Focus Expects to Grow to $4B in Revenue by 2025

Focus Financial Partners CEO Rudy Adolf laid out some lofty growth goals for 2025 at the firm’s investor day on Thursday, based on the firm’s model of investing in registered investment advisors, giving them value-added services and helping them grow. The firm currently has 82 partner firms, up from 63 in 2019, the last time Focus held an investor day, and Adolf expects that to grow to 125 partner firms by 2025.

“We believe that by 2025, we will be able to accomplish growth to $4 billion in revenue, $1.1 billion in EBITDA, and yes, a question that just about all of you have asked us again and again, we believe that our 24% margin target can ultimately go to 28% margins,” Adolf said. “It’s ambitious, but we’re convinced we can accomplish it.”

About $1.5 billion of this revenue increase is expected to come from the organic growth of partner firms and mergers. About $700 million will come from holding company transactions, Adolf said.

And Adolf is betting that Focus’ partner firms will continue on their growth trajectories. Ninety percent of the firms Focus has acquired have generated levered internal rates of return in excess of 20%, the firm said. Overall, the weighted average revenue compound annual growth rate for Focus partner firms has been 15%, compared with 16% for partner firms that have done at least one merger.

Focus disclosed it has a total of $350 billion in assets today; it now operates in four countries and has over 4,800 employees and partners. Since 2019, the firm’s revenues have compounded by over 20%, while EBITDA has compounded by over 30%.

Adolf also laid out his plans for achieving the growth goals, saying the firm will lean on its scale, expertise in M&A and access to data. The firm will focus on improving the value to end clients, including deepening access to investments, as well as expanding its trust and credit capabilities.

The firm will also add to its current suite of services and capabilities available to advisors. Specifically, the firm will help advisors more with recruiting and lead generation.

“We believe we simply have and even will more so in the future help our partners win this war for talent based on the superior structure and superior growth that our partner firms can offer,” Adolf said.

There are plans to expand into new geographies, such as Switzerland and Singapore, and Adolf also expects to add to the firm’s cross-border capabilities to better serve clients globally.

The market for RIA M&A has been heating up lately, with deals reaching record-high volumes and valuations at new highs as well. Adolf said he believes Focus, however, is better positioned to take advantage of the opportunity in M&A.

“It is a consolidating industry. In fact, in so many ways we have invented the systematic, value added consolidation in this industry,” he said. “And if you just look at the U.S. there’s probably $3 trillion in motion over the next five to seven years. It will require $60 billion–$100 billion in capital to support this consolidation activity. There is not enough capital to do that in this industry.”

The biggest losers will be those who are deploying capital at too high multiples and too fast, without the expertise and underlying business to create value.

“It’s easy to spend money,” he said. “It’s very hard to create value—certainly very hard to create value at the levels you’ve seen before.”