Focus Financial Partners will benefit significantly from ongoing consolidation in the registered investment advisor industry, according to chief executive officer and chairman Rudy Adolf.

“Despite the increase in merger activity in the last several years, consolidation in this industry is just beginning, representing an opportunity that will span many years, if not a decade or more,” Adolf said Thursday during the company’s fourth-quarter earnings call.

“Given our scale, track record and exclusive industry focus, we believe that Focus is the best positioned company in the world to capitalize on these dynamics,” he added.

It’s that kind of confidence that led Focus to update its growth targets for 2025, which Adolf initially announced at the firm’s 2021 Investor Day in December.

Focus aims to have 125 partner firms; around $4 billion in revenues; $1.1 billion in adjusted earnings before interest, taxes, depreciation and amortization; and a 28% ebitda margin by 2025, Adolf said in December and then again during the earnings call.

Rudy Adolf
“To reach these targets in about four years’ time requires that we more than double the size of our revenues and adjusted ebitda while increasing the number of partner firms we have by about 50%,” Adolf said during the call.

“We believe that these targets are aggressive, but achievable. Our diverse and growing global partnership creates enduring scale advantages reinforcing the sustainability of our strong growth for many years to come,” he added.

Focus ended 2021 with 84 partner firms in four countries, Adolf said during the earnings call. Eight of those partner firms are located in Canada, the U.K. and Australia, according to information on Focus’ website.

The RIA network closed on 14 new partner firms and 24 mergers last year — including eight for its partner firm Connectus Wealth Advisers — for a total of 38 transactions, chief financial officer Jim Shanahan said during the earnings call. Focus closed on 22 transactions, including nine partner firms, in the fourth quarter alone, he said.

“We had a record year in 2021 for M&A activity, underscoring the attractiveness of our value proposition and the scale benefits we offer our partner firms globally,” Shanahan said.

Focus had total revenues of $523.9 million in the fourth quarter, up 38% year-over-year, and total revenues of $1.8 billion for the entirety of 2021, up 32% from 2020, according to its fourth-quarter earnings report.

“We have entered 2022 with terrific momentum which, when combined with the strong fundamentals of our business, we believe will enable us to continue driving superior growth and performance, in turn creating substantial shareholder value,” Adolf said during the call.

Broadening Investment Capabilities

Meanwhile, Focus' recently announced partnership with alternative investments platform CAIS is an opportunity to broaden investment capabilities available to the RIA network’s partners, according to Adolf.

The partnership with CAIS will enable Focus’ partner firms to evaluate alternative investment strategies for their clients, including hedge funds, private equity, private credit, real estate, digital assets and structured notes. CAIS will provide proprietary feeder funds and multi-manager funds to the firms on Focus’ network.

Focus’ partner firms will also be able to add third-party funds to the platform and use centralized monitoring, transacting and reporting.

It creates “a proprietary platform” where partner firms with alternative capabilities — including SCS Financial, Ancora Holdings and Kovitz Investment Group — “have the ability to add their highly sophisticated strategies to this platform,” Adolf said.

It also enables other firms on Focus’ network to “tap into these capabilities if and when they see a good fit,” he added.

“The beauty of it is it is customized for each Focus partner firm,” Focus co-founder and chief operating officer Rajini Kodialam said during the call, noting that the funds one firm sees on the platform are different than those another firm would see.

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