Shirl Penney left Citi’s Smith Barney more than 10 years ago with the belief that more financial advisors would depart legacy wealth managers and start their own companies, if the right service provider was there to support them.
Penney, the founder, president, and CEO of Dynasty Financial Partners, was correct. For a decade, Dynasty has been a darling of the wealth management industry — a leader in helping advisors establish their own independent firms — while Penney has become a notoriously busy, high-profile proponent of the so-called independent channel.
After relocating its headquarters from New York City to St. Petersburg, Fla. last year, Dynasty has continued to add employees and attract RIAs, even throughout the Covid-19 pandemic. On Tuesday, Dynasty announced it had helped a group of advisors leave UBS and start their own RIA, bringing Dynasty’s network of partner firms to 46 overseeing an aggregate of more than $45 billion in client assets.
Still, Dynasty’s network has remained relatively the same size for at least two years and recently shrunk. There were 47 partner firms last August and only 45 in January of this year, the company told RIA Intel. In 2018, Financial Planning reported that Dynasty once had 50 partner firms.
But this is all part of the plan, according to Penney.
The size of the network is not a good indicator of Dynasty’s health, its founder said. Partner firms have always come and gone, especially the early ones, which managed an average of $250 million — significantly less money per firm than the average today, which manages just under $1 billion. Some of those early firms ultimately determined the cost of being part of the network was too great relative to the services they were actively taking advantage of, Penney said.
Despite adding firms more frequently in the past, it took five years for the Dynasty network’s assets to reach $10 billion. But both organic and inorganic growth, as well as some help from the longest-ever bull market, helped Dynasty get to $20 billion in only three years. It’s more than doubled that since then.
Another reason Dynasty’s network isn’t growing like it once did: Advisors managing, say, $250 million are still prime candidates to start their own firm and join Dynasty. But practices that size are increasingly choosing to forgo starting and running an RIA in favor of joining an existing one within Dynasty’s network, Penney said. About 25 of Dynasty’s partners, which pay Dynasty a percentage of their revenue in exchange for services, have plans in place to actively acquire others.
He is not concerned about assets growing and concentrating within the partner network. Continuing to help the partner firms, and steering other RIAs to join them, only improves Dynasty’s relationships with them.
Assets are "how you keep score,” Penney said, and Dynasty is evolving to better serve bigger partners, which are continuing to grow assets, and more of them.
The private company also has a turnkey asset management platform, or TAMP, with almost $20 billion and is continuing to invest in the Dynasty Enterprise Group, which caters to RIAs managing over $1 billion and uncommon complexity. The group currently has six clients but that number is expected to increase. “The firm that leapfrogs Dynasty needs to be Dynasty. We're constantly trying to find ways to innovate, add more value added services that our clients are asking for,” Penney said.
Recent investments in Dynasty itself are also part of its strategy. In January, Envestnet (NYSE: ENV), a software company used by over 4,700 wealth management firms and 100,000 financial advisors, said it acquired a minority stake in Dynasty. The two companies plan to launch what they are calling the Advisor Services Exchange (ASx) later this fall, a platform where Envestnet clients will be able to access services previously only available to Dynasty’s partner network. Dynasty’s other consulting services, business management tools, marketing services, outsourced CFO services, and investment banking services, will also be available through the exchange.
In April, Mariner Wealth Advisors, one of the country’s largest RIAs that manages over $29 billion, announced it had taken a minority stake in Dynasty, which would power the new Mariner Platform Solutions (MPS). Like the ASx with Envestnet, Mariner’s platform will make Dynasty’s services available to advisors outside Dynasty’s partner network.
“I said early on, I want to grow Dynasty to be the leading and premier integrative platform service company in the industry. I always thought in my mind to do that, and to be seen that way, you need to have over a $100 billion in assets,” Penney said.
Partnering with companies like Envestnet and Mariner are ways to get there. “I think moves in advance,” said Penney, who played competitive chess growing up.
“We got the pedal down and are looking to grow smartly and strategically in a way that fits with our vision and making sure we can service the growth that we have, but we expect to continue to grow rapidly,” Penney said.
While it might be focused on larger partners and enterprise offerings, Dynasty is also still growing its partner network. It has multiple RIAs in the pipeline to join it this year, Penney said.
“I'm not an entrepreneur who's easily satisfied. There's always an opportunity to do better.”