Registered Rep. spoke with Mark Goldberg (former CEO of Royal Alliance Associates) about his new endeavor, Private Wealth Management, which provides independent wealth management firms with capital to help them grow.
Registered Rep.: What does your new firm, Private Wealth Management, do?
Mark Goldberg: We provide capital, which comes in the form of equity and debt, to wealth management firms [including RIAs and independent b/ds]. That means that when we invest, we take an equity position in the firm and we also offer debt financing to help pay for continuing growth.
RR: Why did you decide to leave the independent brokerage world to pursue this new project?
MG: The wealth management model is a superior model. They have access to the broadest array of services and investments. And the operating margins and profitability of these firms are far superior than those of the other types of [financial advisory] firms. But these firms face a lot of challenges. As small businesses, they face the challenge of obtaining financing for growth, achieving liquidity, realizing their full potential. In instances where the leadership is aging, there are issues of legacy and succession planning.
RR: What kind of wealth management firm are you looking to infuse with capital?
MG: We're looking for independently owned and operated firms. Those are the ones that we believe are positioned to succeed in a way that others can't in the next five to 10 years. Based on our research, the top 1,100 wealth management firms manage an estimated $900 billion for individual families and corporations. We're really looking for a select 40 of those. We are looking for firms with between $300 million and $1.5 billion in assets. We want to make sure there's excellent client service, a history of quality earnings and high standards of integrity. We will never take a position greater than 75 percent of the firm.
RR: There are a number of firms out there that are offering the same things, as far as providing capital and then letting the owners continue to run their businesses. How are you different?
MG: These holding companies are offering equity and as a result of that, the acquirees' success is immediately tied to the other acquired firms' success. So if they do 30 transactions, you have to wonder who the other 29 firms are. In our instance, there's an option at some point if you want to participate in the success of Private Wealth Management but it's only an option. Each transaction stands on its own. It's in no way connected to other deals.