Strategic Partnerships in Wealth Management

When Lisa Rapuano was twenty-five years old, she managed to talk her way into an investment management position at a startup in Chapel Hill, NC. As the third employee of Franklin Street Partners, Rapuano wore many hats and handled everything from reception and IT to sales and marketing; the experience she gained at FSP unearthed a new passion for investment research, which quickly became her focus and paved the way for her future as a business leader.

Facet Wealth is an RIA that focuses on people with less than a million dollars in investable assets, and that is important to note because $1M is not a significant amount of capital in this industry. Their niche encompasses thirty-three million American households that have between $100k-$1M in investable financial assets, most of which are excluded from the traditional, holistic financial planning side of the business.

A Market-Cooperative Business Model

As CFO, Lisa Rapuano describes Facet Wealth’s business model as market-cooperative because they are driven by highly efficient, back-end technology that enables their financial advisors to provide a wholesome customer experience to lower net worth clients. As a result, peripheral partnerships are developed with other RIAs that focus on more complex investment strategies. Facet Wealth takes the segmented clients off of their partners’ hands to provide adjusted white-glove service without sacrificing the partners’ consumer relationships or causing them to use company resources disproportionately.

If RIAs make too many exceptions for less wealthy clients, their businesses won’t work because they aren’t set up for that. Too many advisors are trying to be all things to all people, but the most successful ones define their niche very clearly and Facet Wealth has done exactly that. Because financial advisors are inherently helpers, Facet offers a way for them to provide less profitable clients with a solution instead of segmenting and leaving them to fend for themselves.

Referral Partnerships and Revenue Replacement Opportunities

Deals are a driving force behind Facet Wealth’s success, and there are two primary types that they use to generate growth. The first is a referral partnership, where Facet pays for referrals if the prospective partner signs a solicitation agreement with them. This offers Facet’s partners a way to continually serve the segmented clients while freeing up capacity and resources to focus on their niche. The second way is a revenue replacement opportunity. This is also a sequential deal where Facet signs an asset purchase agreement with an RIA to acquire their client relationship, but Facet sets terms for how long the revenue will be replaced after the client transitions to them; this is the most transformative for advisors.

Facet Wealth as a Partner

Facet also has a couple of different ways that they’re willing to work with financial advisors who are considering M&A activity on their own. One stage that they can help with is the preparation for M&A. If you enter a partnership with them before you go to market, Facet can acquire your smaller clients to create more capacity, raise margins, and improve the overall value of your business. Another stage where Facet is a great partner is for buyers in the midst of a transaction. Part of the deal might be very attractive, but if there are smaller clients that aren’t a great fit, Facet can help take them off your hands.

There is a lot of consolidation taking place in wealth management and investment management, and it is largely because of the natural evolution of the industry. But, advisors need to consider whether or not they are adding value to their clients, and if they are charging a fair price for the services offered. Personal service is expensive, but it is one of the current trends in this day and age, and companies like Facet Wealth are making it a fundamental part of their strategy.

Click here to listen to Lisa Rapuano’s interview on the Fueling Deals podcast.

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
 

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