr. Anderson is a younger brother of the firm's CFO.
“This is not for the purpose of allowing the first gen[eration] to retire, but we do want to institutionalize a succession plan,” said Mr. Henderson, who like Mr. Anderson is 51. The firm has 15 employees, including its partners.
Mr. Henderson said he's also hoping to expand beyond the firm's core market in the rural Southwest.
Fiduciary typically buys equity in stages from fee-only advisory firms in return for cash, a structure it promotes as allowing owners to retain much of their business's profitability and retain a vested interest in its success while gradually transferring control to younger successors. Mr. Hurley says his firm pays about 10 times cash flow in the first leg of a deal, with multiples in add-on transactions ranging between eight and 15 times cash flow.
Mr. Hurley said that unlike some consolidators, Fiduciary Network is not looking for an exit strategy in which it will go public or sell to a larger business at a big multiple, but instead is a “portfolio investor” that wants to retain interests in firms with viable futures.
Mr. Henderson said that although his firm is one of the smallest made by Fiduciary, it probably took the longest time to come to an agreement. He and his junior partners interviewed most other firms in the network to gauge how well they had come out of the recession, and also talked to other consolidators. “We wanted to see how FN's partners made it through the stress test” of 2008, Mr. Henderson said.
More than half of Soltis' approximately 800 clients and revenue come from the small corporate pension and profit-sharing plans it advises, he said. The firm advises on investments and expense control but does not directly provide record-keeping services.
Soltis targets plans with participant assets of $25 million to $150 million, and has client throughout the U.S. It recently doubled the minimum asset requirement in its wealth management business to $500,000. Soltis's primary custodian is
Fidelity Investments.
