Getting Clarity On TruClarity’s Breakup And Sale

Julius Buchanan, Managing Editor, Wealth Solutions Report

We Explore The Drivers Behind The TruClarity Breakup And Red Flags That Indicate A Firm May Be Heading Toward A Breakup

The news of TruClarity’s breakup and sale of its constituent parts became public in mid-February, with Dynasty Financial Partners agreeing to purchase transition consultancy TruClarity Management Solutions and RIA One Seven preparing to acquire TruClarity’s RIA, TruClarity Wealth Advisors, as reported in Citywire and other media outlets. TruClarity’s parent company, TruClarity Holdings, will dissolve, according to AdvisorHub.

This news is in the rear view mirror and the parties involved have made public statements, but the move appears to be based on seller weakness, rather than the seller strength that is typical in wealth management M&A. 

Drivers Behind The Breakup

Phil Waxelbaum, Founder & Principal, Masada Consulting

A number of factors drove the breakup, according to Phil Waxelbaum, Founder and Principal of Masada Consulting, who notes, “TruClarity failed to achieve scale before entering the current challenging environment.”

Waxelbaum states that TruClarity has a good product and platform, “but cash flows were inadequate to sustain growth.”

With the caveat that his firm had limited interaction with TruClarity in recent years, Michael Terrana, President and CEO of Terrana Group, states, “TruClarity seemed to have a limited, highly commoditized offering in their value proposition that consisted mostly of outsourced services for breakaway RIAs.” 

Michael Terrana, President & CEO, Terrana Group

Analyzing that value proposition, Terrana concludes, “There are plenty of other providers in this space and in the absence of value it becomes all about price. Therefore as an outsourcer of outsourcers, competing on price makes it difficult to be scalable.”

In addition, Terrana notes that most of the firm’s management did not hail directly from the RIA space “and perhaps lacked the acumen necessary to completely see value in offering all or most of the services in-house that breakaways need to start and run their own businesses,” including services such as marketing, legal, compliance, financial administration, accounting, IT, real estate and financial dashboards.

Down Markets To Blame?

“Of course, the market being down results in a reduction of client asset value and, in turn, lower fees to the service platform provider,” Terrana says, but he does not regard this as the primary factor. “There still should be some growth in a sustainable model by adding more RIAs to the platform and additional client investments to the overall assets under management.”

Waxelbaum also considers lower markets as part of the story behind TruClarity’s weakness, but not the full story: “I doubt the nominal reduction in RIA revenue was singularly to blame. The market down has made breakaways much more challenging, and velocity of flow has slowed measurably.”

Waxelbaum sees restricted access to capital as an additional restraint. “While there remains a free flow of dollars for M&A, access to subordinate debt and common shareholder investment is gone.”

Red Flags

For RIAs and advisors looking to join a firm or break away from a wirehouse and rely on a firm’s transition consulting and business services, noticing the red flags of weakness in a potential partner is important to their selection process. 

“The flags are florescent and very visible,” says Waxelbaum. “If the considered partner lacks a seasoned proof of concept, lacks scale or lacks fluid access to capital they will not survive as is. Some won’t survive at all.”

“During industry bull markets startups are worth the risk,” he adds. “However, in industry bear markets the risk is unforgiving. A life’s work and a future dream cannot be entrusted to a weak handed partner no matter how brilliant.”

Notice the red flags

On perceiving red flags, Terrana circles back to the point he made above, “In a commoditized offering that has minimal differentiation or proprietary value, price is what matters, therefore margins get squeezed, which makes it difficult to be scalable and eventually kills sustainability.”

Terrana concludes, “Besides name recognition and the perception of proprietary value as in the case of Dynasty, capitalization and size always matter.”

Julius Buchanan, Managing Editor at Wealth Solutions Report, can be reached at

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