Emigrant Partners, a new service provider to independent registered investment advisory firms, said Tuesday it made its first deal with an RIA.
The company, a business arm of New York Private Bank & Trust subsidiary Emigrant Bank, now owns a minority stake in NorthRock Partners, a Minneapolis-based RIA with 50 employees and $1.5 billion in assets. In exchange, Emigrant Partners will serve as a strategic consultant to the RIA and provide services and resources, including capital, going forward. Terms of the deal were not disclosed.
Amit Dogra, CEO of Third Seven Advisors, a New York-based RIA, said such deals, where an RIA gets the benefits of partnership while maintaining majority ownership and control, will attract advisors to Emigrant's model. Sale of a minority interest in a firm managing well over $1 billion could generate enough cash to meaningfully reinvest in the business at the owner's discretion, in addition to a nice windfall.
“Not every CEO is looking to sell out. They are looking to cash out,” Dogra said. “To me, that looks like a pretty good business model, and I think you’re going to find a lot of advisors interested in that.”
Karl Heckenberg, president and CEO at Emigrant Partners, said NorthRock is growing, profitable and has potential to get to more than $10 billion in assets under management. Its service offering is already similar to that of the New York Private Bank & Trust subsidiaries, and the partnership will accelerate the RIA's growth, he said.
NorthRock caters to high-net-worth clients with a suite of in-house services it's dubbed and trademarked the "Personal Office" experience. In addition to investment management and financial planning, the firm offers tax services, trust and estate planning, private placements and other concierge services, such as managing all of a client’s bills for them.
Professional athletes are a burgeoning group of NorthRock clientele that will benefit from the deal in the form of better services, Rob Nelson, the founding partner and CEO at NorthRock Partners, told WealthManagement.com. New York Private Bank & Trust's affiliated companies already have relationships with and work with professional sport franchise owners. Galatioto Sports Partners, a subsidiary dedicated to the professional sports business, provides advisory, lending, capital raising and other services.
NorthRock considered opening an office in New York City for more than six years and plans to in 2019, along with others across the U.S. In addition to the Minneapolis headquarters, NorthRock already has an offices in Alexandria, Minn. and Seattle.
Emigrant Partners is the latest bank to acquire an RIA, but more could become buyers this year. Banks are often slower to make decisions, but "that prudent nature of theirs is usually a good long-term play for them ... they usually make good strategic bets,” said Carolyn Armitage, managing director at Echelon Partners, a Los Angeles-based investment bank and consulting firm.
"They have all these other services they are providing to these types clients already. I think they’ve got a better shot than a lot of others at being successful in this market,” said Corey Kupfer, an attorney and founder of Kupfer & Associates, a corporate law firm that works with RIAs and represents them in mergers and acquisitions.
Armitage and Kupfer also pointed out that while Emigrant Partners might be new, New York Private Bank & Trust is an experienced aggregator of RIAs.
Heckenberg is also the president and CEO of Fiduciary Network, a group of 15 RIAs with an average AUM of more than $3 billion, founded by Emigrant Bank in 2007. In 2018, the bank bought out the remaining 25 percent it didn't already own. He said changes in management and ownership hasn't left enough time for Fiduciary Network to onboard new firms – it hasn't made an acquisition in almost two years. But the bank continues to fully support Fiduciary Network and will operate Emigrant Partners alongside it.