Captrust Financial Advisors, one of the country's most aggressive buyers of wealth management firms, has acquired Knox Capital Group, a $300 million RIA in Salt Lake City, continuing a buying spree that could gobble up another four or five firms this year.
Captrust, which oversees around $244 billion in institutional assets and has approximately $6 billion in retail assets under management, acquired seven firms last year, and has advisory firms in 18 markets across the country.
"We will continue to do four to five deals a year," says Fielding Miller, the firm's CEO . "If we could find another 100 [firms] like [Knox] we'd do them in a second. There's a huge demand for advice."
For its part, Knox anticipates that by joining the larger firm it will be able to land a number of ultrahigh-net-worth families who have expressed an interest in working with the firm, but for its small size, says Brodie Barnes, founding partner of Knox.
One wanted to hire Knox to handle its $1 billion family foundation, but "one of the trustees said very specifically, 'We typically will only allocate to firms that will have over $1 billion in AUM' and we were well short of that," Barnes says. "Part of our due diligence is we had that trustee meet with the folks at Captrust before the transaction closed. They were very impressed with the team and the personalities."
When acquiring firms, Miller says Captrust is able to help them grow quickly. "A lot of firms like Brodie's are focused on growing their business, but don't have the scale yet," he says. "I like to say they are really root bound."
To achieve that growth, Miller says, "It's better to pull in somebody who has the infrastructure."
Given that Captrust runs the retirement programs for university systems in the states of Arkansas, Georgia and North Carolina, it must regularly demonstrate its fiduciary bona fides to those clients, Miller says. Having made that case to large, demanding clients makes it easier for the firms it buys, in turn, to gain the confidence of prospects, he adds.
Barnes cites an instance in which Knox managed to win $25 million in assets from a wealthy family before the Captrust deal, while $150 million "went elsewhere because of a perceived concentration [in assets] on their part in our relatively small firm."
Now, he says, "I suspect we will have great success as we go back to those families."
The deal also fulfills succession needs for Knox, especially for Barnes' partner who is 20 years his senior, says Barnes, who is 44. "Over the next three to five years he was thinking about retiring," says Barnes, but now he's reinvigorated. "However, that has probably been pushed out because of his excitement about the Captrust arrangement."
The deal also eases Barnes' long-term legacy concerns. "It certainly was attractive to me to not solely have the risk to buy [his senior partner] out and then to develop the team that would ultimately buy me out," says, adding that now, "We are all kind of re-energized."