2004 was a meaningful year for the RIA industry, as it was the year that Focus Financial Partners was founded. Coincidentally, it was also the year in which I transitioned from a long career as a tax lawyer to an even longer career as an RIA executive; and I’ve been reflecting quite a bit about how the RIA industry has changed these past 20 years.

How the RIA Industry has Changed

20 years ago, the largest RIAs typically had a billion dollars under management and tens of team members. The term “RIA” was not well known, nor was the business model it represented. Consequently, banks and wirehouses dominated the investment-advice landscape.

Today, the largest RIAs are by some measures a hundred or more times larger than those predecessors of 20 years ago, and their growth and establishment as national enterprises have positioned them to lead their competitors in all their forms. Many factors have fueled this growth, but perhaps none is more critical than the infusion of capital, talent, and know-how from private equity.

In 2024, the majority of the largest RIAs are directly or indirectly funded by private equity. According to Echelon Partners, private equity firms played a role in 62% of all disclosed 2023 transactions in wealth management M&A. Echelon also notes that in wealth management, private equity buyers announced 30 direct investments in 2023 alone, and the total transacted assets (by AUM) was $2.4T for the year.

I recently interviewed Dan Glaser for our podcast and video series, and I’d like to share some of the insights and takeaways from our conversation. The episode is called “Focus On: The Value of PE Investment in the Independent RIA Space.” Dan is Executive Chairman of Focus Financial Partners and an Operating Partner of private equity firm Clayton, Dubilier & Rice (“CD&R”). Funds affiliated with CD&R collectively hold a majority stake in Focus. Dan joined CD&R in 2023 after holding senior positions in commercial insurance and insurance brokerage firms across the United States, Europe, and the Middle East for more than four decades. Most recently, Dan served as President and CEO of Marsh McLennan for 10 years.

What Made Focus Financial Partners Attractive to CD&R

Along with fellow PE firm Stone Point Capital’s funds, CD&R’s funds acquired Focus Financial Partners in February 2023. Dan noted that, prior to the acquisition, CD&R had a few investments in financial services firms but didn’t have a dedicated financial services vertical. The wealth management industry was attractive to CD&R because of its size, necessity, and global nature. Historically, the industry has been fragmented and still is in many ways, which Dan sees as an opportunity. Focus Financial Partners stood out to CD&R due to its size as well as the expertise of its people. In addition, Focus’ acquisition track record was unique, having already acquired many significant RIAs in the U.S.

CD&R’s Vision for Focus Financial Partners

Dan describes Focus as it existed in 2023 as a consortium: an association of several independent firms. By its nature as a collection of independent firms, there was and still is a fair amount of duplication, and there wasn’t a single, cohesive vision. According to Dan, “While we didn’t want to create a monolithic firm, we asked how we can create one environment that member companies want to be a part of. To be part of something bigger, part of something that’s more valuable to clients.” CD&R’s investment will help Focus create better programs to attract and retain advisors, and to build new capabilities to serve end clients better.

“Meet Advisors Where They Are”

“Meet advisors where they are” is something I hear Dan say frequently, so I asked him to explain what the phrase means. “We’re not here to tell entrepreneurial firms what to do. We want to create an environment where a firm and the advisors and executives who work there look at us as a way to better serve their clients, have better technology and spend less time on administrative tasks,” says Dan.

According to Dan, advisors are at different levels of maturity and capability as well as different stages of the journey they’re on individually and as firms. Dan’s concept of advisors where they are lets them define their relationship with Focus, as opposed to Focus forcing something upon them. “We’re giving the voice and the power to the individual firms as opposed to us, the investor,” he continues. “I’ve been enthused about the level of receptivity from the partner firms,” says Dan.

The Fiduciary Standard for RIAs

At its core, the RIA industry follows the fiduciary standard of advice. In turn, RIAs must put clients’ interests ahead of their own and have a duty to mitigate conflicts of interest. Dan’s view is that for too long, the wealth management industry didn’t operate that way, and he’s excited to be part of an organization and an industry that puts clients’ interests first. According to Dan, “It’s all about the client. Serving clients is the ethos of the firm.”

“The RIA business is a brains business and a people business. One that is responding to true needs. There’s a financial and tax complexity to having wealth in America that needs to be addressed,” says Dan. He notes that the RIA industry also has a bit of an entrepreneurial flair and a desire for autonomy that doesn’t exist in many other industries.

The Role of Private Equity in the Independent RIA Industry

At their core, private-equity investors are focused on creating value within their portfolio companies. There’s a team approach with PE firms of this kind: they and their portfolio companies are in it together. The principal job of PE is to improve the firm and create value. PE firms focus on what they’re doing in the next month, quarter, or year to improve the firm. Specific to Focus Financial Partners, CD&R is empowering Focus to invest in leading client and advisor capabilities and technologies.

Dan says that some RIAs might have the ideas and vision for how to grow but don’t have the available capital to invest on a large scale. With Focus, he notes that CD&R’s vision is to create the world’s leading fiduciary advice platform. To do so, substantial capital investment is required.

Why We Seek Challenges

Every business has challenges. While some businesses get stressed or worried about their challenges, Dan speaks to the need to embrace them. “You have to look at challenges as being good. They create an opportunity to make a good decision, and making good decisions makes a firm better. Challenges should be embraced and not buried. That’s a PE mentality.” Dan closed by saying that he and the Focus executive team openly embrace challenges, so he expects and looks forward to many opportunities to create value at Focus.

Watch the Full Episode

Watch my full interview with Dan in the episode “Focus On: The Value of PE Investment in the Independent RIA Space.”