Schwab announced today that it acquired a minority stake in Dynasty Partners. The new investment from Charles Schwab Corp. gives Dynasty Financial Partners a big vote of confidence—and gives Schwab an interest in Dynasty’s rapidly growing network of independent advisory firms, according to a Dynasty press release.
The transaction marks something of a departure for Schwab. In the past, the discount broker and custodian has said it was not interested in acquiring financial advisory firms. Dynasty is structured primarily as an RIA service platform However, it owns equity stakes in a number of its member RIA firms, which pay Dynasty fees for its smorgasbord of services. Some of those firms also own small interests in Dynasty, and the press release explained that the capital raise was partially designed to facilitate more such investments.
Along with Schwab, the multinational financial services giant headquartered in Westlake, Texas, Dynasty announced an equity contribution from ABRY Partners, a private equity firm in Boston. The size of the investments, which were managed by Goldman Sachs & Co. as exclusive financial advisor and Sullivan & Cromwell as exclusive legal advisor, was not disclosed.
But Dynasty Chairman Harvey Golub, the former CEO of Ameriprise, said in a statement, “We welcome Schwab’s minority investment in Dynasty to further align our commitment to the independent wealth management space.” Capital from Schwab and ABRY will be used “on behalf of our clients in newly expanded ways,” he added. “We will look to revisit the public markets when the timing is right.”
Dynasty had filed an S-1 to raise about $100 million thorugh an initial public offering early this year. But conditions in the stock market proved unfavorable and very few companies have succeeded at completing IPOs in 2022.
Reasons given for the contemplated IPO were to raise growth capital and provide liquidity for initial investors, including Golub and former Citi Wealth chairman Todd Thomson. Dynasty was launched in 2010.
Based in St. Petersburg, Fla., Dynasty services a network encompassing some 50 RIA and wealth management firms nationwide and more than 840 community partners, according to its website. It provides member firms with a technology platform and a host of other business services and support solutions. Launched a dozen years ago, it specializes in independent advisors who serve high net worth clients, and it prides itself on facilitating the movement of assets from traditional brokerage channels to independent wealth-management channels.
In the press release, Dynasty noted that it intends to use some of the new capital to invest in new technologies, expand its service offerings, and add intellectual capital and key talent. A portion will also provide liquidity for long-time shareholders and enable opportunities for corporate development and M&A activities, with an overall goal of accelerating growth, augmenting capabilities, and increasing margins.
Bernie Clark, head of Schwab Advisor Services, explained the investment this way: “As advocates for independent advisors, we are thrilled to invest in a firm that shares our values of empowering advisors with the technology, tools, and resources they need to build even stronger businesses.” According to the press release, Schwab already serves as custodian for more than half of the $72 billion that Dynasty has in assets under advisement.
Dynasty has been on a fundraising tear. In September, it announced it had raised some $50 million from RBC Capital, UMB Bank, J.P. Morgan, Citibank, and Goldman Sachs.