Securities Service Network CEO Wade Wilkinson credits the perseverance of two of his firm’s advisors for their success in purchasing at least 15 practices over the past 10 years.

“I would be willing to bet they’ve discussed deals with 10 practices or more for every one that they’ve purchased,” says Wilkinson. “You have to talk to a large number of folks to find that number that are good fits and that ultimately come to fruition.”

Mellenia Investments, Securities Service Network

Many advisors at the Ladenburg Thalmann independent broker-dealer have acquired other advisors’ books, Wilkinson adds, but none of them have completed as many deals as Steve Serati and Lee Neumann of Millenia Investments.

In the fourth quarter of 2017, the practice closed on the acquisition of Quintessential Retirement Services, a Next Financial Group firm with $30 million in assets from 130 clients, according to Serati. Millenia has absorbed $191 million in client assets from M&A with plans to add $100 million more this year, he says.

The volume of acquisitions across the industry jumped 22% in 2017 to a record 168 transactions, according Echelon Partners. However, the difficulty of tracking deals involving firms with less than $50 million, which usually go unreported, helps make the figure imprecise, the M&A consulting firm notes.

Slideshow
15 recruiting trends to watch next year
A massive acquisition, the possible end of the Broker Protocol and other issues will shape the industry in 2018.

IBDs like Advisor Group, which opened a succession plan matchmaking service for its advisors in October, have embraced M&A. The industry faces an average advisor age of 50 years old, according to Cerulli Associates, alongside downward fees and upward compliance costs under the fiduciary rule.

“You have this tidal wave of three things happening simultaneously that are pushing this,” says Serati. “The people that are getting squeezed the hardest are the smallest independent investment advisors. Those are the folks that are really feeling the burden of what’s happening. I believe that there’s a tremendous opportunity for consolidation within the ranks of the smaller advisors.”

A recruiter who works with SSN, the No. 43 IBD, introduced Kevin Clark to Serati and Neumann when Clark mentioned that he was considering selling Quintessential to focus on his 401(k) planning software firm, Clark says. He received at least one higher offer above what Millenia paid for it, he says.

“My biggest concern was making sure that my clients were taken care of. Some of these clients had been with me 21 years,” says Clark, president of Plan Confidence. “They had a process in place. They knew what they were doing.”

Clark and the buyers didn’t disclose the price tag, although Serati notes Millenia usually pays about 2.5 to 2.8 times recurring revenue and 1.1 to 1.3 times non-recurring revenue. A spokeswoman for Next didn’t respond to a request for comment on Clark’s departure.

Steve Serati and Lee Neumann of Millenia Investments
Steve Serati (left) and Lee Neumann (right) of Chesterfield, Missouri-based Millenia Investments started making acquisitions roughly 10 years ago.


Millenia has taken over Clark’s former office, and the firm’s four advisors travel to the Chicago area about once a month to meet with their new clients. After the deal closed in October, Serati and Neumann held a dinner event in a banquet hall in Oak Brook, Illinois, with Clark and his clients.

“It gave us an opportunity to introduce ourselves to his clients in a very warm, non-threatening environment,” Serati says. “We’ve learned that those are the events and the kind of things that help quickly to cement that relationship. You can’t just put something in the mail and send them something and expect them to send it back to you. That’s not a very good way to do business.”

Most sellers who strike deals with Millenia, unlike Clark, are retiring. In fact, Serati and Neumann started their acquisition efforts after observing the advanced age of most advisors at a conference a decade ago. The partners have grown more comfortable purchasing larger practices over the years, Serati says.

The $191 million from about 800 clients acquired through M&A makes up about 55% of the Chesterfield, Missouri-based firm’s roughly $350 million in brokerage and advisory assets. Millenia has also added in-force life insurance assets of $450 million from 5,000 policy holders through the deals, according to Serati.

The firm’s growing staff and infrastructure, including an upcoming website for potential sellers, make the larger purchases possible. Serati expects to complete a $40 million M&A deal this summer, along with two other potential acquisitions of $70 million and $110 million practices later this year, he says.

Echelon cites a looming potential correction of the bull market as a factor in the industry’s M&A momentum, while Wilkinson sees the fiduciary rule as prompting many advisors to consider retirement. Anecdotally, he adds, the pace of deals has ramped up dramatically over the past year and a half.

“We want to act as matchmaker to benefit both the buyer and seller and the broker-dealer through retention,” Wilkinson says. “It’s a good partnership.”