Seventy2 Capital is a runaway success story on Wall Street; it is a tale of transformation from a modest $3 million team to a juggernaut commanding $75 million in a mere five years. But how did this remarkable metamorphosis unfold? The journey began with a bold departure from big bureaucratic banks like Merrill/Bank of America and Morgan Stanley where it became blatantly apparent that change was needed and the team began a search of independent platforms, recognizing the future of wealth management was in the independent RIA space. The team’s journey culminated in a decisive move to settle at FiNet, an independent platform, in December of 2016, with only $200 million in AUM.
——————————–
The summer of 2017 was a pivotal moment wake up call for the firm when it added a Morgan Stanley advisor to the ranks, enticed by the guaranteed 70% 1099 pay, the allure of the economy of scale, and building equity in something greater than themselves. By 2018, it became irrefutably clear that a seismic shift was underway, with a groundswell of advisors clamoring to break free from traditional wirehouses in pursuit of independence yet unwilling to forsake the myriad advantages offered by industry giants. Enter Seventy2 Capital, where 33 visionary teams are on board (or currently in transition), poised to propel the firm to new heights by December 2024, with an anticipated $10.6 billion in AUM and a staggering $70 million in revenue. The President Tom Fautrel says, “In my wildest dreams I never imagined how large we have become.”
Understanding FiNet is crucial to the Seventy2 Capital’s success story. FiNet supports independent advisors with all the tools to launch their own 100% owned firm, while allowing full access to a very familiar wirehouse-caliber chassis of products and services, in this case – Wells Fargo. Though as a 1099 contractor and not an employee, advisors at FiNet have their name on the door with no mention of the name Wells Fargo which addresses many advisors’ fears about the brand name. Therefore advisors have access to everything they are familiar with and manage money using a large bank wealth management platform without being an employee and the overbearing oversight. So they have the best of both worlds; managing money complete with global investment solutions and services while having the freedom and control as an independent firm replete with every conceivable amenity, seamlessly integrated with autonomy and revenue ownership. The economics and tax advantages are eye-popping:
- 70% average net operating 1099 income (deduct own expenses).
- Average transition capital of 175% of T-12 as 1099
- Equity ownership at premium RIA valuations and/or Retirement packages at LTCG
- Growth by Acquisition of advisory practices in- house and out
The growth by acquisition is key to the success of Seventy2 Capital FiNet’s capital to acquire a large potential pool of advisory teams in transition. Severty2 then becomes “the house” or the employer offering a platform, payouts, and services rather than working as an employee of some other “wire-house.” The critical point is that Wells FiNet is helping practices like Seventy2 Capital to acquire other teams by paying 175% of T-12 1099 to join them. The financing opportunity that Wells offers has allowed companies like Seventy2 Capital to grow at explosive rates and many other practices at FiNet are encouraged to do the same, including newly recruited teams to the firm. Advisors at FiNet have several opportunities to acquire practices;
- An expansive ecosystem pool of 15,000 Wells Fargo advisors; many are interested in joining an existing infrastructure, with all the benefits of 1099 pay, and LTCG equity in an independent RIA structure.
- Seasoned veterans seeking graceful retirement exits, easy and fast integration, and selling at a LTCG versus a standard W2 tax structure. Retiring advisors can hold equity as long as they want with options to sell in percentages they desire over time.
- Advisors at competing firms such as Morgan Stanley, Merrill Lynch, and UBS also look to join an existing infrastructure which many are also interested in joining an existing infrastructure for all of the RIA benefits as above.
Advisors and ambitious practitioners flock to Seventy2 Capital to merge their aspirations with a larger collective vision. Together, they harness the formidable resources of Seventy2 Capital and many other like franchises within FiNet, to not only seize opportunities but to create them, leveraging firm capital to orchestrate strategic acquisitions and consolidate their standing as industry luminaries. It is the unparalleled fusion of institutional prowess and entrepreneurial freedom that sets Seventy2 Capital apart. Here, the burdens of office management, technological upkeep, compliance, and succession planning are meticulously tended to, freeing advisors to focus on what truly matters: client relationships and business growth. All the while advisors experience a seamless integration into an existing practice, availing themselves to a lucrative 70% 1099 income coupled with equity and even participating in a future IPO option.
That’s right, advisors at Seventy2 Capital (and most any advisor or team within FiNet) have the opportunity to sell equity at LTCG and also have their equity realize public market valuations. Facilitated by FiNet’s strategic partner, Merchant Capital, who is a leading PE shop that specializes in acquiring positions in independent RIA’s, have aggregated a significant diversified pool of like RIA’s. With over 100+ large investments in RIA’s with 10’s of Billions in AUM, they have aspirations akin to industry titan Focus Financial to go public. Merchant charts a course towards a lucrative public offering, amplifying the potential for substantial returns for most any advisor who cares to sell a piece of their equity today or in the future. Here, advisors can sell a piece of equity today or can sell in the future and be rewarded with enterprise valuations with multiples reaching upwards of 17-20x earnings. How does an advisor get that valuation? It is a simple formula whereby as Merchant Capital undergoes an IPO at an enterprise valuation, which are magnitudes greater than any one single practitioner, and advisors such as those within Seventy2 Capital can sell equity thereafter as “drag along, carry along rights.”
——————————————–
Thus, the saga of Seventy2 Capital stands as a testament to the indomitable spirit of entrepreneurship, a beacon illuminating the path towards unprecedented success in the ever-evolving landscape of wealth management. Not only is this the story of Seventy2 Capital, but advisors are joining FiNet to mimic the same trajectory that has led to Seventy2’s success. For today’s advisors, this could be an opportunity of a lifetime to join existing infrastructures like Seventy2 Capital or create their own using FiNet’s independent platform, access to firm capital to acquire other practices inside and outside the firm, and also sell at enterprise IPO valuations.
As the Editor of The Gershman Group, a boutique financial services consulting firm, TGG brings expertise in financial analysis, strategic planning, and market research. With a keen eye for detail and a passion for helping businesses navigate complex financial landscapes, TGG delivers insightful, high-quality content to empower informed decisions. Backed by years of industry experience, TGG makes complex topics accessible through clear and compelling communication, shaping the firm’s thought leadership and commitment to excellence in financial services.
