Savant adds $3.3B RIA in bet on outsourced business with CPAs

Savant Wealth Management made its biggest deal in history, acquiring the firm's first location in Atlanta and expanding its turnkey management and retirement planning business.

The Rockford, Illinois-based registered investment advisory firm purchased Capital Directions, which has 25 financial advisors and other employees managing $3.3 billion in client assets, the firms said on Feb. 23. The parties didn't disclose the financial terms of the deal.

Savant Wealth Management

Like a handful of other billion-dollar firms recently changing hands, Capital Directions derives a significant portion of its business by working with certified public accountants. The firm, which pushed Savant's client assets to nearly $18 billion when it became the firm's 26th office, acts as the outsourced turnkey asset management program to 28 CPAs supplementing their accounting through wealth services. Savant CEO Brent Brodeski had known of Capital Directions since starting a study group with its founder and that of another firm about 30 years ago, he said in an interview last week. 

At the time, the three advisory practices managed around $140 million in assets between them, Brodeski said. Now, each firm has reached multiple billions. Capital Directions' TAMP and retirement services, as well as its location, appealed to Savant, Brodeski said. His firm received a minority investment from private equity firm Kelso in 2021 and set a goal the following year to grow by three to five times its size by 2027.

"The firms are very alike and complimentary," he said. "We're looking at an opportunity to build something together for 10, 20 or 30 years."

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Despite some initial indications that wealth management M&A may be tapering off slightly from its record pace of the past decade, the industry saw major RIA aggregator Focus Financial Partners receive a valuation of more than $7 billion as part of an agreement to be sold to private equity firm Clayton, Dubilier & Rice. 

Dealmakers such as EP Wealth Advisors co-founder Brian Parker are viewing an M&A landscape that's "as robust as it was 12 months ago or 24 months ago," Parker said in an interview. For example, EP Wealth unveiled its first acquisition of the year last week, a $350 million firm named Resolute Financial, after making a half dozen deals in 2022 and a total of 27 since receiving a minority investment in 2017 from Wealth Partners Capital Group. 

Volatility and larger economic concerns won't stop two parties from reaching an agreement "if the partnership is a good fit," especially as the wealth business keeps evolving beyond investment management into areas like estate and tax planning, Parker said.

"We experienced the pain that a lot of firms endure around not being able to spend as much time with your clients," he said. "If the clients are demanding tax and estate and financial planning, it makes the deliverable difficult unless your firm grows a little bit."

Savant Wealth Management

With the Savant deal, Capital Directions CEO Dennis Covington, Managing Director Terry Hartigan, Chief Investment Officer John McMillen, Director of Financial Planning Richard O'Donnell, relationship manager Michael Bork and wealth advisor Miriam Falaki each received equity in their firm's new parent company. Covington will also oversee Savant's TAMP and retirement services. 

The CPAs outsourcing investment management to the RIA will get "more people to help them grow and serve them," Covington said.

"It just taps them into a larger organization with more investment research and trading operations teams," he said. "Savant has made some incredible investments in technology and people to run that technology."