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How 2 RIAs' media strategy powered a $3B AUM merger

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In one of the earliest deals of 2018, two RIAs have merged their complementary traditional and social media capabilities to form a new firm with nearly $3 billion in assets under management.

Hanson McClain Advisors of Sacramento, California, brings more than $2 billion in AUM to the table and Simply Money Advisors of Cincinnati, Ohio more than $700 million. Terms were not disclosed.

Given its size and media reach, the pairing is an "exciting" one, says investment banker and consultant Dave DeVoe of DeVoe & Co., who was not involved in the transaction. He called the deal "cutting edge in terms of leveraging social media within the RIA space."

With its own state-of-the-art studio, Simply Money produces TV and radio shows in the Cincinnati market and beyond. Its advisors also publish regular columns in print media like The Cincinnati Inquirer.

For its part, Hanson McClain employs a full-time social media expert whose only job is to monitor the firm's social media spending and advertising on Facebook and elsewhere, says one of the firm's co-founders Scott Hanson.

In total, social media drives 40% of Hanson McClain's new client acquisitions, he says. Apart from referrals from existing clients, Simply Money's media investment generates upwards of 70% of its new clients, says firm cofounder Nathan Bachrach. Together both firms think they can do more.

"They are doing a better job in traditional media then we do," Hanson says of Simply Money, adding that he wants to incorporate the Ohio firm's skill in producing short video clips that are ideal for social media consumption. "We are further along in digital marketing than they are. When we combine the two, we'll be able to leverage their video capabilities, and they'll be able to leverage our digital marketing."

The merger was brokered by Parthenon Capital Advisors, a mid-market private equity firm based in San Francisco and Boston that holds an equity stake in Hanson McClain. The size of the stake and other terms were not disclosed.

The merger with Simply Money is Hanson McClain's first move to expand its footprint since Parthenon invested in the advisory firm last summer.

The deal could be an early indicator of a record-setting year in mergers and acquisitions that experts have forecast for the RIA space. Following 138 deals in 2016, 2017 was expected to close out the year with 150.

Indeed, DeVoe says his firm has already helped to consummate several deals in the first week of 2018, all of which have yet to be announced.

Later this month, the Hanson McClain-Simply Money deal will be dwarfed by the sale of a majority stake in a $10 billion wealth manager to a large private equity firm, says Liz Nesvold, managing partner of Silver Lane Advisors, a New York investment bank specializing in RIA M&A. Nesvold, who is involved in that transaction, said she could not yet reveal the parties involved.

The Hanson McClain-Simply Money merger represents "one of the recurring themes we are seeing in the marketplace: the consolidation of smaller RIAs into private equity-backed wealth platforms," Nesvold says.

Other such deals include Genstar Capital's investment in Mercer Advisors, Lightyear Capital's in Wealth Enhancement Group, Long Ridge Equity Partner's in Carson Group, KKR and StonePoint's in Focus Financial and Viking Global's in Rockefeller Wealth, she says.

Like Hanson, Bachrach sees their merger not so much as the result of broader trends, but as a serendipitous meeting of minds.

"I think Hanson McClain is like a twin brother from another mother, and we got separated at birth," he says.

Both firms' focus on educating clients through media channels and their shared fiduciary orientation provided a good basis for a partnership, he added.

In time, Bachrach says he hopes the newly bulked-up firm builds out a national footprint.

"If we can do that," he adds, "that would be the measure of success."

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