Heckenberg said deal structures haven’t changed much since the parent company gained full control of Fiduciary Network and created Emigrant Partners, though they’ve tweaked the agreements originally made between firms and Fiduciary Network and use that structure as a template for all of its investments. “The underlying security and philosophy we use has not changed,” he said. “I’d say the change we made for ourselves and our firms is making agreements that are more streamlined and less complicated,” though he didn’t elaborate on what exactly that entails.
Ulrich Investment Consultants is the seventh firm to receive a minority investment from Emigrant Partners, while Fiduciary Network has 13 companies in its stable, including noted wealth management firms RegentAtlantic, Evensky & Katz Wealth Management and Sand Hill Global Advisors.
Fiduciary Network hasn’t made a new investment in a while. Its most recent move occurred in November 2019 when it sold its position in Pathstone, a large RIA that at the time had more than $15 billion in assets under advisement. After Fiduciary Network's exit, private equity firm Lovell Minnick Partners made what was described as a significant investment in Pathstone.
The 20 firms currently affiliated with Emigrant Partners/Fiduciary Network oversee roughly $65 billion in aggregate assets under management and assets under advisement.
“We’re allowing firms to run their businesses as they have, but now they have a capital and advisory partner,” Heckenberg said.
Organic Growth
Heckenberg said Ulrich Investment Consultants’ geographic footprint is one reason why Emigrant Partners invested in the firm. He cited Ulrich’s toehold in Spokane and its aggressive expansion in San Antonio, and noted both are new markets for Emigrant.
“And John’s expertise in dealing with Native American tribes is unique,” he added. “One common denominator of a lot of the firms we’ve invested in is that while at their core they’re diversified wealth management companies, a lot of them have specialties within certain subsets. I thought that working with Native American tribes was an interesting part of the business, and it’s something they want to keep focusing on in addition to their high-net-worth practice.”
Most important, Heckenberg said, Emigrant seeks profitable firms with proven track records of organic growth not fueled by market gains. “The majority of wealth management firms during the past decade have been growing only because of growing equity markets,” Heckenberg offered. “And fixed-income markets have also been contributing a lot.
“Maybe we’re being conservative, but our view of the equity market is it’s unlikely you’ll get the same level of equity returns over the next 10 years,” he continued. “I think when you back out the market performance, most RIAs are shrinking. And because we firmly believe RIAs won’t get that market benefit over the next 10 years, we’re very focused on organic growth numbers net of market.”
As such, he said, he’s looking for firms that are adding clients and, equally important, adding clients who are young enough to propel future asset growth.