Dynasty CEO: IPO still 'on the radar' as firm targets $100B by July

Despite its shelved plans for an initial public offering, supported independence firm Dynasty Financial Partners still has ambitions to go public when markets get on steadier ground. 

"It's still on the radar for sure," Shirl Penney, the CEO and president of Dynasty said of his IPO plans, in a fireside chat for media Tuesday during the firm's Investors Forum in Nashville. Ron Insana, CNBC contributor and chief market strategist at Dynasty, moderated the chat. "Look out a couple of years when maybe things have normalized a bit in the market, where it's less choppy," Penney said. 

Penney's remarks came nearly a year after the company reluctantly announced in Dec. 2022 that it had pulled out of plans for an IPO filed Jan. 2022 that would have raised $100 million, instead electing to finance with minority stakes to Charles Schwab and private equity firm Abry Partners. Many RIAs in the network and firm employees also own shares, he said.

At the time, Penney told InvestmentNews he still hoped to go public "well into 2023" if market conditions improved. Currently over half the firms in the Dynasty network use Schwab as their custodian, a Dynasty spokesperson said in an email.  

The IPO market is tricky to navigate and takes a long time to weave through, Penney said on Tuesday. "You can't just file and then start a roadshow. You have to get all the public audit work done, which takes a year, and it's very expensive and time consuming. You have to get all your ducks in a row with your investment banking partners, you have to line up all the conversations and get to know the investors." He blamed Russia's invasion of Ukraine in Feb. 2022 for scrambling the IPO markets and closing the IPO window for a historically long time. "We talk every week to the head of capital markets at our investment banks. The window wasn't gonna open anytime soon. We pivoted." 

St. Petersburg, Florida-based Dynasty is still sitting pretty. The firm Penney began in 2010 currently has 52 RIAs in its network of advisors, he said, and $85 billion of assets that sit on its tech platform. 

READ MORE: Dynasty seeks to boost M&A work with its own new investment bank

"Internally … don't want to do this too prematurely, but we've started planning for our $100 billion party," he said. Penney said he was aiming to reach that mark, "conservatively," by July 4, 2024 — a date the firm hopes to capitalize on in its appeal to independent advisors as "independence day." 

"We have probably the best pipeline that we've ever had, with advisors … continuing to come from the breakaway movement" from the broker-dealer world toward the RIA model, he said. The firm has drawn advisors with increasingly large books in recent years, often from wirehouse firms such as Morgan Stanley and Wells Fargo — and Penney sees no sign of that slowing down. 

"You're going to see larger, more sophisticated teams that have larger, more sophisticated end clients continue to move to independence quickly, because they realize higher income for them ... and more freedom and flexibility in how they service clients," he said. He added that when Dynasty launched 14 years ago, a very large breakaway team might have had $250 million of assets under management — but the firm has since onboarded "dozens" of teams with $500 million, $1 billion, or multi-billions in AUM. 

"I would venture to say that in the last five years, we've probably done more $1 billion dollar breakaways than the rest of the industry combined. Our pipeline is filled with more large, substantial breakaway opportunities." 

The winds of the industry are flying at Dynasty's back, Penney said. "There are no break-back brokers," he said, adding that virtually no large teams have ever gone independent and then come back to a wirehouse or large BD environment. "So it's a one way street over the last 20-plus years." 

Dynasty, which provides customized tech platforms and outsourced services for RIAs, also launched an investment bank this year which can help advisors grow inorganically. That new service is a unique part of its value proposition to advisors, Penney said. In addition, "We've launched our leads business, Dynasty Connect, which is starting to gain some great momentum." 

At a separate panel for media Tuesday on the firm's role in the M&A market, Harris Baltch, the head of M&A and capital strategies at Dynasty, said there are many more advisors moving to independence than before. At the same time, many advisors are retiring out, creating deal demand. "The number of RIAs that were created in the first three quarters of the year far outpaces the number that are getting gobbled up." He said he expected more M&A in years to come. 

Phillip Knight, managing director and partner at Americana Partners, an RIA in the Dynasty network, said in the panel that the firm's support in scaling up and deciding how to set up his business was helpful on many levels and had given him confidence in becoming more entrepreneurial after leaving Morgan Stanley. 

Knight said he felt "captive" at Morgan Stanley and didn't know what his practice had been worth. Breaking away from the wirehouse to join Americana had been a very hard process, but "absolutely worth it. I wouldn't go back." 

Penney said his firm's strong financial position would make it even more attractive in the M&A market for helping advisors with deals. 

"We're flush with capital in an environment where it's a huge advantage to have that balance sheet, and Dynasty has zero debt. So, relative to a lot of other players that have high levels of leverage with interest rates that are probably about to reset on them higher, it puts us in a very strong position to support our advisors on growth," he said.