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Ex-U.S. Trust, UBS Team Takes $1.5B RIA to Focus

By Murray Coleman September 14, 2017

After nearly eight years building their indie RIA from scratch, three former U.S. Trust and UBS planners are selling a minority stake in Eton Advisors. The Chapel Hill, N.C.-based firm, which manages more than $1.5 billion, is trading equity interest with Focus Financial Partners in exchange for a range of resources and support services, says cofounder and chief investment officer Jack Parham.

The deal raises New York-based Focus Financial’s wealth services and financing business to 51 member firms.

“So far in 2017, we’ve now added 10 partner firms,” says CEO Rudy Adolf, who adds that count already surpasses last year’s total of six.

Typically, Focus Financial will take stakes worth anywhere from 40% to 60% of a firm’s net cash flow, he says. As with previous deals, how much equity of the privately held Eton is changing hands isn’t being made public.

The latest transaction represents an ongoing push by Focus Financial into the ultra-high net worth segment. Earlier this year, it signed six other RIAs targeting the U.S. market’s elite families. Those include Bordeaux Wealth Advisors, Crestwood Advisors and Lake Street Advisors.

“We see the ultra-high net worth marketplace as highly attractive and we plan to keep expanding our presence in this area,” Adolf says.

Besides gaining access to a global community of advisors to share ideas on best practices, Eton’s Parham believes joining such a network will help provide capital from Focus Financial to grow in the future. FA-IQ caught up with him Wednesday to find out more details about what went into the decision to partner with Adolf and his team.

Q: Why did you decide to look for outside financing and support at this time?

A: We have a very specialized focus on providing family office services to our clients in the U.S., Canada and Puerto Rico. We only serve 25 families, which gives us a lot of ability to provide high-touch and highly customized service menus.

Q: Did you feel like your firm needed more service support?

A: Not as much service support as succession support. The families we serve are at a level of wealth where their financial plans are built to cover several different generations. So we felt as a firm that we needed to create a succession plan that was just as robust.

Q: How does this deal with Focus Financial help along those lines?

A: We want to put into place a transition in equity ownership from the founding partners, who are in their 40s and 50s, to our four younger and newer partners. We also want to create a path for equity ownership for new advisors we recruit in the future. The investment by Focus in our business will help us to accomplish these types of succession goals.

Q: Isn’t the family office market highly competitive?

A: It’s very competitive. We didn’t invent this field but I believe we’ve made a meaningful impact on advancing how goals-based investing can best be done for ultra-HNW clients.

Jack Parham

Q: How so?

A: We actually started using goals-based strategies 15 years ago, which was about the time when Ashvin Chhabra (former CIO at Merrill Lynch) and Jean Brunel (ex-J.P. Morgan executive) started writing about this issue. Our team actually started applying goals-based investing for our ultra-HNW clients when we were at U.S. Trust and UBS. When we opened Eton in 2009 it became the centerpiece of our investment planning philosophy.

Q: Hasn’t goals-based investing become a sort of cliché across wealth management?

A: It has indeed, and it’s an area we are very concerned about at Eton. Most firms do ask clients about their long-term goals. But in the end, advisors often wind up putting most of their money into prefabricated model portfolios. That can work against the whole idea of true goals-based investing for each individual. Our approach is to maximize the probability of meeting the client’s specific goals. Since every client is different, every portfolio needs to be measurably different.

Q: How do the economics of running a practice with so few clients work?

A: We’ve focused on building processes without standardizing the experience. For example, we’ve created a matrix to categorize all of our clients’ wealth goals by time horizons and priorities. Then, we’ve created a methodology for determining the best asset allocation strategy for each separate goal. This creates a tailored yet consistent and scalable process for us to apply to each unique client situation.

Q: What about dealing with concierge types of services?

A: We have a sister company, Eton Solutions. It’s not part of the Focus deal but it’s a separate specialty shop which focuses on middle- and back-office services for family offices. It provides us with the tools to more effectively manage concierge services and client relationships. Eton Solutions is a key to managing our costs and operating more efficiently in a business that’s inherently highly customized.

Q: What other growth strategies do you plan on pursuing?

A: We’d like to find opportunities to work with more like-minded teams who share our goals-based planning approach. Another area of growth we see as a result of the Focus deal is offering outsourced CIO (chief investment officer) services to single-family offices and smaller multi-family offices. We see a lot of demand for that type of outside investment support, especially since so many family offices these days are narrowing their focus in response to rising complexities and growing costs of managing family assets.