Such a set of conflicts in having product sponsorship and client fiduciary duty under one roof is mostly new for RIAs because the rise of the business model is "a recent phenomenon," according to DePardo.Īsked by Business Insider, how it would get past such conflicts, insiders said Iconiq's investing emphasis will dodge create conflicts of interest with its clients because the capital goes to medium-size tech companies that the clients’ firms won't pursue, according to people familiar with the firm - leaving out concerns of conflict with the wealth manager. "Many of the investors in the ICONIQ Private Funds are our Managed Account Clients, and when we recommend that these clients invest in funds that we sponsor, we face actual and potential conflicts of interest," it writes on page three of this SEC document. Iconiq agrees, at least for disclosure purposes. "The conflict of interest issue is glaring," she says. "I don't think it matters how this issue is conveyed or couched, it's unavoidable." Eliza DePardo: 'The conflict of interest issue is glaring.' Yet being in so many lanes at once as manufacturer and distributor simply must bump off the the icebergs of conflict, says Eliza DePardo, founder and director of consulting at De Pardo Consulting. "Those guys (Iconiq) truly “get it," says Lorenzo Esparza, founder and CEO of Manhattan West - a JPMorgan breakaway in Los Angeles seeking to build a major venture investing firm as part of an RIA wealth manager. "The reason Iconiq has gotten so big is that they are investing in the next big thing – Facebook (Meta) for example – before they ever go public.
It was a major early investor in both, which were acquired by Doordash and IBM, respectively. Iconiq also scored big on M&A deals involving two companies, Wolt, a restaurant food delivery business, and Turbonomic, an application resource management firm. See: How the Facebook IPO is creating the mother of all RIAs, Iconiq, and what an in-your-face it is for Wall Street David Lee now manages most of the Zuckerberg fortune outside the Iconiq RIA. All had their initial public offerings last year.
Iconiq Capital grew from $23 billion in June of 2020 to more than $80 billion after a bunch companies had their IPOs and drove huge capital gains in client-owned pre-IPO shares.ĭivesh Makan, the Morgan Stanley stockbroker for Facebook co-founder Mark Zuckerberg, co-founded the breakaway San Francisco RIA in 2011 and owned big stakes in 11 firms - including Honest, Robinhood, Gitlab and Warby Parker. Iconiq Capital seems to prove it can be done - dodging conflicts at every juncture - but seemingly delivering extraordinary returns by using client expertise, capital and connections in a virtuous circle on their behalf.
What if those "distributing brokers" got organized and value-added enough to use the power of direct relationships with investors to build out financing machinery for the most lucrative deals. We know that the profit centers at the investment banks are related mostly to trading, financing and deal-making and the retail brokerage forces were almost an afterthought - a means of distribution. Brooke's Note: I have always wondered just how far the Wall Street breakaway movement could go.
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