The NAPFA study group proved to be highly productive.
Mark Willoughby, Robert Hockett and Barry Kaplan had known each other for many years through such groups in Atlanta.
It became obvious that the executives shared an extremely compatible approach to the financial advisory business, and eventually they decided their respective Atlanta-based firms, Modera Wealth Management (Willoughby is the COO) and Cambridge Wealth Counsel (Hockett and Kaplan are principals), would be stronger together than separately.
As a result, Modera acquired Cambridge and the firms' $238 million in AUM to reach the $2-billion asset milestone on Jan. 1, according to Modera principal Greg Plechner. Both firms offer fee-only service and count high-net worth individuals as their largest base of clients.
“The core investment philosophy was very similar. That’s not necessarily a coincidence,” Plechner says. “We participated in study groups with Cambridge, and we knew from that process that their approach was very similar.”
‘RED-HOT’ RIA M&As
Modera has acquired or merged with four smaller firms in the past five years.
“There are probably double that amount that we’ve investigated or gotten very advanced with that haven’t panned out for one reason or another,” Plechner says. “That has really helped us fine-tune what we can deliver to the different firms that we’re talking to.”
The RIA-buying-RIA trend is part of a “red-hot” M&A market, says David DeVoe. He is the managing partner and founder of DeVoe & Co., a San Francisco-based consulting firm specializing in mergers and acquisitions.
Modera falls into the category DeVoe calls “serial acquirers.” The buyers in 89% of RIA mergers over the past year had completed at least two such prior transactions, according to DeVoe.
“One of the trends we’ve been seeing is large RIAs that create a component of their overall business strategy which is focused on mergers and acquisitions,” he says. “So Modera is part of that trend.”
Modera also has a strong base in New Jersey, with the Westwood, New Jersey, office led by high profile principal and former NAPFA chair Tom Orecchio.
Hockett and Kaplan will become Modera principals, and Cambridge, which is based in Atlanta, and Modera, which already has an office in the city, expect to combine into a single new office when their current leases expire. The latest transaction will grow the RIA to 55 employees in four states.
Cambridge specializes in divorce planning, doctor clients and business executive customers. Modera executives sought out Cambridge in part to expand the firm’s business with corporate executives, Plechner says. Principals with the two firms agreed to the merger nearly a year ago and decided to time it for the start of the year to ease the bookkeeping burden, he notes.
The combined AUM of Modera and Cambridge in their most recently filed ADV forms adds up to just under $1.9 billion. Modera’s AUM will climb above the $2 billion mark after final reconciliations between the parties to be reflected in future filings, Plechner says.
Modera currently manages 4,156 accounts through 1000 clients, while Cambridge listed 993 accounts through 200 clients. Up to 75% of Modera’s AUM comes from high-income individuals, while over 75% of Cambridge’s AUM is from the same type of client.
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