David Canter: Into the Buyout Fray at Bluespring

 Into the Bluespring Buyout Fray, by David Canter

David Canter has been a stalwart of the registered investment adviser sector for many years. Before leaving Fidelity Investments in August, he was best known for heading up the RIA division inside the institutional arm of the company. Canter likes to claim that she was performing in the RIA model's nightclubs and pubs before it became an instant phenomenon.

Zooming in on Barron's Advisor from his West Newton, Massachusetts home office, where he also plays a number of electric guitars, Canter explains why he just left Fidelity to take the helm of Bluespring Wealth Partners. 

He contends that the Kestra Holdings-owned Austin, Texas-based RIA acquisition agency has an "unfair edge" over other businesses and anticipates that it will acquire four businesses to its client list this year, increasing the total to 30. Canter offers his opinion on the reasons why so many aspirational RIA companies fall short of their goals.

An image by Kate Copeland

Where are you from and how did you enter the wealth management industry? I was raised primarily in California despite being born in Maryland. As a lawyer who later transitioned to RIA work, I began my professional journey. 

I eventually rose to the position of general counsel for Charles Schwab's adviser division. After leaving Schwab in 2008, I spent a year working for the Los Angeles RIA Post Advisory Group before switching over to Fidelity Investments.

At Fidelity, what did you do? I worked continuously at Fidelity in a variety of roles managing the RIA business. I assisted in establishing and growing the practice management function as the chief operating officer. I managed the RIA business for the following five and a half years, followed by the family office business.

You definitely have a lot of faith in the RIA sector. I like to claim that before the RIA model became an instant phenomenon, I was performing in the nightclubs and bars of that industry. I have a strong interest in the category. 

As a former student of the industry, I fervently support the fee-based, fee-only advisory model because I believe it to be what both advisers and investors are seeking.

Why did you choose to join Bluespring after 13 years with Fidelity? I had a wonderful career with Fidelity, and I believe I added something there. But I want a fresh obstacle. I had been all over the ecosystem, but the opportunity to work on the creation, expansion, and management of a company like Bluespring really appealed to me. 

I've known Stuart Silverman, the chairman of Bluespring, for at least three years and James Poer, the CEO of Kestra Holdings, for more than ten years. Personally, I like both of them, as well as the cultures of Bluespring and Kestra, the partner businesses, and the community we've established.

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So I sought a location where I believed we could effectively construct something. Additionally, Bluespring offered the ability to expand and develop upon its 26 partner companies' type of untapped networks.

What best sums up Bluespring? For RIA businesses who wish to preserve their greatest work, Bluespring is first and foremost an entrepreneur-driven approach. We defend their entrepreneurial endeavors, and they uphold their individual brands and methods of conducting business with customers. 

However, we provide them the ability to consider the future and appreciate the worth of their company. We are in a wave where these companies require successors to run them. Helping with the G2s [second generations] in these enterprises is thus one of our areas of expertise, which I think we do fairly well.

We serve as a platform as well as an acquisition tool. We purchase up to 100% of the voting stock of companies. We also offer a platform where we relieve businesses of what we refer to as the defensive aspects of operating a business—human resources, finance, payroll, and benefits.

This model is adaptable. We don't demand that you adopt our name, and all of our procedures, and give up your individuality. It really is a pledge to keep growing in order to become this platform of adviser optionality. They can focus on running the front of the house and doing what they do best, which is expanding the business and serving customers, but we can take a lot off their plate in terms of running the business.

What is your most successful affiliation model? The majority of the businesses we work with choose total ownership. And it often depends on where they are in the life cycle of their enterprises.

For the businesses you purchase, are there equity opportunities? Partner companies can trade a portion of their equity for our equity, allowing them to become a part of something bigger and benefit from our chance for joint growth. This indicates that there will be a significant upside following the sale, even if they sell their whole company.

What position does Bluespring own in Kestra Holdings? Kestra Financial, a hybrid broker-dealer and RIA business is a part of Kestra Holdings. Kestra Holdings includes Bluespring as well as Kestra Financial. We also have additional related businesses, like Arden Trust, a trust corporation. 

We have a smaller hybrid company called Grove Point and an investment management affiliate company named Kestra Investment Management. The fact that we have so many options is another thing that drew me in. We attempt to meet advisors where they fall on the spectrum.

What is the total amount of assets managed by Bluespring's companies? At the level of the holding company, we disclose assets. The entire AUM of Kestra Holdings was $53.6 billion as of June.

How would you sum up your work responsibilities? I'm primarily there to expand the company, increase its effectiveness, and assist the team—which includes our partner businesses and the home-office staff—in expanding and being more effective with regard to our advisors.

But when you break that down, there are a few things for which I have a strong passion: being quite clear about who our target customers and target markets are, both for our own company and for the partner companies. expanding our capabilities because I think it's important to have a complete range of skills as we progress down the wealth management arc. ensuring that we have the appropriate infrastructure and staff in place. recognizing our unfair advantage: What makes our company distinct and challenging to replicate?

So, what exactly do you mean by Bluespring having an "unfair advantage"? I believe that the way we approach G2 gives us an unfair edge. We have a strong belief that companies must continue to build a solid G2, G3, and G4, for that matter. That is the primary reason we founded the company. How can we meet the requirements of founders while simultaneously guaranteeing that G2 and G3 companies have a home and a path to growth? We worked on this Successor Academy for that reason.

Beyond that, one of the other things we're concentrating on is how to maintain a talent pool for these organizations and properly train employees in all facets of not just operating but also expanding these advising services.

In business, skill is everything. Given the issues our society is facing, you have undoubtedly heard that cliche this year more than any other. It's intriguing: As a society, we're going through a really reflective time. We're thinking about how work will develop. We are deliberating our ideals' potential future. However, that's where we step in. We are here to assist businesses in considering these very crucial issues both within their organizations and with their clientele.

What precisely does the Successor Academy teach? How is the course structure set up? A two-year program called the Successor Academy is designed to get the next generation of advisors ready to take over the reins of the advice industry. Importantly, it offers a platform for peer-to-peer interactions amongst next-generation advisers based on real-world case studies and simulations and involves industry professionals as instructors.

The program covers important topics such as customer experience and company growth, coaching and team leadership, P&L management, and the basics of business management. The development of a strategic expansion strategy is also covered. We discover that the majority of founders and their G2 haven't had formal exposure to these disciplines, and the opportunity to apply these principles with peers in an artificial setting makes them useful.

What is your current opinion of the M&A market? The market, in my opinion, is still quite strong. This founding age wave will ensure its continued strength. You'll see that the issue is being faced by an increasing number of businesses. These very valued firms were founded by founders. 

But without the assistance of a third party, they have grown to be prohibitively expensive for their G2s to purchase altogether. We'll have to wait and watch how the market evolves as a result of these changes. Interest rates have increased for people who are heavily leveraging their assets. So, that will play a role.

Describe a potential purchase for Bluespring. We decline more than 90% of the businesses we approach because there must be a cultural match. We are attempting to account for four factors. We want to provide them with solutions for the future. We are attempting to keep them free. To create a transaction structure that is adaptable and catered to the requirements of the companies we deal with. We also want to enjoy ourselves.

Beyond culture and the four Fs, however, our main priorities are expanding businesses with EBITDA [earnings before interest, taxes, depreciation, and amortization] that will benefit both sides. Do they still have G2 in situ, I ask again? We also engage in the business of financing sub-acquisition. We are keeping an eye on the regions in which we want to compete, so if a company is expanding in a specific area, perhaps that company will be useful in terms of sub-acquisition.

What AUM is the majority of your candidates? When it comes to acquisitions, we are adaptable. The rules state that we need to purchase a company with at least $1 million in EBITDA and that we must take at least a 51% interest, however, those rules can change if we are assisting a partner business in a merger or Sun acquisition. The typical AUM range for Bluespring solo purchases is between several hundred million and $1 billion.

Do you have any expansion plans for Bluespring? We currently have 26 businesses. At the end of the year, we should have around 30 businesses, perhaps more. I joined because I genuinely want to contribute to the team's continued and exponential growth.

How many businesses may be included in the Bluespring group in five years? Instead of focusing on a set number of businesses, we are aiming to develop while carefully maintaining our shared culture and placing a strong emphasis on quality over quantity. We think we can substantially extend our activities from one year to the next for the next five-plus years due to the enormous possibility and need for our strategy.

What is the main business issue you are facing? Growth and efficiency are, in my opinion, everyone's top business challenges, and this is related to priority. How therefore can we maintain the platform's growth and the business's expansion while also improving processes and raising efficiency?

Finding talent is the next step. The talent market has become competitive. The good news is that over the last 60 days alone, we've made a number of important employees for our company. That involves hiring individuals to work in our consulting, practice management, and business operations departments. A head of onboarding was also hired by us.

What do you believe are the key factors preventing many ambitious businesses from achieving their potential as industry students? I'll limit it to two. The first is that you won't get there by doing what got you here. In order to attain exponential development, you need change agents. Additionally, that transformation agency can consider talent, target markets, and, quite honestly, letting go.

When you mention working with organizations like Bluespring, you are using the term "change agent." The term "change agency" describes our capacity to offer leverage and scale to our partner companies in order to support growth. It may relate to setting aside time for business executives to concentrate on growth. To assist in freeing up time and resources for company leaders, we remove some of the administrative tasks off their shoulders.

The second action that businesses must take is to build a time machine. That is to say, you must find a way to get extra time for development. Finding the perfect talent or placing individuals where they would fit effectively might help you free up time to work on other projects. I return to the question, "Who are your target markets? What skills do you possess? How are you planning to get there, too?

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