A widely regarded executive at one of the largest registered investment advisors in the country has jumped ship to start her own practice with another, much larger RIA. Lori Van Dusen, formerly executive director at Convergent Wealth Advisors in Potomac, Md., set up her own RIA in the Rochester, N.Y. area under Focus Financial Partners, effective Oct. 10. The practice, LVW Group, will specialize in wealth management for institutional investors, ultra-high-net-worth individuals, and family offices.
It’s Focus’ second major acquisition in as many months; three weeks ago the firm announced that Colony Group in Boston had joined up. Van Dusen has made the short list of a number of top advisor rankings over the years. She placed third this year on Barron’s list of top women financial advisors, with a reported $4.9 billion in assets under advisement. Convergent says Van Dusen and a colleague, George Dunn, together account for $4 billion in AUA (there was no breakout of what Van Dusen’s share is.) Dunn just left Convergent too; at the beginning of this month he joined the Global Institutional Consulting Group at Merrill Lynch. The “vast majority” of the Dunn/Van Dusen assets were institutional money that included foundations and endowments, and were brought over to Convergent by the two advisors when they left Citigroup/Smith Barney in 2008, Convergent said. It wasn’t clear today how much she was bringing from Convergent to Focus, but Focus Founder and Chief Executive Rudy Adolf says he expects the “vast majority” will move with her.
Van Dusen entered the industry in 1987 by joining Shearson Lehman. Convergent, owned by publicly-held City National Corp. but operated independently, reports on its website that it has $14 billion in assets under advisement (as of June 30). It ranked seventh on Registered Rep.’s list this year of Top 50 Wealth Management RIAs.
In Focus’ press release on the deal, Van Dusen says that forming the new practice will let her team “provide clients with objective fiduciary guidance, free from the constraints of corporate ownership.” Elaborating in an interview later with Registered Rep., Van Dusen said the reference to constraints refers more broadly to “any kind of ownership that’s not customized, and you don’t have control.” Both she and Convergent say they parted on good terms. Convergent has “very good resources,” Van Dusen says, but Focus bought a minority stake in her management company that allowed her to proceed in her own fashion.
With about $45 billion in assets, Focus is among the nation’s largest RIA aggregators. Adolf says Focus’ model is very different from Convergent’s. Offering advisors cash and equity stakes in Focus in return for typically 40 percent to 60 percent of the advisors’ EBITDA before partners’ compensation, Focus allows the advisors broad freedom to manage their practice as they see fit, Adolf says. “Lori does not work for me, Lori does not work for Focus,” he says. “We are basically in a supportive role.” Van Dusen, who is founding partner and sole equity owner at LVW, has brought a team of 10 along with her, including Richard “Rick” Van Kuren, who has worked with her for 15 years. Van Dusen said Van Kuren and others at the practice would have the opportunity to take stakes in the business in the future.
An agreement between Convergent, Van Dusen and Dunn includes an “appropriate amount of compensation to Convergent” for clients who decide to leave the firm and stick with the advisors, the Convergent statement said. Their departures will have “no impact on ongoing operations” at Convergent, it added, and the firm “continues to add clients at a record pace.” In an interview with Registered Rep., Convergent spokeswoman Laura Smith said the firm’s institutional business has largely left with Dunn and Van Dusen, although the firm still has a large high- and ultra-high-net-worth clientele. “We wish them and their teams the very best in their future endeavors,” Convergent CEO Steve Lockshin said in a company statement. “The culture of our teams and our approach to servicing clients simply did not benefit the collective enterprise.” (Van Dusen’s departure from Smith Barney to Convergent in 2008 wasn’t without controversy. Smith Barney filed a complaint with FINRA against Convergent, Van Dusen, and others charging raiding, unfair competition and other issues. FINRA dismissed Smith Barney’s complaint and assessed the brokerage $38,000 in fees.)
Moves such as Van Dusen’s are becoming more common as RIAs grow from small partnerships to larger entities, says Philip Palaveev, president at Fusion Advisor Network, an RIA network. Their changing structure can pose challenges for the advisors who founded them. “At some point, the label ‘independent’ doesn’t apply anymore. Instead they become large corporate organizations,” he says. “Sooner or later the notion of partnership becomes more abstract. You no longer feel the same level of control and the same level of friendship tied to the partnership.”
This story reflects additional information on the deal that was provided by Convergent subsequent to the announcement of Van Dusen's move.