Steward Companions International Advisory is establishing a brand new division with the acquisition of Freedom Road Companions from Raymond James. The 7-year-old agency has 38 workers—together with 28 advisors—17 areas and $3.2 billion in managed belongings.
Dubbed the Freedom Road Division, the channel will comprise all companies introduced in beneath Steward’s brand-new acquisition mannequin. With one exception, Steward has solely added new advisors by way of recruitment, rising the agency from $50 million to round $28 billion within the decade since its founding. (The one exception was the agency’s buy of Umpqua Investments in 2021, a transfer that introduced brokerage providers in-house.)
Freedom Road will type the muse of the brand new division, which might be operated by the agency’s administration staff alongside Steward and supply a vacation spot for advisors in want of a succession resolution. Most, if not all, Freedom Road advisors will be part of Steward as fairness companions and workers when the deal closes earlier than the tip of the yr, however one or two could choose to affix beneath Steward’s recruitment mannequin and affiliate as an alternative.
“Leveraging Steward Companions’ deep assets and experience within the wealth advisory house permits us to offer our shoppers with enhanced entry to the very highest degree of experience and repair, and in addition frees further assets as we proceed to develop the enterprise as a brand new division of Steward Companions,” Freedom Road CEO Scott Danner stated in a press release.
“The addition of Freedom Road Companions as the muse of our new Freedom Road Division creates a brand new useful, high-growth enterprise phase at Steward Companions the place now we have had excessive demand from advisors and wealth administration companies contemplating a transition from their present conditions,” added Steward President and COO Hy Saporta.
Steward is entering into the M&A recreation to fulfill that demand and seize different development alternatives the agency sees out there, CEO Jim Gold advised WealthManagement.com. He famous the variety of impartial RIAs—about 15,000—and stated many are reaching a degree the place additional development turns into troublesome and promoting is smart to realize the advantages of partnership and scale.
“We even have advisors we’re speaking to who simply don’t need to be house owners anymore and get again to working their enterprise,” he stated. “After which, you might have the RIA and wirehouse breakaways that now need to promote—which is a brand new dynamic. Particularly from the wirehouses, as a result of the wirehouse offers, on common, you are speaking one- or two-times income and that is sometimes paid someplace between 5 and 10 years after retirement.”
Steward’s transfer is smart as a result of “the good, sturdy breakaways do have the chance to view themselves as a future enterprise associate of a significant agency, and that will positively obtain their highest worth,” stated John Langston, founder and managing associate at industry-focused funding financial institution Republic Capital Group.
“There’s extra worth for the breakaway, however there’s additionally much more worth for the partnership as a result of their income is not rented and their asset retention and the potential that they will keep on with the agency is a lot extra enticing to the surface investor,” he stated.
“All this stuff result in M&A,” Gold stated. “And I need the expansion funnel to be as vast as potential; I need to have as many choices as potential.”
Acquired companies are given the choice of co-branding, becoming a member of beneath Freedom Road or just transferring beneath the Steward title. Gold stated full acquisitions are most well-liked however he’s open to different preparations in the proper conditions.
“We satisfaction ourselves on flexibility and optionality, so we’re not going to attract any traces within the sand, however I feel our normal premise goes to be that we need to purchase the entire thing,” he stated. “If there is a actually, actually nice alternative that may be a minority stake or a majority, however not a complete buy, we’ll actually take a look at that and see if it is smart.
“In a minority state of affairs, there must be actually optimistic and extenuating circumstances equivalent to company match or the power to develop it at the side of one other group,” he added.
Steward’s current capabilities round recruitment bode properly for the success of the brand new mannequin, stated David DeVoe, founder and CEO at RIA-focused M&A advisory agency Devoe & Co.
“Hightower is proof of idea that this transition could be made efficiently,” he stated.
Steward presently has seven or eight potential acquisitions within the pipeline, in accordance with Gold, and has been fielding requests from current associates who need to finally transition their practices to the brand new division. With areas throughout New England, the Mid-Atlantic, Southern and Northwest United States, the Freedom Road acquisition will assist to bolster regional enlargement efforts there, he stated.
Steward has had its greatest recruiting yr ever in 2023, onboarding about $6 billion in belongings to this point, and Gold expects the brand new division will solely amplify that development.
“This deal is a bit more than half of that,” he stated. “So then extrapolate that out 5 years.”
Majority owned by workers, Steward is minority-backed by Cynosure and The Pritzker Group. In late 2022, the agency acquired a $140 million credit score facility led by different funding agency Apogem Capital to assist recruitment and, now, acquisitions.
