First Republic Announces Spin Off
Anticipate this announcement imminently as our intelligence suggests.
As we’ve watched the banking industry stumble left and right, commentary and conjecture have run rampant. First Republic Bank, however, the darling success story of Wall Street, is the “at issue” everyone is trying to figure out regarding what’s next? A powerful rumor is that given Robert Thornton’s background as an investment banker (ex-Goldman Sachs), the notable and highly profitable wealth management division will be spun off into its own RIA, First Republic Advisors (FRA), with Pershing remaining the custodian of assets. What happens to the failed banking division is unclear and will be held away separately. Advisors get free of the failed banking division.
What does this mean for First Republic advisors? There are numerous positives. First, the culture of the First Republic advisor remains consistent for both the advisor and client without change. Clients will not have to move assets to a new platform and/or custodian. Clients are safe, and there is no affiliation with a bank that created choppy waters for advisors and clients in the first place. Assuming a massive investment by a either venture capital firm or a passive investment partner, First Republic would create a separate and distinct RIA, operations would be funded but also allows a private equity opportunity carry along/drag along rights for advisors with guaranteed front and back ends, potentially a cash offer, and a lucrative option in either an IPO or sale in future years. The potential negatives to this spinoff unit have much to do with who the venture capitalist is, how strong they are, and if an IPO or sale, at what price.
The seasoned consultant for top advisor teams nationally, Roger Gershman of The Gershman Group, commented on options for First Republic advisors, “the fact is I am routing for First Republic Advisors to spinoff and be freed of the bank to keep consistency and culture intact as much as possible, that said, I counseling countless teams with a solid Plan B even given a favored Plan A.”
The other advice consultants like Gershman have is try and empower them to choose their own destiny since the storied firm they once knew and loved is very sadly not going to be the same. They chose First Republic for good reason as the best option for their clients, they honored their contract but, under terribly unforeseen circumstances, the bank could not honor theirs.
So, if and when there will be a new parent, advisors can now choose who that new parent will be to best serve the interests of their clients whether its First Republic 2.0 or New Co. Competitively, FRB advisory teams are some of the most seasoned, high caliber advisors in the nation and Wall Street is salivating seeing economic packages of 400% guaranteed including front and back ends since acquiring firms know that 100% of the advisors’ business will follow.”
First Republic advisor, the choice is yours. Which destiny will you chose?