A Canadian investment manager that’s backing one of the most active acquirers this year is gaining a stake in another one of the big consolidators driving the record volume of deals.
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“It's very beneficial for organizations to mature,” Dekko said. “You get the very strong reporting, you get the really good disciplines that benefit everybody.”
The employee ownership alongside the external investors, he added, ensures that advisors and executives are “incented to think, ‘How does the firm benefit?’ as well.”
After the deal closes, Onex will get two seats on Wealth Enhancement’s board alongside the two for TA Associates, according to Dekko. Other members include Morningstar CEO Kunal Kapoor and A. Charles Thomas, the vice president of data science at Facebook. Wealth Enhancement has emerged as one of the largest and fastest growing hybrid RIAs.
“WEG is certainly in the upper tier with respect to the size of RIA firms,” consultant Brad Wales of Transition to RIA said in an email. “There will always be opportunity in the marketplace for smaller firms, but WEG’s continued growth is indicative of the emergence of so-called super regional, or national RIAs.”
The existing and incoming private equity backers of the firm issued respective statements on their deal.
Wealth Enhancement “has demonstrated its ability to succeed across a broad spectrum of industry, market and economic cycles,” said Onex Managing Director Todd Clegg, who’s also listed by the firm’s website as the lead in its OneDigital investment. “Looking ahead, we're confident that WEG remains uniquely well-positioned to keep growing, both organically and by continuing its track record of well-executed acquisitions."
TA Associates Managing Director Roy Burns praised Dekko’s management team for “generating consistent growth and strong client retention rates, even in the face of extraordinary events such as the pandemic and its resultant disruptions on the markets and our economy.”
The law firm Goodwin Procter acted as counsel to TA Associates and Wealth Enhancement, while Fried Frank represented Onex. Wealth Enhancement tapped Raymond James & Associates as its financial advisor.
In addition to its relationship with LPL as its broker-dealer and one of its custodians, Wealth Enhancement has had its own limited purpose broker-dealer since June 2004 called Wealth Enhancement Brokerage Services, FINRA BrokerCheck shows.
As an illustration of its sheer size and the number of firms working with Wealth Enhancement in some capacity, the firm’s latest Form ADV brochure mentions third-party payments described as “assistance with technology-related expenses” totaling nearly $1.5 million from six custodians: Pershing Advisor Solutions ($18,200); Raymond James & Associates ($60,000); LPL ($72,380); TD Ameritrade Institutional ($139,167); National Financial Services and Fidelity Brokerage Services ($245,861); and Charles Schwab ($960,000).
Wealth Enhancement’s incoming capital backer has $46 billion in assets under management, according to Onex’s website. Its private equity deals have generated 2.6 times the returns of the capital the firm has invested. Dekko rejected any possible connection between a sales strategy for Onex’s funds and its investment into Wealth Enhancement.
“We're an independent firm and we are absolutely not a distribution channel for anybody,” Dekko said.
