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After baker’s dozen of acquisitions, hybrid RIA gets new PE backer

The private equity capital crowding into the RIA and independent broker-dealer sectors is showing no signs of abating.

In its second major sale announcement in a three-month span, Lightyear Capital’s affiliated funds sold a majority interest in the Wealth Enhancement Group — an LPL Financial office of supervisory jurisdiction with 26 practices managing $11.3 billion in client assets — to funds affiliated with fellow PE firm TA Associates, the firms said July 31.

The parties didn’t disclose terms of the deal, which followed Lightyear’s agreement in May to sell a majority of the 6,500-advisor IBD network Advisor Group to Reverence Capital Partners. TA Associates and Reverence Capital acquired asset manager Russell Investments in 2016.

RIA M&A deal volume

TA Associates also backs Orion Advisor Solutions. Holding company NorthStar Financial Services Group is rebranding under the wealth management technology firm’s name, after agreeing to purchase turnkey asset management program FTJ FundChoice earlier this year.

Wealth Enhancement has contributed to the record M&A activity of the last six years in wealth management, having made 13 acquisitions in the past six years and 10 under Lightyear since June 2015. It has also amassed $1 billion in organic growth each of the past two years.

TA has invested more than $23 billion in five industries since launching in 1968.

“Driven largely by robust long-term market performance, demographic changes and an overall accumulation of wealth, we believe that the independent wealth management market will continue to perform well,” Todd Crockett, the co-head of the North American financial services group at TA Associates, said in a prepared statement.

“In a relatively fragmented market,” he continued, the hybrid RIA-OSJ “has implemented a differentiated strategy that has led to consistent growth and strong customer retention rates, which we believe has positioned the firm well for the future.”

Crockett and TA Associates managing director M. Roy Burns serve on Orion’s board, according to TA’s website. Crockett also has a seat on Russell’s board.

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Lightyear Capital — a firm launched by former PaineWebber CEO Donald Marron — established Cetera Financial Group after buying three IBDs from ING in 2010. Lightyear sold Cetera to RCS Capital in 2014 for $1.15 billion, prior to acquiring the stake in Advisor Group in 2016.

“Lightyear’s funds invested in [Wealth Enhancement] with the view that smaller [RIAs] would benefit from the centralized planning, marketing and operational resources afforded by the company’s scale,” Mark Vassallo, a managing director, said in a statement.

He noted that, with the seller’s capital backing, Minneapolis-based Wealth Enhancement boosted its assets by 150%, reached six new markets and doubled its count of offices and advisors. In his own statement, Wealth Enhancement CEO Jeff Dekko thanked Lightyear.

Cultural fit, a shared strategic vision and TA’s commitment to accelerate Wealth Enhancement’s expansion prompted the deal, Dekko said. Wealth Enhancement has more than 250 advisors and employees — more than 75 of whom will continue to hold stock after the deal.

“Bringing TA Associates aboard as our new capital partner opens a new stage of growth for our firm, while keeping everything instrumental to our success until now in place,” Dekko said. “This includes our structure as an independent, privately-held company, our brand, our growth expansion plans and our leadership team.”

News reports about a pending sale had surfaced this month. The volume of M&A in wealth management has resumed its record pace in 2019, according to investment bank and consulting firm Echelon Partners, which estimates there will be more than 200 deals by year-end.

Lightyear, fellow investor PSP Investments and other shareholders are keeping a combined 25% stake in Advisor Group after the firm’s deal. Reverence is reportedly paying more than $2 billion to pick up the majority interest in the network.

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