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OPINION OF THE WEEK: Dynasty's $100 Billion AuM Milestone Reflects Rising Wealth Tide
Tom Burroughes
16 July 2024
Wealth management firms around the world sometimes like to brag when their AuM figure hits a big number. When you have made it to $100 billion, who can blame them for uncorking the champagne? Dynasty's model also taps into the breakaway phenomenon of advisors quitting banks, large wirehouses and other firms to start up on their own. In May 2023, Dynasty launched an investment bank dedicated to the RIA space. In other developments, the business rolled out its managed models program called Dynasty Model Select. Dynasty said this program is expected to surpass $7 billion in assets under management by the end of 2024. Elsewhere, Dynasty's Outsourced Chief Investment Officer offering has experienced “significant growth” and the firm maintains $49 billion on its Turnkey Asset Management Program, or TAMP. With so much development, it is easy to sense the optimistic buzz around the firm. All that said, with success comes scrutiny, and competitors will watch closely for opportunities if they see an unfilled gap or pricing point. Dynasty was founded in the aftermath of the 2008 financial crash when interest rates fell to the floor. Since 2021, interest rates in the US and elsewhere have risen, and some M&A ferment in the US wealth sector has cooled. An environment of higher rates sharpens competition and puts more focus on margins, costs and revenue results. This is, to an extent, entirely healthy. Given the wealth creation engine of the US economy, and asset transfer still going on, this is an industry still undergoing big change. Not all the economic and market news is going to be benign, never mind what goes on in the political world, as well. That said, it might seem that Dynasty will be issuing a few more big AuM milestone press releases for a while yet.
Down in St Petersburg, Florida, where Dynasty Financial Partners has had its HQ since 2019 – moving from Manhattan – the business yesterday said it has surpassed $100 billion in platform assets. Dynasty said that with average AuM per firm of $1.8 billion and average assets per advisor of about $250 million, its network of wealth firms represents some of the highest AuM-per-firm and assets-per-advisor ratios in the sector, according to a statement last week. The firm issued results shortly before America's large banks, starting with JP Morgan, Wells Fargo and Citigroup, began their quarterly splurge of results data last Friday. Their figures, however, give only one angle on the wealth management pie.
Dynasty, which is a network of wealth advisor businesses across the US, provides services including investment bank and M&A advisory to business owners looking to acquire RIAs, grow them or exit the business. In 2021, Dynasty Financial Partners started to make minority equity investments in RIAs in its partner network.
With trillions of dollars in assets expected to change hands in the next few years as Boomers pass on, Dynasty, founded in 2010, is a business seeking to surf the wave of this wealth. Recent reports here and here from Boston Consulting Group and UBS, respectively, among others, ram this point home.
“Clearly, our belief in the Triangulation of Advice™ resonates in an industry that is ripe for change and we are proud to be the partner of choice for financial advisors and their clients who are in search of an integrated platform that powers their independence,” Dynasty Financial Partners founder and CEO Shirl Penney said.
In other developments this year, in March Dynasty – alongside management consulting firm, F2 Strategy – outlined in a report why it believes that RIAs benefit from using Dynasty’s Supported Independence™ Model. F2 Strategy analyzed data on 38 Dynasty Network RIAs and over 4,500 other independent RIAs. Compared with the industry benchmark data set, Dynasty RIAs had over twice the five-year compound annual growth rate of 14.3 per cent versus their peers of a similar size at 6.4 per cent, the report said.
Back in 2021, our US correspondent, Charles Paikert, analyzed Dynasty’s strategy in terms of taking minority stakes in RIAs. He noted that Emigrant Partners and sister firm Fiduciary Network, both backed by New York billionaire investor and banker Howard Milstein and Merchant Investment Advisors, founded by Goldman Sachs veteran Marc Spilker, were among the most prominent players in this area, and have deep pockets. Hightower Advisors, controlled by private equity firms Thomas H Lee Partners, helped pioneer the concept.