Any RIAs who may be thinking of teaming up with venture capital or private equity firms to grow their firm may want to think twice.
That was one of the takeaways from a recent podcast in which Chuck Failla, president and CEO of Sovereign Financial Group, with his guest Michael Kitces, head of planning strategy at Buckingham Wealth Partners and co-founder of AdvicePay.
While there was a lot to unpack in their conversation, Failla tells InvestmentNews that the overall takeaway was “just how down to earth he was.”
Kitces “is just an icon in our industry,” Failla says. “I don’t think there is any one person more iconic in the investment advisory space than that of Michael Kitces. He was just very down to earth, very easy to talk to, and the conversation just flowed very, very easily.”
Failla noted that Kitces’ views on private equity and venture capital were similar to his own.
“I don’t like venture capital very much,” Kitces said in the January 31 podcast. “I’m really not a fan of it in the RIA space in particular. I don’t even love it in the technology company context. I just find companies tend to raise too much capital, puts too much pressure on growth, and then they just start making not ideal choices for their users, because they’re trying to justify it to their investors … VC expectations have become misaligned with how our industry works.”
While private equity is slightly better because its growth expectations are not quite as wild and the time horizons are a little bit more reasonable, Kitces said he still finds it challenging because industry benchmarking data in the aggregate show most advisory firms grow their client base by mid-single digit percentages a year, plus market gains, while private equity investorsRead more on investmentnews.com