An LPL Financial hybrid firm is purchasing an RIA with $340 million in assets under management, in an acquisition which would mark the Wealth Enhancement Group’s sixth M&A deal since private equity firm Lightyear Capital began backing it three years ago.
Bill Carr, Bill Hart, and Mary Beth Neeley of Retirement Strategies agreed to sell their Jacksonville, Florida-based practice to the hybrid RIA, the firms announced July 24. They declined to disclose the price tag, but the deal is expected to close in September.
Retirement Strategies, which has seven CFP advisors, will operate under the Wealth Enhancement brand after the merger. Wealth Enhancement will reach 68 advisors with more than $9 billion in client assets upon closing.
The Minneapolis firm has acquired six other practices since 2013, with a strategy aimed at buying planning-based RIAs and boosting their organic growth.
“One of the biggest things that the industry faces is the scarcity of talent,” says Wealth Enhancement CEO Jeff Dekko, praising Carr, Hart and Neeley’s team. “We look at acquisitions as a way to go into a marketplace. And as part of an acquisition, the talent of the team is a really big component for us.”
In addition to the three partners and four other CFPs, Retirement Strategies’ team includes a CFA portfolio manager and a total staff of 13 people. The practice had spent 11 years with Purshe Kaplan Sterling Investments before dropping any broker-dealer affiliation in 2016.
Since the practice is entirely fee-based, it doesn’t need a BD, Hart said in an email. He cited Wealth Enhancement’s “ability to leverage their resources and scale effectively to establish a national brand that is known for planning and not product” as one reason for the deal.
The firms share a similar emphasis on individualized planning, he added. The practice’s succession planning also made it apparent that the firm’s next generation of advisors would need to learn “a whole new set of skills” in business that add little value for clients.
“Our industry has become far more complex over the past 25 years, and we expect that trend will continue,” Hart said. “We decided that our advisors should remain free to focus on what they do best rather than having to retrain for business management.”
His firm would mark the second acquired in Jacksonville by Wealth Enhancement, which purchased CPA Retirement Planning in December. Wealth Enhancement manages some $8.9 billion in client assets after picking up a sole practitioner firm with $495 million named Cimino Wealth Advisors in May.
The firm has also expanded its custodial arrangements by one firm this year with the addition of TD Ameritrade. Clients of Wealth Enhancement, which has 18 offices and 37 advisory teams, also custody assets with LPL, Raymond James, Charles Schwab and Fidelity, according to its latest form ADV.
“Usually the clients are not dissatisfied with their existing custodian,” Dekko says of newly acquired practices joining his firm. “We like that flexibility, so that we don’t have to disrupt the clients’ lives in that process.”
Lightyear, the private equity firm which owns Advisor Group, started its investment in Wealth Enhancement in June 2015. Private equity capital has helped boost M&A deals to record levels in each of the past five years, according to Echelon Partners, which forecasts a new high of 189 deals in 2018.
Neither Lightyear nor its affiliated funds play a role in Wealth Enhancement advisors’ management of their clients, according to the ADV. The firm and its indirect investor maintain an “information barrier” to prevent exchanges of proprietary or material, non-public information.
In addition, Wealth Enhancement set a policy against purchasing any voting securities in firms where executives sit on the board or investment funds advised by Lightyear hold an ownership interest. The firm also listed more than $1 million in technology-related assistance from its custodians this year.