PLANADVISER - November/December 2020 - 16

cover story
The entrance of new, large acquirers has played a big
part in the acquisition upswing. Hub International Ltd.,
headquartered in Chicago, has made numerous high-profile
deals for advisory practices in little more than one year. Its
recent acquisitions include Baystate Fiduciary Advisors Inc.
in November. And a year ago September, all in one day, it
acquired Inter-Mountain Retirement Partners Inc. (MRP),
StoneStreet Pearl River LLC, Washington Financial Group
and WhartonHill Advisors.
And Hub is not done yet. " We intend to do more acquisition
in the next year than we did in the past two years, " says
Adam Sokolic, chief operating officer (COO) of retirement
services. " We intend to 'keep the pedal to the metal.' "
The acquisitions fit into Hub's growth strategy of having
an integrated products and services offering for employers.
" We've frequently heard from our clients that they want to
have one benefits provider, " Sokolic says. Hub already has
a large client base in its insurance and employee benefits
businesses. " We look at [retirement and wealth management
advisory services] as the last leg of the stool, so we
can provide the entire range of benefits and risk services to
employers, " he says.
Adds Hub Director, Business Development Jim Owen,
" Clients want specialists in the different benefits areas, but
now they want the specialists to be under one broad roof. "
Employee benefits consultant OneDigital made an effective
entry into the retirement and wealth management
space in February when it acquired Resources Investment
Advisors LLC. That group's high-profile advisory practices
include 401k Advisors Intermountain, Bukaty Companies
Financial Services, Cafaro Greenleaf, Chepenik Financial
and Strategic Retirement Group (SRP).
The retirement and wealth management advisory space
is " the single most natural extension of our business, " says
Mike Sullivan, OneDigital co-founder and chief growth
officer. He says employers increasingly want to look at their
benefits holistically, rather than as separate silos. " Previously,
employers picked a benefits consultant and a retirement
plan adviser, and never the two shall meet, " he says. " It
turns out, that's not the best way for them to do it. It's much
better to take a holistic view of their overall benefits spend
and to craft a customized benefits solution that is best for
that employer and its employees. "
OneDigital foresees making more advisory practice
acquisitions imminently. " And if you flash forward three,
four or five years, I think you'll find that the stand-alone
retirement plan advisory firms will have much less market
share, " Sullivan predicts. " The silos are quickly breaking
down, and a more integrated approach is going to win in
the marketplace. "
Private equity firms also have started making deals in
the advisory space.
In June, CAPTRUST announced that GTCR LLC in Chicago
had taken a 25% minority stake in the firm. Shoff says
the advisory firm did the deal in part to reward longtime
CAPTRUST employees who have accumulated, via a merit
system, a substantial number of shares and who could liquidate
part of them in this deal. Some have become millionaires
as a result, he says.
" The second reason is that we've always used our own
capital to grow, " Shoff says. " But we believe that the opportunity
in front of us now to grow through acquisitions is so
huge that we needed more growth capital. "
The larger acquiring advisory firms that Advice
Dynamics Partners LLC works with tend to be privateequity-backed,
and they have a mandate to do acquisitions
as part of their growth strategy, says David Selig, CEO and
founder of the company, an M&A and valuation adviser to
wealth managers and asset managers, in Mill Valley, California.
The private equity firms' interest in the RIA business
stems largely from the fee-based RIA model, he says. " These
advisers have recurring revenue streams, and investors like
to see predictable revenue streams, " he notes.
" It's become really competitive among the private-equitybacked
firms to do acquisitions, and, as a result, the valuations
have risen, " Selig continues. " A private-equity-backed
advisory firm can afford to pay a relatively high multiple
to acquire a smaller advisory firm, because the acquiring
firm received an even larger multiple investment from the
private equity firm. "
To Centralize or Not to Centralize
There is more than one flavor of advisory practice acquisition.
Some acquirers take a less centralized approach, and the
acquired advisory practice keeps its brand name and much
of its operational autonomy. " If you've already achieved a
semblance of scale as an advisory practice, which usually
means you have at least $1 billion to $2 billion in assets
under management, this could be a good option, " Selig says.
A trade-off exists between how closely an advisory business
integrates with the acquirer and how much scale it gains:
An acquired RIA that integrates more gains more scale, but it
gives up more control. " When we talk with an adviser who is
interested in selling his or her business, we start by asking
questions about, 'What's important to you? Is it important
to you to retain control over your operations? Is keeping your
brand important?' " says David DeVoe, founder and CEO of
DeVoe & Co., an RIA M&A consultant in San Francisco.
Other acquirers, such as OneDigital, take a more
centralized approach to acquisitions. The acquired advisory
practices will transition to the company's name and
integrate much of their operations with OneDigital's advisory
business. " We're 100% focused on building the brand
in the small- and midsize employer market, so everyone
will take our brand and get on our platform, " Sullivan says.
" It's so important to build brand awareness at the employer
level and also to manage the data in a way that creates
new and interesting insights for employers. " OneDigital
has embarked on a project with Microsoft to capture a
wide breadth of data on participant behavior in its clients'
plans and then to deploy artificial intelligence and machine
learning to produce those insights, he says.
CAPTRUST has taken a centralized approach to acquisitions
all along. " Our model is to have fully integrated services
16 | planadviser.com November-December 2020
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PLANADVISER - November/December 2020

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