When an RIA plans to introduces a family office into its business model, there are essentially two options: build or buy. Stewart Mather, founding partner of Mather Group, chose the latter.
Earlier this week Mather Group, a Chicago-based RIA with just over $4 billion in AUM, purchased Astraeus Advisors, a multifamily office in suburban Chicago that manages over $1 billion in assets. This follows Mather Group’s acquisition of $1 billion RIA Berman Investment Advisors in October. Both deals will allow the firm to better serve its Fortune 500 executive clients, according to the Mather.
While terms of the deals were not disclosed, Mather noted that both were self-funded as the firm received no private equity backing.
“We could easily self-fund our way to a $10 to $20 billion dollar firm over the coming years,” Mather says, noting that the firm’s revenue has been growing 50% year-over year, and that cash flow has been steadily accelerating. “We can offer 100% liquidity,” Mather says, although acquired RIAs can personalize the deal with equity.
“I can tell you point-blank we will never take on private equity,” says Mather. He characterizes PE funding as “short-term thinking,” and says that investors introduce a conflict of interest.
When Mather Group signs on advisors — through acquisition or not — it also assumes ownership of that planner’s clients, Mather says.
Mather says that all clients join through either the RIA’s marketing program, client referrals or acquisition. When advisors join organically, they come from custodians or banks that owned the client, and they never bring clients with them, Mather says.
“Our advisors aren’t out there working their natural networks, bringing in clients like you would see at a Wall Street firm,” he says. Instead, they come on to the firm through acquisition or with no clients.
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Chris Yannella, who sold Astraeus Advisors, was not concerned with handing off client ownership, he says. He had spent a long time making the decision and his clients “unanimously agreed to this,” he says.
This isn’t to say the decision to join Mather Group was an easy one for Yannella, who considered about 12 different partners. The whole process took about 18 months, he says.
Yannella had become overwhelmed with an ever-changing technology landscape, he says.
“I always felt like the ground was shifting underneath us,” he says, who added that he was attracted to the efficiencies Mather Group provided. In addition, he was tired of running the day-to-day operations and compliance matters of the practice, as he would have rather spent the time with his clients.
Another thing that stood out to Yannella: Mather Group branded itself as a young, next-gen firm.
The Chicago-based RIA seeks out young advisors and will fill up their client list in about 18 months after they sign on. Additionally, the firm runs a 42-person summer internship program. Mather estimates the firm will hire about 12 of them this year. Once an advisor joins the firm, he or she is paid a base salary with a bonus based on client retention, according to Mather.
While the acquisition of Yannella’s firm has closed, Mather says the work is hardly over. “A lot of people think that the hardest part is getting a deal done, but there’s so much on the other side of it frankly,” he says. “There’s a lot of potential for miscommunication and issues to arise.”
Mather says he and his team do as much as possible on the front end to get to know their partners. Before bringing on advisor Steve Berman in October, Mather took him on a mountain hike with Patrick Lawlor, managing director of strategic partnerships, in order to get to know him better.
“This isn’t just a financial thing for us,” Mather says, adding that he intends to spend the next few decades working with whoever joins the firm.
However, Mather is confident in the success of both the acquisitions — and so is Yannella, who says it felt right from the beginning, when his initial meeting with Mather went on for three hours (twice as long as scheduled).
“We ended up talking at the elevator bank for an extra 30 minutes,” Yannella says, adding: “I left and called my wife.”
However, Mather says that his firm is in no rush to grow. “We are building a national brand, but we’re going to do it measurably and we are going to do it intelligently,” Mather says. “We’re not in a race. I hear people talking about an M&A race. We don’t need to race. I’m 40.”
