John Furey is the Founder and Managing Partner of Advisor Growth Strategies (AGS), the firm he launched in 2009 to help business owners advance their financial advisory firms. Since the inception of AGS, John has worked with over 300 firms representing $400+ billion in investable assets. AGS has been trusted to help with some of the most important strategic decisions in the lifecycle of advisory including structuring new entities, optimizing business performance, and transaction advisory (M&A).
Russ Alan Prince: You’ve been a leader in the expansion of the RIA space since your days at Schwab. How has AGS evolved along with the industry?
John Furey: When I started Advisor Growth Strategies—AGS—in 2009, our unique strength was helping breakaways transition to independence. The aftermath of the biggest financial meltdown since the Great Depression might have seemed like a terrible time to start up a new business, but I believed that the economy would recover.
We started solely focused on helping breakaway advisors. I built an offering to be an outsourced chief operating officer for larger teams who desired an expert to set up their business the right way. I was fortunate to possess deep practice and business management experience from my time at Schwab. AGS could help the breakaway set up their business, doing things like designing a partnership agreement, and a payment system for the team, as well as selecting the technology stack and setting up a physical office. That was the initial thesis of the company, but the industry soon needed more.
Right after AGS started, there was a vacuum of people who knew how to design compensation systems and equity programs for independent firms. Firms started reaching out for help as many owners experienced a severe reduction in owner returns given the market decline of 2008/2009. We were one of only a few firms that could redesign compensation and equity systems. We had the know-how and experience, which is how we got into the business management business.
M&A transaction advice is very important to our business today, but there were very few transactions occurring when the business was set up and there was little capital in the RIA space and even less deal “know-how.” Although we helped a couple of firms combine businesses, the first meaningful transaction was helping Savant Capital buy the Monitor Group in 2012. That was an important milestone and helped establish us in the world of M&A transactions.
In 2018 we started conducting quantitative M&A research, which resulted in our annual report, The RIA Deal Room. It was through that research that we proactively educated the industry about how buyers were structuring deals, and how multiples were changing. We feel this research is unique and adds tremendous value for our M&A clients and the industry broadly.
Fast forward to today, where we’re now an integrated management consulting firm that does three things. We help advisors set up businesses, we help them strategically with business management opportunities, and then of course we help them when it’s time for M&A.
Prince: What do you think is the most important consideration in an M&A deal?
Furey: I think the most important piece of it, whether you are a buyer or a seller, is being deliberate with your business strategy. You need to have a valid reason why you want to enter the highly competitive M&A market. You need a good answer to the question, “Why does my firm want to enter into a transaction?”
If you’re a buyer, there has to be something you are offering to a seller, such as the need for more talent or capabilities to drive incremental organic growth. For sellers, valid reasons should be along the lines of wanting additional capabilities that are too expensive to build yourself or to provide greater business continuity.
When we take on a project, we always ask, what is the reason for pursuing M&A? If that question can be answered clearly, then the probability for success goes way up.
Prince: Where do you see the future of the RIA industry heading?
Furey: I think the space is big enough that there’s room for everybody, but as firms get larger there will be more concentration. I think very large RIAs will have sufficient capital to reinvest which will yield a better platform that should drive a better client experience.
When I started in financial services, most advisors were investment managers, which changed to financial planners, which in turn changed to wealth managers. Wealth management is simply a catch-all for being a quarterback who does things beyond investment and planning—tax, insurance, and everything else financial—which most firms outsource. But now larger RIAs are integrating those capabilities in-house. I think that’s the future, where we’ll see these large integrated platforms that have very deep in-house capabilities.
Structurally, the industry will get very barbelled. You’ll have large firms with integrated capabilities that are going to dominate select markets, eventually on a national scale, and then you’ll have niche players that have a specialty. And there will be this big middle of everybody else that will struggle to grow and compete.
RIAs that don’t have a niche but want to grow will likely start looking for a partner, which is why M&A won’t go away anytime soon.
RUSS ALAN PRINCE is the Executive Director of Private Wealth magazine (pw-mag.com) and Chief Content Officer for High-Net-Worth Genius (hnwgenius.com). He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.
