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VOL. 9 | NO. 18 | Saturday, April 30, 2016

Waddell & Associates Merges With International Network

By Andy Meek

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David Waddell’s Memphis-based investment firm is celebrating the third decade of its existence this year with more than just the acknowledgement of its longevity in the business of managing clients’ money.

Waddell & Associates Inc. as of this month has joined the network of Focus Financial Partners, an international partnership of independent, fiduciary wealth management firms. It’s an arrangement that, among other things, gives the Memphis firm access to Focus’ capital and resources, essentially hitching the firm to a larger partner that Waddell described as a kind of partial acquisition.

David Waddell of Waddell & Associates says it was time to either acquire another wealth firm to grow, or join forces with a player that has more resources.

(Memphis News/Andrew J. Breig)

“Focus is becoming an owner,” Waddell said in an interview in his East Memphis office. “They’ve bought the assets that lay claim on 50 percent of the profitability – we basically share the economics.”

Among the things, though, that won’t be changing for his firm is the W&A name. Local decision-making also isn’t changing. And in a letter to clients, Waddell said the client experience also won’t be changing either.

In that letter, Waddell said Focus had reached out to the firm 10 years ago. They kept in touch over the years, and today – with Focus having built a network of 40 wealth management firms nationally and internationally – the time appeared to be right.

What the firms gain by being together, among other things, is the benefit of “shared resources and intelligence,” while retaining their independent brands, business strategies and management authorities.

“What’s happened in our industry – as firms get to be about our size or larger, they start looking at strategic options,” Waddell said about his firm, founded in 1986, which is a registered investment advisory and serves more than 875 households and institutions. “That means either acquiring other firms so they can grow more scale or partnering with firms like Focus Financial that are coming along and acting as consolidators, to a certain extent, to provide platforms to do shared resources.

“Nothing changes, really, at W&A, and that’s the point of the model. What we get in the process is an opportunity to collaborate with those other 40 firms. I chose to bring in an institution that comes with a lot more horsepower and resources. And Focus shares in the economics of W&A going forward.”

Among the environmental factors that also make an arrangement like this more fitting now, Waddell rattles off a list of changes in his industry, everything from increased regulatory scrutiny – which smaller firms can have a harder time keeping on top of – to “sideways markets” that put pressure on returns and fees.

The addition of his firm – which also has a Nashville presence that’s included – to the Focus partnership gives Focus even more of a foothold in the Southeast, following the addition last year of Patton Albertson & Miller, a Georgia-based RIA with an office in Chattanooga.

“The addition of Waddell in Memphis and Nashville will further open up the local RIA market for Focus, creating additional opportunities in the region,” said Focus founder and CEO Rudy Adolf.

The arrangement with Focus also gives Waddell more time to think about the parts of running his business that he enjoys most.

“After reading trade journals, going to conferences – the amount of independent research time it takes to come to a decision on whether to go hard at (an investment opportunity), it’s a big, laborious process,” Waddell says. “And your intelligence is only as good as what you were able to gather.

“Our ambition has never been to be a massive firm. This way, we continue to be a boutique that has the back office of a massive firm.”

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