The Prospects of Private Equity

financial advisor wealth management

For RIAs, the deals with private equity investors solves a problem many have of accelerating a growth plan that can only be accomplished successfully with an infusion of capital. Their clients are expecting better technology and digital capabilities akin to those found in other areas of their lives, including large retail banks—something most firms need much greater scale to develop and provide.

“If you’re not on the good side of scale, the market is going to pull away from you very fast because it’s going to become obvious in the type of digital experience that a client has,” said Ron Carson, founder and CEO of the Carson Group. It was his commitment to investing in technology upgrades for his clients that led him to make a deal with Long Ridge Equity Partners. In 2016, the firm invested $35 million in the Carson Group. Carson said it was more than just money that sold him on the deal. He added Long Ridge co-founder and managing director Jim Brown and partner Kevin Bhatt to his executive board.

“We didn’t do it for the money, we did it for their knowledge,” Carson said. “We had no debt when we brought them on and we continue to have no debt.”

The paradox of private equity in wealth management is that those firms attracting the most interest aren’t usually the most in immediate need. In fact, those firms that aren’t growing or don’t have a plan in place to scale effectively find little interest from the investors.

“[Private equity firms] don’t want to spend time turning a firm around,” Carson said. “They want to pour fuel on a fire, not rehab one.”

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