RFG Advisory, the Birmingham, Ala.-based hybrid RIA platform with about $4 billion in assets under management and 100 advisors, has sold a majority stake in the firm to Long Ridge Equity Partners, the private equity firm that previously backed Carson Group before selling its stake to Bain Capital in 2021. This marks the first time RFG has outside capital; it has been management-owned since its founding in 2003 by CEO Bobby White.
White declined to disclose how much capital was raised, nor provide a valuation for RFG.
Shannon Spotswood, who joined RFG in 2015 as president, said most of the capital would be invested back into the company, adding talent across investment management, technology, business development, branding and marketing, and advisor coaching functions. It will also go toward improving the tech stack and recruiting new advisors to the firm.
White said while the firm may consider mergers and acquisitions opportunities if the right fit comes along, M&A is not a top five priority, and they do not want to compete by rolling up practices.
The investment by Long Ridge also allows RFG to roll out an equity ownership program, which will be structured as an equity-swap. For advisors who opt in, RFG will take a small ownership stake in their practice, in exchange for a small share of RFG. Advisors will also receive a cash payment as part of the deal.
“It was really important for us going into this process to find an equity partner that was interested in providing alignment between both our advisors and ourselves through this type of model,” said Chief Investment Officer Rick Wedell.
The program will be available to existing and new advisors to the firm.
“We want our advisors invested in our success, and we are interested in partnering with and recruiting advisors that are interested in the success of RFG,” Wedell said. “We are all about building advisor enterprise value, and we want to put our money where our mouth is in terms of creating that alignment and actually giving us an economic incentive at the end of the day to see those advisors grow.”
RFG also plans to launch an ambassador program, a peer-to-peer recruiting program, an idea Long Ridge came up with when it was evaluating the firm. Spotswood said the firm’s advisors were giving it such high Net Promoter Scores that Long Ridge thought that enthusiasm could be used to attract others to the company.
“We have these like off the charts Net Promoter Scores, which is underpinning that evangelism,” she said. “And they said, ‘Why wouldn't we structure a program that really taps into that passion for RFG?’ Give them financial incentive that's very attractive to be able to bring advisors into their firms as well as bring advisors to the table who want to build their own independent businesses and partner with RFG.”
Spotswood said when she joined the firm about seven years ago, it looked a lot like a super office of supervisory jurisdiction (OSJ); it was predominantly brokerage business, with 100% of the assets custodied at LPL Financial. She and Wedell were brought in to take it to the next level.
“That 2.0 model was really anchored in advisor independence and putting all of the foundational support pillars around advisors to be able to build enterprise value in their own firms and really harness that entrepreneurial fire and really honor that entrepreneur's journey in doing so,” she said.
They’ve had their heads down for the last several years building out that platform. Now, she said the hope is the investment from Long Ridge will spur more recruiting and help get the word out about RFG.
“Our tagline for 2023 was, ‘we're the most industry awarded firm no advisor had ever heard of.’ Because unlike our competitors, we focus the time and the capital on the platform, and less so on building and growth from recruiting to the firm,” she said.
“We believe that the market is ready for the next derivative of these platforms, where the first generation has been focused on aggregation and financial engineering. What we really want to build is a platform that is anchored in that independence, where independence matters, where advisors matter, where there is just an intentionality around surrounding advisors with these force multiplying resources—talent, technology, coaching, and, most importantly, a passion and growth mindset to be able to carve out the future state of the industry. And that's how Long Ridge sees it as well.”