Rise Growth Partners, the new RIA investing company launched by former United Capital CEO Joe Duran, has raised $250 million in funding from its management team and Charlesbank Capital Partners, the middle-market private equity firm that also backs Lido Advisors. Charlesbank will take a majority stake in the new company.
“Our management team funded the building of Rise, and we’re using [Charlesbank’s] capital to invest in the underlying enterprises,” Duran said. “It’s a capital appreciation and equity growth strategy.”
Charlesbank has the right institutional experience and a "growth orientation," as well as patience, he said. They also have conviction in the investment merits of the wealth space, he added.
Last September, Duran, who sold his company, United Capital, to Goldman Sachs in 2019, revealed details about his new venture, which will acquire a roughly 30% stake in next generation RIAs with between $1 billion and $7 billion in AUM. In exchange, Rise Growth will provide growth capital and resources with the aim of helping them become national RIA platforms with $10 billion or more in assets.
Duran stressed Rise Growth is not an investment fund but an operating company.
“We’ll be bringing operating expertise, operating technology and know-how to the underlying firms. But everything we do will be in the name of the underlying firms. We’re not selling a proprietary platform. We’re not forcing them to do anything. We’re 100% aligned at increasing the equity value of the underlying enterprises.”
Duran said there’s more market demand for Rise Growth’s offering than he expected. The firm is currently in active discussions with 33 RIA firms, representing $100 billion in combined assets, with another 55 firms, representing $120 billion, in early stage discussions. He expects to take minority stakes in two to three RIAs initially, and another two to three later this year.
Those initial RIA partners will likely have $3 to $4 billion AUM, but he expects to help them do subacquisitions of $1 to $2 billion AUM firms. Rise Growth will tap into its pipeline of candidates for those deals, and provide the funding. Duran said there’s debt financing available as well.
Rise Growth has already begun conducting “enterprise readiness assessments” for a couple dozen RIAs. The assessments identify gaps in their businesses and measures them across areas including business management, which includes the firm's service model, leadership team and business processes; the enterprise platform, or the technology used for clients, advisors and the back-office; and the firm's growth strategies, both organic and inorganic.
Duran outlined three things his firm is looking for in prospective partner RIAs.
“We’re looking first for super-ambitious, exponentially growing firms that want to make a big impact and grow as an equity appreciation opportunity,” he said.
“Number two, we want them to do something to fundamentally take pride in changing the industry and delivering a world-class client enterprise experience. They have to be willing to think creatively about what it means to build a great brand. What does it mean to have incredible operating efficiency and a unifying client experience that is a challenger and exceptional and different?”
Third, they have to be willing to change up the organization if required to unlock growth potential.
“A lot of advisors who get to $3, $4, $5 billion—they’re at the top of the food chain, and they feel really good, and frankly don’t need to listen to anyone,” Duran said. “Since we have no controls, we want people that aren’t satisfied with the status quo and want a partner who can help them.”
Duran has been building out his management team over the last several months. In October, he brought on Terri Kallsen, former chief operating officer at RIA Wealth Management Group, as managing partner and senior operating advisor. Recently, he hired Will Armenta, a co-founder of Opto Investments, as managing director, who’s working alongside Brian Shenson, managing partner and COO, to help firms fill gaps in their existing technology and operating platforms.
That may include anything from digital onboarding, behavioral economics and investments that they may not have on their platform. That will also likely include some unifying middleware, that will be built by an outside vendor.
