A $450M investment and the shifting, growing wealth landscape

The case for investing in wealth management's growth will get a test on a global scale to the tune of hundreds of millions of dollars flowing to AlTi Tiedemann Global.

Allianz X — an investment arm of giant insurer and asset manager Allianz — and Constellation Wealth Capital, a startup fund launched last year by former Emigrant Partners CEO Karl Heckenberg, will invest up to $450 million in AlTi Global, the firms said last week. The deal reflects how investors keep betting on wealth management in a time of high interest rates driving deal flow downward in other industries, as well as the substantial capital raises in the past year for aggregators receiving cash for acquisitions of registered investment advisory firms.

AlTi has taken a somewhat different path than many of those firms. It focuses specifically on ultrahigh net worth clients and alternative investment management with a global footprint and a publicly traded structure as a special-purpose acquisition company whose shares began trading on the Nasdaq exchange last year. On the other hand, the firm displays a lot of similarities with RIAs and other wealth management firms that are confronting the challenges of an industry that remains fragmented between large and small companies that are fielding a lot of calls, emails and LinkedIn messages from potential investors who might change their business overnight.

"The capital will be invested in a methodical manner, in line with our long-term growth strategy. We have a defined set of strategic priorities for the partnerships, and we will focus on expanding and fortifying AlTi's footprint in key markets, and executing on organic and inorganic growth opportunities," AlTi CEO Mike Tiedemann said in an email interview. "This is a significant endorsement of our unique business model as a publicly listed global multifamily office that offers a comprehensive alternatives platform. This model not only creates enhanced solutions, but also benefits from the diversification provided by the distinct growth drivers and profiles of our two business lines."

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At roughly $68 billion in client assets with offices in Hong Kong, London and Toronto in addition to its New York headquarters, AlTi looks much different than a firm like Atlanta-based Advisory Services Network. The latter firm — an RIA services platform that works with 129 independent advisory practices and 207 financial advisors — just surpassed $7 billion in client assets. However, the team led by founders Dave Paulukaitis and Tom Prescott is considering its options for the firm's first outside investment in light of pending advisor retirements and the accompanying succession questions for their clients and teams, Prescott said in an interview.

"They're already here. We know their clients. It makes sense for us to be the firm that would either takeover or facilitate that transaction within one of the advisory shops that is on our platform already," Prescott said. "Everything is on the table. We don't want to lose who we are and what's gotten us to the success level that we've gotten to today."

The AlTi deal comes after newly launched wealth management firms saw big investments: Modern Wealth Management picked up $200 million in financing last spring, and former United Capital founder Joe Duran's new venture, Rise Growth Partners, received $250 million earlier this month. Chicago-based Constellation Wealth has already made at least two other RIA investments in the first two months of 2024 for minority stakes in Lido Advisors and Perigon Wealth Management since Heckenberg's firm submitted a filing to the Securities and Exchange Commission last August indicating it planned to raise $1 billion for a private fund.

"This partnership represents a significant milestone in our ongoing mission to support innovation and excellence in the wealth management industry," Heckenberg said in a statement. "We believe AlTi is ideally positioned to capitalize on future opportunities, in line with their impressive strategic vision."

Upon close, the joint investment will give Constellation Wealth, which is committing $150 million in financing to AlTi, an observer on the company's board and Allianz X, which is seeding $250 million, two directors on the board. Allianz X has the option to invest up to $50 million more for Alti's international expansion. It buys stakes in firms deemed to be "digital frontrunners in ecosystems relevant to insurance and asset management," according to its website, which cites 25 portfolio firms and nearly 2 billion euros in assets under management.

"Allianz X brings capital and skills to our portfolio companies to foster innovation, fuel growth and realize their ambitions," CEO Nazim Cetin said in a statement. "Our investment in AlTi demonstrates our approach as well as our conviction in wealth management and alternatives, and we believe it will unlock opportunities for scale, new revenue streams and societal impact for the Allianz Group."

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Deploying that substantial capital will "expand and fortify AlTi's global footprint," as well as boost its organic growth and carry out deals in its "identified pipeline of strategic acquisitions," according to an investor presentation. For the year to date, AlTi's stock value has fallen by 23% to $6.26 a share at the latest trading before publication. However, on the day the firm unveiled the investment by Allianz X and Constellation Wealth, its shares soared by 30% to $7.40.

The firm and its investors will need to execute on a plan that unifies the companies' businesses and any incoming firms at a major scale to compete with the many other wealth management aggregators that continue vacuuming up acquisitions, Prescott said. For others in the industry operating at a different size, the headlines and eye-popping numbers just read nicely.

"It's gratifying that we're in the right industry at the right time," Prescott said. "There's a lot of money flowing into this business."