How the industry's mixed signals point to further consolidation
Corey Kupfer, founder and managing partner at Kupfer., PLLC speaks with Financial Planning’s Tobias Salinger about how the lack of preparedness in succession planning throughout the industry is pointing to continued M&A. “Those in the independent RIA space have had a mindset shift from being employees to being entrepreneurs. There is an additional mindset shift to also being a dealmaker. The dealmaker mindset is different from the entrepreneur mindset. Saying that you don’t have time to finalize a deal is evidence of not having a dealmaker mindset. Dealmakers make the time, build the team and allocate the resources to get deals done,” says Kupfer.
To keep reading click here
The Climate Tech Landscape and Meeting Energy Demand in the U.S.
Vincent Ambrose, Chief Commercial Officer of FranklinWH and Brian Meegan, Partner at Kupfer, join Jill Malandrino on Nasdaq TradeTalks to discuss the climate tech landscape and meeting energy demand in the U.S., and how this could impact the energy M&A environment.
To read more click here
Personal goodwill is opening up M&A for employee advisors
Bankers and lawyers are using personal goodwill sales to help W-2 and 1099 advisors monetize their practices at capital gains tax rates rather than ordinary income.
To read more click here
Why advisors should prioritize next-gen planning
Advisors are making a succession planning list and checking it twice.
After all, “succession planning is a huge deal,” said Ryan Halliday, managing partner at Crewe Advisors.
“One of the things the SEC investigates in their examinations [of firms] is what your succession plan is. We have a fiduciary responsibility to take care of the clients of the firm, and part of that is making sure there's a succession plan in place,” he said.
“It’s important that you build your firm, or as you're managing your book of business, you’re considering the qualities and the capabilities of people.”
To read more click here
The Evolution of Advisor M&A Deals: What to Know Now
If you are an advisor looking to monetize your firm or book of business, you are belle of the ball — and it’s become a big ball. Take your time to get aligned and understand your options, but don’t forget that there is a pace and a rhythm to the dance.
If you want to become a serial acquirer, you have tough competition from private equity-backed buyers, so you need to have a strong value proposition. That means a model and deal structure that are attractive to the sellers who have objectives other than getting top dollar for their firms.
To read more click HERE
In Search Of The Perfect Deal
Is there such a thing as a perfect merger or acquisition deal or exit strategy? Maybe, according to Corey Kupfer, managing partner at Kupfer Law, a law firm based in New York and Denver that helps RIAs and entrepreneurs with complex legal issues.
The answer to the first part of that question depends on a number of factors, including the goals of the merging firm owner, Kupfer said in an interview.
Studies have shown that the majority of mergers and acquisitions fail in the current market, at the same time that the financial consequences are becoming more substantial. Kupfer provides guidance to firms and advisors who are looking to make a move so they can avoid mistakes.
To read more click HERE
What's at Stake in the Ameriprise-LPL Fight Over Client Data
A series of recruiting disputes between Ameriprise Financial Services and LPL Financial could help clarify what client data advisors are allowed to take, and the client contact they're allowed to make, when switching firms.
In a spate of recent lawsuits, Ameriprise accuses LPL of encouraging recruits to breach industry rules and abscond with the firm's client data, while LPL counters that a "bleeding" Ameriprise aims to use litigation over client information to stifle industry competition.
To read more click HERE
ThinkAdvisor: Fidelity: RIA Deal Size Rises, Volume Eases in 2024
"Corey Kupfer, founder and managing partner at Kupfer PLLC, a law firm that represents RIAs in M&A deals, noted that non-private equity buyers have various strategies to compete for transactions with PE firms that can offer more money.
"For some of them it's more independence and flexibility in terms of the control that the advisor can maintain over their practice," he said.
Some offer advisors more capabilities or more say in the company's management, direction and growth.
One family firm also sells its "Midwest values" and culture, Kupfer noted."
To read more click HERE
Corey Kupfer Talks RIA Transitions in Financial Advisor IQ Article
Our very own Corey Kupfer was recently featured in an in-depth article by writer Brianna Monsanto in Financial Advisor IQ. The article, aptly named "Considering Jumping Ship from One RIA to Another? Here's How To Ensure Smooth Sailing," delves into the fluid dynamics of the wealth management sector. As the industry witnesses an uptick in advisors debating changes, the necessity to grasp the finer points of such transitions begins to grow.
COREY KUPFER ON RIA TRANSITIONS
With years of experience in navigating the complexities of wealth management, Corey underscores the importance of staying on top of industry shifts. This is particularly important when it comes to M&A activities, and the continuous influx of private equity investments into the sector.
In Monsanto's insightful article, Corey highlights the need for a clear distinction between the intended goals and the actual outcomes of business transactions. While independent RIAs often initiate deals with their employees' best interests at heart, the end results may not always align with these initial aims.
MONSANTO CAPTURES THE RIA INDUSTRY FLAWLESSLY
For professionals at the junction of making a career change or for those intrigued by the intricate workings of the RIA landscape, Monsanto's article serves as an invaluable guide. It maps out the numerous complexities, challenges, and considerations that come with such professional shifts.
Be sure to check out the Financial Advisor IQ article: https://www.financialadvisoriq.com/c/4152344/534334/considering_jumping_ship_from_another_here_ensure_smooth_sailing?referrer_module=issueHeadline
Father and son breakaway team 'poke the bear' by suing Merrill Lynch upon exit
Father and son financial advisors have filed a lawsuit against Merrill Lynch as part of a one-two punch that began with them breaking away and taking their clients and assets with them.
Michael and Philip Bradshaw petitioned the U.S. District Court Southern District of California on Jan. 24 for a declarative judgment to effectively block any attempt by Merrill Lynch to seek an injunction in state court.
The same day, they also filed an arbitration claim with FINRA – the Financial Industry Regulatory Authority – over the substance of their dispute. It involves a series of restrictions Merrill imposes on brokers who try to leave the firm.
To keep reading head here: https://riabiz.com/a/2023/3/1/father-and-son-breakaway-team-poke-the-bear-by-suing-merrill-lynch-upon-exit-a-risky-move-experts-claim-but-potentially-a-brilliant-out-of-the-box-approach-to-keep-their-clients
Kupfer Named Finalist in the Prestigious Wealth Management Industry Awards for DealQuest Podcast
Kupfer, LLP, a leading law firm in the wealth management industry is thrilled to announce that it has been chosen as a finalist in Wealth Management's Industry Awards, affectionately known as "The Wealthies," in recognition of its innovative DealQuest Podcast special series, "M&A Talk with Leading RIA Aggregators and Integrators.”
WealthManagement.com will honor the firms, individuals, and organizations making an exceptional impact in supporting financial advisor success at its 9th annual Industry Awards this coming September. The winners. – chosen across 92 categories – are selected by an independent panel of judges. The awards will be presented at a black-tie gala on September 7 at the iconic Ziegfeld Ballroom in New York City.The firm's nomination comes in the wake of a highly competitive selection process, with finalists being chosen from over 1,000 entries submitted by 413 companies. Kupfer founding principal, Corey Kupfer stated: “Frankly, although we are often encouraged to do so, we don’t apply for many awards as we stay focused on serving our clients. We have been impressed by what WealthManagement.com built over these last 9 years, however, and are thrilled to have been chosen as a finalist our first time applying.
The DealQuest Podcast, hosted by Corey Kupfer, leading RIA attorney, strategist, negotiator and deal-maker provides a platform for insightful discussions and thought leadership in the realm of mergers, acquisitions, and other types of deals. The nominated special series "M&A Talk with Leading RIA Aggregators and Integrators" offered invaluable insights from the CEOs and top executives of some of the most active acquirers in the industry into the strategic aspects of M&A activity, the different models available to advisors and the state of the deal market, contributing significantly to the advancement of industry knowledge and expertise.
Kupferes extends its gratitude to WealthManagement.com for this prestigious nomination and looks forward to the upcoming awards ceremony in September.
To view the full list of finalists, please visit HERE.
About Kupfer
Kupfer, LLP is a leading law firm assisting breakaway brokers to transition to independence, creating new independent RIA firms, supporting those firms to grow including through M&A, and working with them on succession and exit. The firm is led by Corey Kupfer, an experienced strategist, negotiator, and dealmaker with more than 35 years of professional experience. Kupfer is dedicated to assisting businesses and financial advisors in achieving their full potential through innovative strategies and solutions.
DEALQUEST PODCAST – Claire O’Keefe
M&A Talk with Leading RIA Aggregators and Integrators:
Claire O’Keefe of Cerity Partners
Claire O'Keefe with an impressive resume in the wealth management industry is a Partner and the Head of Partner Development in Cerity Partners’ Chicago office; she also serves as a member of the company’s Executive Committee. Prior to her roles at Cerity Partners, Claire held leadership positions at two wealth management firms, where she was responsible for:
Strategic planning
Client Development
Advisory services to affluent individuals, business owners, executives, and nonprofit organizations.
Claire is a strong advocate for philanthropy and prides herself in being involved with many charitable organizations as well as having served on the Henry Viscardi School Board of Trustees.
A PHILOSOPHY TO DOING MERGERS
Cerity Partners views themselves as a partner and not an aggregator thus believing in bringing together like-minded professionals to benefit colleagues and clients. Their vision is to build a global professional services firm for wealth management, both for workplace wealth management for executives and high-net-worth clients.
When considering potential new partners, they look for key areas of alignment, including but not limited to:
Culture
Target clientele
Value proposition
Business model
BUILDING A NATIONAL FOOTPRINT
In order to build a national footprint and brand recognition, the distinction of integrator or aggregator is important in terms of their growth, exit, and funding strategy. Cerity Partners is an integrated firm, meaning they have:
One brand
One technology stack
Equal payroll and benefits for all colleagues
Using this model ensures they are building a national footprint and brand recognition. When they acquire other firms, they integrate technology, data, and operations but do not force or accelerate integration, this in turn prioritizes a consistent colleague and client experience. The consumption of colleagues is a day-one priority, while technology integration can take longer as they make sure to map data and user requirements.
THE IMPORTANCE OF HAVING A VISION, MISSION, AND VALUE PROPOSITION
Part of building recognition for your firm is having a mission, a vision, and a value proposition:
Mission: By having a solid mission, your firm and clients are aware of what you can do for their business, and exactly how you will achieve that for them.
Vision: Setting your vision is effectively the blueprint for how you want your firm to approach business and allows for you to set a clear mission.
Value Proposition: This is arguably the most important aspect to set in order to attract clients. Value proposition offers customers what distinguishes you from competitors.
With well over 800 colleagues and serving approximately 15,000 clients across 20 markets, Cerity Partners manages around $65 billion in assets. While these are very impressive numbers, Cerity Partners prioritizes forming relationships with remarkable people over the number of completed deals. This aligns with their mission, vision, and value proposition.
All of this combined allows Cerity Partners to be very attractive to specifically G2 advisors.
FACING A MARKET DOWNTURN
I’ve said many times, the variation of the market is one of the truths in business. We’ve discussed in the past of the importance to not rely solely on the market or the news cycle to dictate your deals. (For more: listen to Episode 220, “The Art of Balancing Market Conditions and Client Motivations in Deals.”)
For Cerity Partners, Claire emphasizes that they are looking for a full merger, and not partial investments. They allow partners to take equity as part of the merger and are flexible on the mix of cash and equity in the deal. Clerity remains transparent with the valuation structure and considers expenses that would be eliminated after the merger to increase the EBITDA and apply a multiple to it. They believe in the growth of opportunity in coming together.
Despite the market downturn, their firm's interest continues to be at an all-time high due to this approach to mergers. Cerity Partners continues to invest in the resources and infrastructure required to optimize their pillars and is quick with experimenting and changing things to continue growth.
For my full discussion with Claire O’Keefe, and more on the topic:
Listen to the Full DealQuest Podcast Episode Here
FOR MORE ON CLAIRE O’KEEFE AND CERITY PARTNERS:
http://www.linkedin.com/in/m-claire-o-keefe-305b539
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!
DEALQUEST PODCAST – Stan Gregor
M&A Talk with Leading RIA Aggregators and Integrators:
Stan Gregor of Summit Financial
CEO of Summit Financial, Stan Gregor, is a seasoned business leader with over 30 years of experience in various industries including banking, investment banking, insurance, and wealth management. Throughout his career, Stan has been involved in the acquisition and integration of large and complex businesses in these industries. This has led to his history of improving their profitability, performance and returns for shareholders.
A UNIQUE VALUE PROPOSITION
The independent advisor industry has undergone many significant changes in recent years, with many options available out there for advisors seeking a firm that caters to their own specific needs. With Summit Financial, Stan recognized this evolution so he adapted his business strategy to stand out amongst the other firms, while remaining current with the evolution of the industry.
Stan describes Summit's approach as one that combines support, but offers independence. Advisors are given the autonomy to operate their own businesses, in turn providing their clients with the level of service they desire, but they also allow access to a team that offers support and assistance in their day-to-day operations. Furthermore, Summit's partnership model is distinctive and superior, with partners coming together on a regular basis to share their own experiences and act as advisory committees to one another. This culture of collaboration is what sets Summit apart and is a leading valuable benefit for advisors who have been with the firm for an extended period of time.
SUMMIT FINANCIAL: AGGREGATOR? INTEGRATOR?
In the RIA industry, there are two main business models: The aggregator model and the integrator model. The aggregator model is where a company acquires smaller businesses, while operating them separately the only focus is on generating profit and revenue without integrating them into the larger company. In contrast, the integrator model emphasizes on equipping advisors with the necessary resources and tools to work independently, while still having access to the regulatory compliance and technology infrastructure of the larger parent company. Many firms will operate as a hybrid, opting to pick the parts of both models to create an amalgamation that suits their own individual firm’s needs.
Summit Financial would fall under the full integrator model, where they simplify the things that advisors don't want to do, such as having their own ADV, or dealing with technology and compliance. Summit Financial also provides:
An investment team
Insurance agency
Servicing arm to take non-client-facing tasks off the advisor's plate, while still allowing them to use their own brand
The culture of the company is one of collaboration and partnership. Stan holds firm in his belief that if Summit Financial is not adding value to an advisor's business, the advisor should take an exit.
The honesty is appreciated with this approach, as many times in business, the focus can become overly superficial and only emphasizing solely on financial figures without taking the consideration of how the team functions together as a cohesive unit. I agree that a positive company culture is vital, and making sure that everyone is content – so they can excel – should be a top priority.
FLEXIBILITY & COMPANY CULTURE
The approach to flexibility is one of the key components to ensuring Summit Financial stands out in the comparison with other firms. Stan highlights that the company's business model is adaptive and distinctive, allowing firms to maintain their own branding and for employees to come and go as they please. As they have the ability to shape and adapt the company to their specific needs, this approach allows for a more personalized experience for both firms and employees alike.
This approach contrasts greatly with other, larger companies that often make 100% acquisitions, absorbing all aspects of the acquired businesses. With this method of acquisition, the total absorption of the acquired company yields the result of often the loss of identity and culture.
SUPPORTING GENERATIONAL GROWTH
There are countless unique opportunities and challenges that arise when working with second (G2) and third (G3) generation business owners. Stan acknowledges that these individuals may have different interests and goals, with some more interested in growth opportunities while others are looking to cash out sooner.
Through their business model of only buying a minority stake in a business is one of the ways that Summit addresses these challenges. This allows G2 and G3 members to continue to grow and run the business, while still having the resources and support provided by Summit. Additionally, Summit has experience working with G2 members who are loyal to the business but may not have the means to take over the business on their own. In these cases, Summit will make an investment in the seller and also provide financing for the G2 member, allowing them to acquire the business without incurring a significant amount of debt.
Summit's primary focus is on assisting G2 and G3 members grow their businesses organically. Stan emphasizes that they do not aim to make money in the financing aspect of the deal and that their model is designed to be simple and fair. Stan is sincere in his dislike for the "nickel and dime" mentality that is a commonplace in this industry, citing that Summit's approach is meant to be more beneficial and transparent for all involved parties.
THE SUMMIT FUNDING STRATEGY
Regardless of their model, all firms, whether it is a full integrator, a full aggregator, or a hybrid, have their own unique funding strategies. Stan explains that all financing for Summit derives from the personal capital of its partners and that the company does not have any loans from banks or private equity. For larger transactions, Summit will utilize the services of Merchant Capital, of which he is a shareholder.
It is crucial that a firm is financially smart. Stan believes that the most intelligent way to run Summit is by:
Limiting its funding to not include private equity
Limiting its funding to not include loans from banks
Keeping a healthy amount of cash on hand
Avoiding taking excessive risks
Summit being in business for 40 years has proven this strategy to be effective which Stan believes could only be achieved by being financially savvy.
For my full discussion with Stan Gregor, and more on the topic:
Listen to the Full DealQuest Podcast Episode Here
FOR MORE ON STAN GREGOR & SUMMIT FINANCIAL:
https://summitfinancial.com/
https://summitfinancial.com/team-members/stan-gregor/
https://www.linkedin.com/in/stan-gregor-2113465/
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!
DEALQUEST PODCAST – Marty Bicknell
M&A Talk with Leading RIA Aggregators and Integrators:
Marty Bicknell of Mariner Wealth Advisors
CEO and President of Mariner Wealth Advisors, Marty Bicknell, drives the strategic direction for the firm, coming up with innovative solutions to help meet the needs of Mariner’s clients. Marty has wide-ranging personal and professional experience with closely held family businesses and their exclusive complexities. As a result, he is often sought out as a mentor by other successful entrepreneurs and is a recognized leader in wealth management.
In 2006, Marty along with seven others founded Mariner Wealth Advisors with the leading goal of keeping the client at the center of the business. Marty’s vision was to build a firm that could simplify their clients’ lives by allowing all the needed resources under one roof. Marty and Mariner’s promise is to always put the clients’ interest first – a promise they haven’t budged from in their 17 years of business.
I’ve had the unique pleasure of following the growth of Mariner since the beginning, so having Marty’s experience and insight available to the DealQuest community is such an honor.
THE INCEPTION AND CORE OF MARINER WEALTH ADVISORS
Coming from a background of the wirehouses, that’s all Marty knew. He spent the first 16 years of his career with A.G. Edwards, which is an incredible firm with an incredible culture that, too, went through its own changes; ones that greatly impacted many advisors, including Marty. At this point, he needed to figure out his next steps and was fortunate enough to come across two people from Fidelity that assisted in educating him on what the RIA industry was. As soon as he had a good grip on the fiduciary model and the RIA industry, he knew it’d be an excellent fit for his team, his clients, and his own personal goals, so he “jumped right in.”
Marty and his fellow founders started Mariner Wealth Advisors with a simple philosophy that still stands today:
Clients first. No exception.
Associates second.
Shareholders last.
This philosophy became important to Marty and the Mariner team due to the fact that many firms today tend to prioritize shareholders a tad too much, but for Marty, he wanted his clients to feel their needs and wants were always met; never leaving the question if Mariner is on their side, or not.
FROM ORGANIC GROWTH AND ONBOARDING TO M&A INTEGRATOR: WHY MARINER SWITCHED
Looking at the wirehouse model, it isn’t uncommon to find a “corner office guy” to be the best business development professional, but lacking on the advice side. Looking elsewhere in the office, you’d find the opposite is true for someone else.
For many years Mariner Wealth’s growth consisted of a combination of organic growth and onboarding new advisors, but not from doing M&A deals.
With a deep dedication to their core philosophy, Mariner focused on client outcomes, differing from the model within the wirehouses. Mariner got their start as an in-house tax practice. In addition to that, Mariner also solely owns their Insurance General Agency. All of the many steps of forming Mariner allotted Marty and the team to bring to the table a great deal of diverse and new things, allowing them to perform greater for their clients.
Following approximately 10 – 12 years of operating primarily under organic growth, the studies began to show that organic growth was actually a lot lower, and slower. If you look at the average firm – below the big aggregator firms – you actually begin to see that growth is sitting at or under 3%.
Compiling the staggering growth statistics for firms that pursued deal-driven growth, Marty’s philosophy for Mariner, and what he and his team want to achieve for Mariner’s clients, making the switch to the integrator model began to make sense.
WHERE THERE IS FAILURE, THERE IS A CHANCE FOR GROWTH
The model switch was not an overnight, quick decision for Marty and the Mariner team. The switchover actually began in 2011 with Mariner’s first acquisition deal. Marty frankly states that it was an opportunistic deal that ultimately just did not work out. It was a beneficial and financially sound deal, but culturally it was not a good mix. This in turn resulted in Mariner having to ask their three largest revenue producers to leave the organization, taking their clients with them.
This failure was not without its lessons in growth. It made Marty take a step back and reevaluate. He learned what their non-negotiables were for a deal. Those non-negotiables in a deal have not faltered much if at all since that first unsuccessful deal.
THE HOW OF THE SWITCH
In 2012, Mariner used this new knowledge and successfully completed four acquisitions. From 2012 to 2018, Mariner had a holding company approach, with approximately 20 firms that Mariner owned, on average, 70% of; wherein they kept their own brands. This initial aggregator approach allowed Mariner to enter into the acquisition space. The problem which existed was that they weren’t getting any synergy; they were simply sharing 70% of the profits of the firms.
In 2018, Mariner began the process for the transition from that aggregation approach to an integration strategy, starting the One Mariner Project. The One Mariner Project involved:
Buying out minority owners
Brands transitioning to the Mariner brand
Operating under one ADV
The acquisitions from 2019 onward were full buyouts, which is an impressive feat considering these deals were entirely self-funded until June 2021, when Mariner brought in their first private equity partner.
INTEGRATOR VS. AGGREGATOR
For Marty and Mariner Wealth Advisors, the philosophy of “clients first” meant their firm’s growth relied on how they could provide their best for their clients. This is not to say that other models don’t or can’t work, as we know many firms operate under various models to serve their clients in their own best way. The takeaway from here is being aware what will work best given your unique business goals and target clientele.
With that in mind, I hope what you take away from this series includes some actionable next steps you can use to determine which wealth management model – or combination of models – works for your business, your clients and you in general. Also with the new understanding one the featured firms might be a good fit for you.
For my full discussion with Marty Bicknell, and more on the topic:
Listen to the Full DealQuest Podcast Episode Here
FOR MORE ON MARTY BICKNELL & MARINER WEALTH ADVISORS:
https://www.marinerwealthadvisors.com/
https://www.marinerwealthadvisors.com/our-team/marty-bicknell/ https://www.marinerwealthadvisors.com/our-team/marty-bicknell/
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!
DEALQUEST PODCAST – Jim Dickson
M&A Talk with Leading RIA Aggregators and Integrators:
Jim Dickson of Sanctuary Wealth
In 2022, the top funded aggregators and integrators completed the vast majority of the RIA M&A deals. While it’s a wondrous time for the space due to the variety of different buyers, more funding, and more private equity, there is also room for a greater deal of confusion.
This week’s guest on the DealQuest Podcast RIA Series is Jim Dickson of Sanctuary Wealth. As an “entrepreneur at his core”, Jim joins me to talk about the Sanctuary Wealth model, his role as an aggregator, leaving Merrill Lynch, the ongoing frustrations many have felt in the wirehouses, and the different characteristics of aggregators and integrators that appeal to a variety of people. We also dive deep into some of the new opportunities in this market, and go over what they mean for advisors.
SANCTUARY WEALTH
Sanctuary Wealth is a nationally recognized pure aggregator firm. Their core operational principles revolve around helping people grow and autonomy. Everyone sits under the same ADV, but in turn each retains its own brand. Sanctuary Wealth will breakaway a lot of firms from the wirehouses, and later take a stake in them.
In ending, the understanding is there is no one way to do M&A. The sheer variety of ways firms are approaching it shows that it is all hinging on with whom you fit and work the best with. In choosing the right firm for you will ensure the rest falls into place. Listen to this and the other episodes in this special series to help you make that decision.
For my full discussion with Jim Dickson, and more on the topic:
Listen to the Full DealQuest Podcast Episode Here
FOR MORE ON JIM DICKSON & SANCTUARY WEALTH:
https://www.sanctuarywealth.com/
https://www.linkedin.com/in/jim-dickson-b02934162/
https://twitter.com/JDicksonSW
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!
DEALQUEST PODCAST – Bob Oros
M&A Talk with Leading RIA Aggregators and Integrators:
Bob Oros of Hightower Advisors
Bob Oros is Chairman and CEO of Hightower Advisors, a national wealth management firm that focuses on empowered investing for independent-minded financial advisory businesses to drive growth and assisting clients to achieve what they call “Well-th Rebalanced.” Bob, who has more than 25 years of experience, has spent a great deal of his RIA career at large custodians, such as Schwab and Fidelity, recruiting, retaining, and supporting advisors. In 2019, Bob joined Hightower and since then the company has completed a number of acquisitions of high-profile independent wealth management firms, expanded its own operational and business acceleration services for advisors, and achieved consistently strong organic growth.
While serving as Chairman and CEO of Hightower, Bob is deeply involved with several social improvement organizations. He sits on several boards, including The Chicago Mental Health Association and EEqual, a not-for-profit focused on providing opportunities for students who are battling homelessness. He is very passionate about the cause of financial literacy. He enjoys speaking to student groups, as well as contributes frequently to panels and thought leadership pieces.
In his youth, Bob had no superhero ambitions; however, he definitely had no issue working hard for what he wanted. A self-denominated “hustler” as a child, Bob would wake up at 5:30 AM to work a plenitude of odd jobs around his neighborhood, including but not limited to lawn-mowing and paper routes. Clearly, his entrepreneurial mindset began at an early age.
THE EVOLUTION OF HIGHTOWER
Hightower Advisor was founded in 2008 and the company was a revolutionary idea. Over a decade before Bob joined Hightower, back when they were not in the M&A business, I had the pleasure of coming in and doing a full day’s white-boarding session with the executives at the time to check the landscape of entering the business of M&A.
Following Hightower entrance into the acquisition market, my firm was involved in some of their early deals from the sell side, representing several of their affiliated advisors in the sales of their businesses to Hightower. It has surely been interesting and a real pleasure to see where Bob has taken the company. With Bob’s leadership skills, Hightower has made an impressive 35+ deals.
Bob’s belief in flowing with the tides and evolution has in part made the 15-year-old company so stable. The RIA world is still relatively in its infancy, so it’s going to be ever-changing. Bob’s commitment to keeping Hightower relevant and evolving supports Hightower’s growth prospects for long into the future.
HIGHTOWER’S DEAL TEAMS
Hightower completed its first successful deal in 2016. While Bob has not yet joined Hightower, it is still a very important moment in the Hightower history books, but getting to the point of making 15+ deals a year with three deal teams is no simple feat. This takes clever strategy, experience, and operating deliberately. Bob impresses the serious nature of the industry and urges buyers and sellers alike to not take it lightly. In turn, if you are not fully prepared with not only enough capital, but the right know-how, it’s very easy to do a lot of damage.
For Hightower, taking the industry seriously has allowed the company to:
Divide into multiple distinct deal teams, led by a deal-lead
Have many analysts supporting the distinct deal teams
Have an internal sourcing team, allowing up to 50% of their volume to be created internally
Have a team making outbound reach outs
Bob cannot stress enough the importance of being purposeful in the direction you choose. Dealmaking is not for everyone. It is not something everyone can, or should, do. If you are going to take part in the industry, you are taking on an obligation to become diligent and educated in your deals.
FUNDING HIGHTOWER
One of the most important factors in growth and stability has to be the source of capital a firm has. If your capital source is weak, your business will be weak, ultimately making your deals weak. I have seen too many firms falter due to the unstable streams of capital. In 2018, Hightower was at a place where a fresh injection of capital was crucial; this resulted in Thomas H. Lee Partners becoming the majority investor in Hightower.
Choosing capital partners is crucial. When doing so, you want to be mindful of whom you are choosing. Making the incorrect choice for capital partners or investors can easily turn potential growth into a stalemate. When choosing your investors, Bob suggests choosing someone who is:
Experienced and knowledgeable in the industry
Asks great questions
Gives great input
Willing to help make sure the company’s decisions are sound decisions
Due to Hightower’s calculated and disciplined choice in private equity in January 2018 and the growth that helped facilitate thereafter, by December 2020, Hightower was able to do their first equity recapitalization, which in turn can become a useful tool for building future growth.
Keeping all of the above factors in mind, Hightower knew that they had a very prosperous opportunity and they wanted to be entirely sure they had the right capital structure to support all the upcoming growth opportunities. That structure included:
A secondary where Hightower recapitalized into a continuation fund
Thomas H. Lee Partners continued to be Hightower’s primary partner
Also bringing in 11 passive institutional investors to offer fresh growth capital
This structure mentioned above has been incredibly beneficial and sound to Hightower’s strategy of driving leading organic growth. For Hightower – deals aside – the most valuable companies are the ones that can generate consistent, leading same-source sales growth. Bob truly believes Hightower is that company.
HIGHTOWER: AN INTEGRATED AGGREGATOR?
On the topic of Aggregator versus Integrator, Bob brings up what he calls “The Curve of Conformity,” which asks the question: How conforming does the buyer make the seller?
Within this “Curve of Conformity,” a low-conforming buyer would mean the seller keeps its ADV, branding, etc., etc. This is typical for aggregators. Whereas, on the other side of the curve, with a high-conforming buyer, you are conforming to become them (one ADV, one brand, one tech stack, etc.) – which is more aligned with an integrator model.
Following Bob’s conformity curve, Hightower sits somewhere right in the middle:
There is some conformity
They operate under a single ADV
There are things they do for every one of their businesses – HR, Finance, Compliance, etc.
Single – but FLEXIBLE – technology stack
Brand Agnostic some firms have the Hightower Brand, some have a “Powered by Hightower”, and some have a brand not branded to Hightower at all. Branding is your choice and is not forced. “Whatever creates the most value is what you should do.”
Autonomy of money management
The conformity is in “as Bob describes” the back-office areas. The client chain carries the individualism and is where they try to keep the autonomy.
Hightower does not have a particular view on how you manage money. This means, the capability is available to help their advisors if they want to turn that over, however, this is not a requirement, in turn it really balances out to most that do not need that help, and to the few that do. Neither is right or wrong for Hightower.
Client satisfaction is of the utmost importance to Hightower’s “integrated aggregator” model, and an advisor having the freedom to serve their clients in the way that best fits both parties is the key to how their company functions. By doing things in this manner, Hightower’s goal is to unlock value by giving the access to scale, in turn access to new capabilities that can be value-creating for their client.
To determine where on the curve you belong, Bob suggests to sellers they come to the table with their top two non-negotiable items; without narrowing it down the lists are too long and impossible to work with.
THE HIGHTOWER TARGET
Hightower is done with wirehouse lift-outs meaning no more breakaways. Bob does not think it’s a bad strategy but Hightower is more focused on their acquisition strategy. Their transaction of established businesses does not really mesh well with a wirehouse lift-out, so the majority of their deals are standalone RIAs with some IDB deals.
Hightower also does not take into consideration geography or size. While their history suggests their deals tend to skew on the larger side, they really do not discriminate based on size; there is no artificial number they’re looking for. The same is true for geography.
What they’re looking for are great leaders. This is because Hightower is not attempting to come in and create a full conformity take-over; they’re coming in to build a great leadership team, take some things off their proverbial plate, and power them with new capabilities.
A bull’s-eye target for Hightower is a relationship with great leaders and leadership teams.
For my full discussion with Bob Oros, and more on the topic:
Listen to the Full DealQuest Podcast Episode Here
FOR MORE ON BOB OROS AND HIGHTOWER ADVISORS:
https://www.linkedin.com/in/boboros/
https://hightoweradvisors.com/about-us.html
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!
DEALQUEST PODCAST – David Canter
M&A Talk with Leading RIA Aggregators and Integrators:
David Canter of Bluespring Wealth Partners
Musician and President of one of the nation’s premier RIA firms, David Canter, is focused on positioning Bluespring Wealth Partners as one of the premiere acquirers in the industry. He is very hands-on with operations, including overseeing day-to-day operations and identifying new areas for growth and opportunity. David has worked in multiple aspects of the RIA space, previously serving as Executive Vice President and Head of the RIA segment for Fidelity Clearing & Custody Solutions and now serving as President of Bluespring Wealth Partners.
Although David has been in the RIA space for years it was not his true passion. He had his sights set on the entertainment industry – training at one point as an actor – and loves music and playing his guitar. Breaking into the entertainment industry is complex; beyond acting as an extra, he found that the work just wasn’t there. He quickly had to realize there were other avenues he could take in terms of his career, while still keeping the arts as a deeply held passion.
Once he made the decision to focus himself elsewhere, David was drawn to law. The lure of the courtroom was undeniable to David, and he went on to pursue a Juris Doctorate from the University of Baltimore. He loved the courtroom and trial work, and currently holds his FINRA Series 24 license, as well as being a California State Bar member.
THE BLUESPRING ATTRACTION
David has done it all in the industry, but what attracted him the most to Bluespring Wealth Partners after nearly three decades in the RIA space is simple: He wanted a new challenge. For David, Bluespring Wealth Partners wasn’t just a challenge, but a fitting piece to the next chapter in his career. It allowed him to be entrepreneurial, but simultaneously intrapreneurial. This balance is important because it allows David many freedoms he wouldn’t otherwise have, and also the opportunity to build the company into something new. Bluespring Wealth Partners is now a 29-firm platform spanning 16 states – and actively growing. The firm will do 9 acquisitions by the end of 2022, but not just for the sake of doing them. Their acquisition plan is focused on solving the problems of their “partner firms”, as they call their network of firms.
AN INFORMED CHOICE
In the RIA space, getting to the starting line can involve making many choices and decisions. David believes in choice, and not merely having the choice, but having an informed choice. David understands that Bluespring Wealth Partners won’t be the perfect choice for everyone; however, he wants the DealQuest listeners to know what Bluespring does have to offer.
Bluespring Wealth Partners can be best described as a practice management consultancy at its core that happens to be in the strategic M&A space. It is the sole responsibility of practice management consultants to aid offices and firms with improving and developing efficiency within their workplace and in their business operations. That’s the bulk of Bluespring Wealth Partners’ approach: Addressing the problems their acquired “partner firms” and establishing new problem-solving efficiency via the network of firms under Bluespring.
ONE SIZE DOES NOT FIT ALL
Two of the most commonly used words in the RIA space are “aggregator” and “integrator”. Some firms operate as either pure aggregators or pure integrators; however, there are more firms that pick elements of each model to define the definitive model that is best for them. There is a reason all these models exist, and that’s simply because no singular model works for every firm, client, investor or entrepreneur.
Again, choice plays a role of the utmost importance in the decision-making of which model will be best for any advisor and under which model Bluespring will operate. The choices in the marketplace that David layout are:
Choice 1: Do nothing. Keep on plowing forward as you always have, and hopefully, fulfilling your career.
Choice 2: De-risk. For example: A firm has a retiring partner, so to pull some capital, they find a minority interest capital partner that is not going to take control, but merely provides some capital.
Choice 3: Find a pure capital partner. For example: They buy 50%+, and you obtain a capital partner that’s not going to provide other shared services or support aside from the capital.
Choice 4: Entrepreneurial model (on the aggregator side of the spectrum) . Keep your brand and the acquiring company will take at minimum 51% interest in your firm and build a flexible deal structure. By doing this, the focus is preserving the entrepreneurial model and providing various services to help propel your firm forward into growth within the network of acquired firms.
Choice 5: Subsume into another brand (more commonly known as the integration model). You become the larger brand, forgoing your independent brand identity for the growth of the whole institution. The larger firm will guide the smaller acquired firms in their business activities and take over all the services other than, having the advisors continue to look after their clients.
Choice 6: Internal succession to a G2. David notes that in their initial research for founding Bluespring, they found that founders mostly prefer this route; however, the biggest obstacle is finding the capital. G2s would say they would like to pay out of cash flow, but ultimately, it’s the entrepreneur taking the risk and it’s their cash flow that will fund that transition.
Choice 7: A combination of all of the above. Choosing the aspects of all the available models to build a Frankenstein model that works best for your goals, your future, and what you want to do with your firm.
The above seven choices on how to proceed to allow a firm to formulate how they will move forward with their M&A deals. Bluespring Wealth Partners choose to primarily function as Choice 4, the Entrepreneurial Model. They recognize the benefits of all the models but opt to borrow practices from other models to give their entrepreneurs the best of all worlds, thus allowing over half of their firms to be standalone RIAs.
Keep their brand (For example: Capital Planning, A Bluespring Wealth Partner)
Keep their own ADV
Keep their client experience
Bluespring provides capital
Take the defensive tasks off the advisors' plate ( HR, benefits, financial implementation and reporting, procurement, etc.)
THE VALUE BLUESPRING BRINGS
David affirms they do not take about 90% of opportunities that cross their path. As to why they pass, Bluespring is very transparent with those opportunities. By being particular in the opportunities they take, Bluespring has built an elite and strong network of firms thus offering immense value to the firms that Bluespring do acquire.
One attribute of Bluespring’s consultancy is that even when they choose to pass on an opportunity, they are still offering their advice and consultation to these firms to help them better grow, irrespective of whether Bluespring chooses to bring them into their network or not. Bluespring’s consulting really begins long before they even decide to enter into a transaction.
If Bluespring does choose to go forward with a transaction, there is a great deal of due diligence that they are completing by way of taking a consultative approach to how they are going to do business together, also how they are going to structure transactions so that the right benefits, incentives, and synergies can be found.
Once a firm enters their network, they provide a multitude of resources to assist in their community network growth:
A business consulting group
Marketing assessments
Large technology infrastructure
An M&A team to help with sub-acquisitions
Access to capital, backed by two private equity firms -- majority-owned by Warburg Pincus, and Oak Hill Capital
A training program for G2s: The G2 Successor Academy, a simulated 2-year course wherein G2s are educated and trained through guest lecturers, peer study, etc.
CHOOSING WHAT WORKS FOR YOUR SUCCESS
There is a reason why there are so many various models and combinations of models. At the end of the day, choosing your model is about you and your goals. With Bluespring, David ultimately wants to operate as a culture-driven community. Allowing their acquisitions to remain primarily autonomous, while gaining the support of Bluespring and their resources.
There is no singular superior model; however, each firm will always believe they have found the key to making a successful business. That is true in a lot of ways because success is very abstract; the business is successful because their model works for them, not because they have the superior model.
Reviewing choices, building a model for their needs and goals, and understanding what opportunities should be taken and also those that shouldn’t, are all keys to making Bluespring’s model work successfully. They will be some of the keys to helping build your success, as well.
For my full discussion with David Canter, and more on the topic:
Listen to the Full DealQuest Podcast Episode Here
FOR MORE ON DAVID CANTER AND BLUESPRING WEALTH PARTNERS:
https://www.bluespringwealth.com/advisor/why-bluespring
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!
DEALQUEST PODCAST – Pat McClain
M&A Talk with Leading RIA Aggregators and Integrators:
Pat McClain of Allworth Financial
Pat McClain, Senior Partner and Co-Founder of Allworth Financial, is much more than his company. He is distinguished in the RIA industry, for more than two decades, he has been co-hosting Allworth Financial’s Money Matters, which is one of the nation’s longest-running financial topic radio shows and podcasts. He also has served as a keynote speaker for a multitude of financial conferences around the nation. In 2021, Pat was named one of the 10 “Icons and Innovators” by InvestmentNews. Pat’s expertise has contributed to Allworth Financial being ranked 23rd on Barron’s 2021 Top 100 Independent Advisors list. While under his and his partner Scott Hanson’s leadership, Allworth Financial has grown to over $15 billion in assets.
As the RIA space grows, the options for buyers and sellers can get a tad clouded. As an industry leader, Pat fully understands just how make-it-or-break-it the market is today. Growing up in a socioeconomically modest, large Irish family, he jokes that when he grew up he wanted to be “not picked on,” but his serious desire was to, like his father, go into business of some sort.
Pat reminisces on his first commissioned job as a child through his father. They would go to hotels that were being remodeled and acquire all the pictures and paintings that were to be replaced. Then, together they would go to swaps or flea markets to resell the pieces for $2-3 each. His commission was generous, he says, at 25¢ a picture. This was a good deal for a child not even 10 years old!
As Pat grew up that dealmaker mindset ran steadfast. In junior high, he ran a cactus stand for a man at the same swaps and flea markets he would attend with his father. After 6 months, the cactus stand owner went on vacation and never returned, at this time Pat was positioned to buy out the man’s entire inventory and take on the business for himself. This adolescent cactus stand became Pat’s first business.
ALLWORTH AND A MODEST START
Before Allworth Financial, Pat and fellow now-Co-Founder Scott Hanson worked at a different firm in neighboring cubicles. Three decades ago, Pat and Scott decided to leave that business in hopes of establishing their own firm, Hanson McClain Advisors. Pat rolled out his $10k IRA for 60 days to fund the initial capital for the business, then he and Scott were able to lease an office space from an accountant. They then began buying the bare necessities to get started. This was a modest start, but a start none the less with great potential.
In their company’s infancy, they began with a salaried advisor model and market and made the appointments for the advisors.
HITTING A RISK TOLERANCE WALL
As Pat and Scott grew their firm, they realized they had something special. As time passed, more and more interest began coming towards the pair, and they were starting to have to turn away offers due to hitting a risk tolerance wall. For Pat, he says at that point more money was clearly possible, but more money wouldn’t necessarily make his life better, however, less money would have.
Which is not often something many people think of when they are riding the wave of financial growth. Most people think the goal is to just accumulate as much money as possible, however, a good business person understands the risks that can be involved with consistently trying to accumulate more money than what is needed or can be handled, not just personally but within your business, too.
By taking a personal inventory of his risk tolerance, Pat was able to balance out his work and life to something he – and his family – are now happy with. His business seems to be happy with his choices, as well. In his words, “he quit running his business for cashflow, and started running it for value and for long-term capital appreciation.”
GROWING UP ALLWORTH FINANCIAL ORGANICALLY AND INORGANICALLY
In 2017, Allworth Financial sold a controlling stake to Parthenon Capital, a “private equity firm that partners with and invests in management teams and their companies,” per their own website. In 2020, Parthenon Capital sold off its $8 billion stake in Allworth Financial. Pat speaks highly of Parthenon, attributing this acquisition as “one of the best decisions we ever made.”
This major acquisition in 2017 by Parthenon allowed Allworth to grow significantly, and in Pat’s words, “brought a level of sophistication to our business that was beyond what we were doing, but not what we were capable of; they made us think about us being bigger than ourselves.” This push in the right direction allowed Pat and Scott to go from $2.4 billion in AUM to nearly $10 billion in less than a 4 years’ time. In late 2020, a new capital partner, Lightyear Capital, bought out Parthenon Capital, in turn adding great value to Allworth Financial.
Because of these high-value deals, Allworth Financial’s menu of offerings to clients has grown exponentially. They have made acquisitions, integrated key additional capacities, and other additions to their firm’s offerings. These include but are not limited to:
Integrated tax offerings – at times even for free to clients
Integrated in-house insurance desk
Integrated estate planning
Hired an estate planning attorney to review wills and trusts
Added 55 IP for tax laws harvesting
Direct indexing
SMAs
Highly robust Analytics and Insights Team
Pat estimates in great deal due to these previous deals, his firm’s offerings have expanded by at least ten-fold.
Many of these expansions and additions are not accessible to smaller firms, as they weren’t accessible to Allworth prior to their deals with Parthenon and Lightyear. Many of the small firms would love to have fully stocked departments and heads, but Pat states you have to get to scale in order for it to work. Although some owners can become overzealous and end up putting the cart before the horse, well-thought-out strategic growth can be very different. This goes back to one of the many discussions I have had about ego and dealmaking, and in turn not allowing your ego to run your business. In Pat and Allworth’s case, the growth has been very strategic and successful.
MERGERS & PARTNERSHIPS: A PERSONAL INTEGRATOR MODEL
In the RIA space, similar to many others, the term “mergers and acquisitions” is commonplace. For Pat, he prefers to call them “mergers and partnerships.” Pat prefers “mergers and partnerships” terminology because Allworth is always looking to bring in like-minded, aligned people who will become key partners in the firm’s moving forward, especially with being on the same wavelength in regards to:
Financial planning
Tax
Estate planning
Asset management
While M&As do not always seem like a very personal thing, Pat and Allworth Financial choose to take a more personal approach to their mergers and acquisitions, ensuring that the partnerships and deals being formed are all about mutual satisfaction and harmony.
With all that being said, Allworth Financial, at the core, operates under a primary integrator model. The key to Allworth’s integrator model is the whole business is shifted onto a common platform. The benefit to this model choice is two-pronged for Pat:
Free up time for partners and advisors, so they have the time to do what they like to do, IE: go out and generate business or meet clients.
It offers significant efficiencies through technology and processes.
EFFICIENCY IN BUILDING A CLIENT BASE
In a space where significant equity is being rolled over, Pat wants to ensure the deal is a perfect fit, and this can be exceptionally difficult to find a good fit for your needs. IE: The best marketers may not be the best financial advisors and vice versa.
Pat’s model splits the two: He has 26 marketers on a team with a call center that schedules the appointments for the advisors. While advisors are free to seek out their own clients – and the compensation for that may differ – he’s found that having a dedicated team in the call center that are setting up appointments for his advisors will keep the business running more fluidly for everyone involved.
This setup has also allowed Allworth the freedom to bring on many different types of advisors and personalities under their banner:
The ones that like to go out, meet the folks, have the golf meetings and drum up their own business
The ones that have no interest in doing all the socializing to make the connection and prefer the clients seek them out
The advisors who like any degree of balance between those two types
Granted, most of Allworth’s advisors choose to utilize the call center and have appointments assigned to them, having this freedom to accommodate different personalities allows for his firm to not restrict themselves on the types of clients they bring in thus in return broadening their potential clientele pool significantly.
INTEGRATING WITH PURPOSE
Pat has certainly been on many sides of the M&A scope. He’s been the employee, the small business, and the co-owner of a multi-billion-dollar company. He’s had the opportunity to see inside the nooks and crannies and inside all the closets within the RIA space, so it is safe to say his expertise is very well-rounded throughout experience.
For instance, Pat knows that no entrepreneur has ever thought, “Sign me up for a corporate job and give me an infrastructure that I need to report in to.” His belief is that Allworth’s main focus is to find out what people’s motivations are. Pat offers the perfect anecdote of a firm they recently integrated, wherein the owner’s personal goal was to go out and generate business, work the first couple of years with the client, and then step away and allow someone else to nurture the ongoing relationship. It’s important to Pat that his firm has flexibility for all its’ clients and has the ability to work with its’ clients, not against them, and certainly not force them into decisions or boxes they are not interested in.
For my full discussion with Pat McClain, and more on the topic:
Listen to the Full DealQuest Podcast Episode Here
FOR MORE ON PAT MCCLAIN:
https://www.linkedin.com/in/patmcclain/
https://allworthfinancial.com/
https://allworthpartners.com/
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!
DEALQUEST PODCAST – Matthew Cooper
M&A Talk with the Leading RIA Aggregators and Integrators:
Matthew Cooper, Beacon Pointe Advisors
Matthew Cooper has many accomplishments under his belt. He has been featured in Forbes Magazine, was a finalist for the “Individual Thought Leader of the Year & for the 2019 WealthManagement.com Wealthies Industry Awards and was the winner of “M&A Leader of the Year” for the 2022 WealthManagement.com Wealthies Industry Awards. Overall the most meaningful to Matthew is the business that he is a Founding Partner and President of, Beacon Pointe Advisors, one of the U.S.’s most successful RIA firms with locations spanning all over the country.
The RIA industry was not Matt’s first business calling. Following his college graduation, Matt began his career in the life insurance industry. Nevertheless, life has its turns, and that life insurance firm branched out into the RIA arena and, as Matt says, “Here we are.” Matt was responsible for working out deals when a client’s loved one passed away and this gave him an early start at deal making. Matt took the knowledge he had through his early education in deal making and built Beacon Pointe Advisors into what it is today, a remarkable RIA powerhouse firm and acquirer. Beacon Pointe Advisors has:
● 13,000+ clients
● 375+ on staff nationwide
● 220+ Designations and Certifications including CFA, CFP®, JD, MST
● Since March 2020 -- after bringing in Beacon Pointe’s first capital
partner -- completed 24 successful transactions
BRINGING IN A CAPITAL PARTNER
For nearly 20 years, Beacon Pointe had no capital partner. This changed when the company took on two underlying RIAs – one expressly for the inorganic growth side of the business – and discovered they weren’t as aligned as they had originally believed. Not only did the M&A RIA start to grow much larger than the other RIA, but several veteran shareholders were looking to exit and cash out. This misalignment paired with the timing of shareholders wanting to exit, caused Matt to see the natural need to bring in outside capital and merge the two RIAs together.
Alignment is extremely critical in M&A; if one facet is out of sync, the entire existence might come crumbling down like a house of cards in a downpour. Matt took on the challenge, recognizing the opportunity, and decided to bring in a capital partner to assist the firm in evolving.
Choosing the right capital partner can:
● Help you strategically
● Offer your business more value
● Lessen potential risks
● Accelerate growth
For Matt and Beacon Pointe, the right partner was KKR & Co.
IT’S NOT A HOBBY
As a dealmaker, Matt has been doing a great deal of heavy lifting through Beacon Pointe. To close even one successful deal – let alone the volume and caliber of Matt’s deals– it takes a great amount of knowledge, tenacity, and dedication. Matt emphasizes the importance of dealmaking as a conscious exercise; “It’s not a hobby,” he adds. Nothing could be truer.
For Matt to make such effective deals at the volume he does, he has a process that he sticks by:
● Keeping his mindset sharp on the deal, remembering “it’s not a hobby”.
● Having teams built and in place: one team to source the potential deals, do due diligence, and then build the LOI.
● Following the LOI, an integration team performs further due diligence and remains on-task post-close until the firms are fully integrated.
● Having all the department heads at Beacon Pointe be a part of the whole process.
● Knowing when to push, and when to ease up in the deal-making process.
FULLY INTEGRATED MODEL TO SERVE CLIENTS As previously discussed in episode 199 of The DealQuest Podcast, there’s debate within the M&A RIA space about aggregators versus integrators. Beacon Pointe is squarely on the fully integrated model side. This means:
● One brand
● One ADV
● One tech stack
● One company culture
The goal, whether you’re an aggregator or an integrator, is to limit confusion about potential targets with so many options and choices available these days in the RIA space. To help mitigate confusion, Matt has constructed a consistent story in the marketplace regarding Beacon Pointe’s all-wealth approach. This allows the numerous teams across the U.S. to have the flexibility and speak with their own voices while keeping on the agenda with Beacon Pointe’s strategy.
Matt’s approach to dealmaking is very people-oriented; this shows the importance of how well his people within the firm get along. Matt has three pillars he continues to focus on with Beacon Pointe:
● Access to institutional quality investments
● Life and legacy planning
● Impact initiatives
EQUITY-FORWARD AND MAJORITY INVESTORS
Another feature of Beacon Pointe’s integrator model is being equity-forward and doing only majority investment deals. Due to the need for cash flow at the time, Beacon Pointe’s first nine deals featured a 100% equity swap, going forward they now prefer to keep the equity between 20% and 60%, with the sweet spot for a typical deal being the high-30% range. These percentages result from the fact that equity is the most expensive consideration for them, however, equity is generally a very attractive incentive to investors, as the higher multiples and growth rate of Beacon Pointe help create greater enterprise value for all.
Depending on your goals and expectations, bringing in majority investors can be viewed as a positive or negative. Some attributes of bringing in majority investors can be:
● Founders can build their company to be a bit self-operating in which they can take a break from the daily operations by sharing responsibility with majority investors.
● Sometimes new ownership can add a fresh perspective, which might be precisely what a business needs to be reinvigorated.
● Each investor is likely going to have a series of people they trust on their end. They may very well want to bring those people in, which will offer a fresh perspective and expertise that you may not otherwise have had access to.
● For founders, a surface-level concern is the need to give up control to majority investors, however, Matt prefers to see and present it as giving a little to gain a lot in the long run.
ATTRACTING THE RIGHT CLIENTS UNDER A FULLY INTEGRATED MODEL
A major part of the debate between aggregator and integrator models is not only the route to the end goal, but also the type of clientele you are aiming to attract for your business while avoiding wasting time on deals that will not function well with your model. Beacon Pointe targets firms with assets ranging from $3 million to $2 billion for Beacon Pointe’s fully integrated approach. Beacon Pointe can offer the most value in the future to firms who fall within that target range.
Other attributes Matt seeks in potential firms:
● An earnest desire to be a planning-first type of person, or driven to get a planning-first attitude
● Those looking to not make a quick exit but remain for the long term; be it five, ten, or fifteen years. Their intentions are to make those upcoming years more prosperous than the previous.
● Those looking to be proactive and active in building a solid long-term operating company for the clients
● Primarily standalone RIAs versus wirehouse or IBD advisors.
The main intention should always be to create a structure to be attractive to the people that want to be involved. If you are not projecting yourself in an appealing manner, you are not going to garner interest, pure and simple. Beacon Pointe’s approach is to ensure that equity is split all around to achieve a long-term outcome that will satisfy all involved.
IT’S ALL ABOUT GROWTH
Growth can mean so much more than just referring to the expansion of your own business or your own personal achievements. The M&A RIA space has undoubtedly evolved and changed over the past decades. Currently, more RIAs are being founded than are being absorbed, so despite the consolidation caused by the aggregators and integrators the market is still expanding. Whether you are an aggregator or integrator, you lie somewhere in between, or are considering selling to one, you are part of a natural maturation of the RIA space that will continue for some time. One of the many elements that enable this industry to continue to expand and flourish is the healthy competition combined with increasing options for all that are involved. We appreciate Matt giving us further insight into Beacon Pointe, one of those quality options, and his view of the RIA industry and the deal market in general.
Listen to the Full DealQuest Podcast Episode Here
FOR MORE ON MATTHEW COOPER AND BEACON POINTE ADVISORS:
https://www.linkedin.com/in/mattcooperbpwa/
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!