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How advisor-dealmakers are reshaping the IBD sector

Financial advisors who have turned into expert dealmakers are helping RIAs tap into a greater share of the record M&A volume that’s reshaping wealth management. The industry shifts under the consolidation extend beyond the vanishing brands to how BDs and OSJs serve advisors.

Private equity firms, consolidators and BDs have received much of the attention for the whopping price tags, valuations or assets in their deals. However, succession deals and other acquisitions financed by the rising sources of capital for RIAs have made advisors a growing force.

Shehab Mohammad of NWF Advisory Group and Alex Chalekian of Lake Avenue Financial have found ample opportunity. Mohammad’s Los Angeles-based firm — a hybrid RIA and office of supervisory jurisdiction affiliated with Advisor Group’s Royal Alliance Associates — has made nearly 30 deals since 2015. A practice with $75 million in client assets is NWF’s latest pickup.

Chalekian’s L.A.-area hybrid RIA, which is aligned with LPL Financial, has purchased seven practices since 2008. He has since launched a website serving as an M&A information outpost for advisors, and he affiliated with an OSJ that hired him as its head of practice acquisitions.

Spurred by innovative advisors and competition from RIA consolidators, BDs like Advisor Group, LPL and Kestra Financial are ramping up capital and other M&A services. OSJs like Integrated Partners and the Independent Advisor Alliance are boosting their resources as well.

“We’ll work with the buyers and sellers to put a really successful deal together,” says Todd Fulks, Advisor Group’s senior vice president of succession planning and business acquisition. Advisors buy 80 to 100 practices each year across the network’s four BDs, he says.

“It’s not like you’re selling a house,” Mohammad adds. “You have to live with the person you’re selling to for a while.”

While many transactions between advisors moving tens or even hundreds of millions of dollars in client assets fly beneath the radar, RIAs notched 36 deals in the first half of the year, according to investment bank and consulting firm Echelon Partners.

Even in a year on pace to set another record, Echelon’s year-end estimate for number of deals by “pure-play RIAs” as distinct from consolidators and strategic acquirers would mark 132% growth. RIAs made 35% of the deals in the first half of 2019, compared to 27% in 2018.

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Chalekian’s RIA M&A knowledge-sharing network, AdvisorsUnite, was “borne out of necessity” from receiving so many questions from fellow advisors, he says. The free service is expanding into paid content, matchmaking and other areas as he discusses M&A at industry conferences.

“Now I can basically have a consulting role with them where I'll help them put the deal together,” Chalekian says. “I've lived it. I'd rather share those ideas with advisors so that they don’t have to make the same mistakes I made.”

The biggest mistake, according to Chalekian, comes when advisors don’t complete “step No. 1” by getting a valuation. Mohammad suggests starting with a business continuity plan as well.

NWF advisors Kevin Ryan and Derrigan Sheedy acquired Randall Zacuto’s The Retirement Educators ahead of Zacuto’s retirement, the OSJ said last month. Mohammad views succession planning and marketing services by OSJs with expertise and large teams as part of a new era.

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“I really believe that the OSJ is much different than it was five or 10 years ago. All that staff needs to be in place to be a successful OSJ today,” says Mohammad. His OSJ has 65 practices with 85 advisors managing $3.6 billion in client assets under NWF and Royal Alliance.

Chalekian’s Lake Avenue switched this month to Integrated as its OSJ and RIA from direct home-office supervision under LPL. The practice’s vice president of operations and Chalekian’s wife Rosa, like him, is also taking a larger role at Integated in its marketing efforts.

Advisor Paul Saganey’s Integrated spans 143 advisors, 127 CPAs and 41 regional offices with around $6 billion in client assets. In a statement, he praised the Chalekians as “all that is good about the independent financial advisory community today.”

Alex Chalekian now identifies potential deals for Integrated and leads its succession plan counseling. Like similar M&A coaching and capital ramp-ups at Advisor Group and Ladenburg Thalmann, LPL is also seeking to help advisors rein in costs that he says could amount to as much as $25,000 to $50,000 for consultants and other vendors in the selling process.

“They want to be able to handle the deal A-to-Z,” Chalekian says of the No. 1 IBD. “LPL is looking to try to mitigate that and offer that as a service as part of affiliation with LPL.”

Other recent moves further display how IBDs and OSJs are trying to fend off rivals from the fully independent channel by offering more specialty M&A services. Another OSJ with LPL and Kestra’s new RIA M&A arm, Bluespring Wealth Partners, have tapped new executives.

Robert Russo’s Independent Advisor Alliance hired Kyle Campbell, a former RIA loan officer with Live Oak Bank, to lead its new mergers and acquisition program. “Whether an advisor is looking to buy a book of business, achieve a certain scale or needs to plan their exit strategy, we’re here to walk them through it,” Campbell said in a statement.

Bluespring tapped a marketing manager to assist its RIAs with promotional outreach, a vice president of strategic growth and a new mergers and acquisitions specialist. Brett Gage previously managed transaction execution for PE clients at Goldman Sachs. Bluespring is growing “due to the industry’s insatiable need for succession and capital support,” President Stuart Silverman said in a statement.

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