A little more than a year into a joint project between Envestnet and Dynasty Financial Partners called the Advisor Services Exchange (ASx), the duo is reporting it now has 38 clients on board, almost double its original projected growth estimate. The faster-than-expected growth of the service is due to a suite of marketing tools introduced and its outsourced CFO program, according to an announcement by Dynasty. The two-pronged toolkit dovetails with a “very high demand” for advisor mergers and acquisitions, according to the firm.
Details of the capital deployed across the 38 clients were not disclosed, but eligible advisors can access debt financing, up to 50% of trailing 12 months’ revenue, or “equity-like financing” to facilitate capital-intensive decisions. With RIA retirements expected to reach a fever pitch, Envestnet and Dynasty want to be positioned to help advisors expand their practices inorganically, when presented with the opportunity.
Prior to the launch of the service, which is available via Envestnet’s Analytics feature, Dynasty had an in-network capital program for RIAs to access funds for succession and M&A needs. Advisor Services Exchange opened that facility to more advisors.
At the launch of ASx, Ed Swenson, president of the partnership, indicated that the service was appropriate for firms with a minimum of $400 million in assets under management. Since then, a minimum AUM has been less important, he said. “We have found these advisor service[s] can work across the board for small RIAs that lack some of the resources to invest in these capabilities internally, as well as for large RIAs that want to outsource (rather than insource) some of these capabilities,” he explained. “Frankly we are less focused on [a minimum AUM].”
Last year was a record year for M&A, according to firms that include Fidelity, Echelon Partners and DeVoe & Company. Predictions at the outset of the year were that 2021 would not slow down where 2020 left off. DeVoe & Company reported it expects to see around 200 transactions this year, up from the 159 it counted last year. Consolidation to stay competitive is warranted, said Carolyn Armitage, managing director at Echelon Partners.
Besides stronger than expected demand in the RIA channel, interest in ASx has grown among independent broker-dealers and institutions, added Swenson. While deals among IBDs and institutional players tend to take more time than RIA-focused deals, ASx is seeing enough demand that it’s taking a second look at expanding the types of deals it facilitates.
“Those sales cycles take longer,” said Swenson, “but we believe the enterprise channel is potentially a very good channel we had not necessarily anticipated seeing success when we first launched the exchange.
“We believe that trend—more engagements—will continue,” he added.