New RIA acquirer Choreo makes first deal to buy $1.8B practice

A registered investment advisor spun off from a giant accounting firm earlier this year agreed to acquire a billion-dollar practice with 13 financial advisors in its first deal as a standalone firm.

Minneapolis-based Choreo is buying Enso Wealth Management, a California-based RIA with $1.8 billion in assets under management, in a deal at an undisclosed price that's expected to close by the end of the year, the firms said on Nov. 3. Choreo itself launched independently in February, when private equity firm Parthenon Capital Partners acquired the wealth management arm of RSM, a top five accounting firm. An incoming team of 22 employees from Enso will add to Choreo's existing base of 28 offices nationwide managing $13.5 billion in client assets. 

"We have very aggressive ambitions," Choreo CEO Larry Miles said in an interview, describing independent, fiduciary financial advisors as "really emerging from our infancy in many respects."

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For Enso, which is based in Petaluma in the Bay Area with four other offices in California and one in Nevada, the decision to fold the partnership into a larger firm came down to questions of scale, technology and other infrastructure, according to co-founder Jim DeCota. He said that he and the 10 other members found that they were "working on the business too much rather than working in the business, which happens at our level." After the close of the deal and taking on Choreo's brand, the firm can focus more on its clients and its own recruiting and M&A.

"We believe that there are going to wind up being a handful of dominant firms that are shaping the future of the industry, and we want to be one of them," DeCota said.

Despite a slight dropoff in the volume of wealth management M&A transactions from the all-time high of 99 in the fourth quarter of 2021, the industry remains on pace to set a record for the 10th straight year, according to investment bank and consulting firm Echelon Partners. In an indication of continuing momentum despite slumping stocks and persistent inflation, LPL Financial struck an agreement on Nov. 3 to acquire one of its biggest branches, Financial Resources Group Investment Services, for $140 million with extra earnout payments for three years after the close. While it won't mean any change in brokerage, the branch's 800 advisors in 85 banks and credit unions with $40 billion in client assets will have a new parent firm. 

The increasingly competitive fight among the giant wealth management firms that are rapidly consolidating is prompting many RIAs with between $1 billion to $2 billion in client assets to consider similar deals, according to recruiter Louis Diamond, the president of Diamond Consultants. The need for a succession plan represents the other main factor in rollup deals.

The succession-minded practices primarily seek out "culturally aligned" buyers with the best fit for clients and employees, while growth-oriented firms are also trying to find "some level of autonomy" under the acquirer, Diamond said.

"They want really strong resources to free up their staff, their advisors and to have a more compelling value proposition for recruiting and acquisitions," he said. "Together they can build something that's much more valuable than if the firm was just running on its own."

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Diamond described Parthenon as a "smart and sophisticated backer," given its current investment in the parent company of NewEdge Wealth and past stakes in firms such as Allworth Financial and the forerunner firm to the wealth manager now known as Avantax. The private equity firm invests in companies with enterprise values between $75 million and $750 million in finance, healthcare and business services through funds that have raised more than $5.5 billion in capital commitments, according to its website.

With Parthenon's capital, Choreo sees "a lot of firms out there" as prospective recruits as it works at the intersection of "wealth and estate and tax planning," Miles said. After spinning off from RSM, the company took its name from the word "choreograph" to denote how financial planning maps out a client's future like a dancer following a routine. 

"We've been around for over 20 years," Miles said. "If there's such a thing as a 22-year-old firm just getting started, that's where we think we are."