Firms backed by one of the industry’s fastest-growing RIA consolidators are scaling quickly, too.
CI Financial-backed Congress Wealth Management said May 3 it had acquired Pinnacle Advisory Group, a Columbia, Maryland-based RIA with $2.4 billion in assets.
Congress Wealth Management will nearly double its client assets as a result, to $5.8 billion, up from $3.4 billion.
“It’s not growth for growth’s sake,” says Paul Lonergan, president of Congress Wealth Management. Scale will help the firm invest in more technology, give it access to additional investment options and contribute to recruiting and compensating talent, he says.
Congress Wealth Management has considered “many different” acquisitions, according to Lonergan, but he was attracted to Pinnacle particularly because of its geographic presence in the D.C. and South Florida areas, as well as the RIA’s entrepreneurial spirit and long-tenured employees.
The deal has been complex, due to its sheer size, he says. Executives at Pinnacle will be joining Congress’s own leadership team, although the firm is still determining the details.
“It’s more rare to have similarly sized firms join up … Although it is certainly not unprecedented,” says Brian Lauzon, managing director of investment bank and M&A advisor InCap Group. InCap was not involved in this deal, but Lauzon has done consulting work with Congress Wealth Management in the past, he says.
Congress Wealth Management was seen as one of Toronto, Canada-based CI’s “keystone” investments in the U.S., according to Lauzon. CI Financial
The Canadian asset manager is the largest stakeholder in Congress Wealth, though it is a minority stake, according to Lonergan, who said that the firm wouldn’t have been able to close a deal of this size without CI’s backing.
Pinnacle’s presence on Schwab’s referral network was “a positive by-product” of the deal, though it wasn’t a driver, according to Lonergan, who says it’s still unclear how Schwab will combine its own program with TD Ameritrade’s after it closed the purchase its competitor
Both of the firms custody at Schwab, TD and Fidelity, according to ADVs.
A Schwab spokesman did not return a request for immediate comment.
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The deal will also boost CI Financial’s presence in the U.S. The asset manager entered the market last year and has since been on a buying spree. While the company’s pace has slowed relative to competitors like Mercer Advisors since last year, CI Financial, or the RIAs it owns, have minted five deals already in 2021, according to data by investment bank Echelon Partners — including its
In total, the Canadian asset manager has purchased a stake in 13 RIAs since 2020, all but two of which have been a majority or full purchase, according to the firm. There have been four sub-acquisitions. CI Financial is currently building out its U.S. wealth platform with executives from the firms it’s purchased, its CEO
Lonergan is looking forward to the platform being finalized, he says, as it will be a great opportunity to share best practices with other RIA executives. Ultimately, he anticipates there will be a “tremendous amount of operating leverage” with other CI Financial-backed RIAs for technology and human resources, he says. Congress Wealth Management expects to complete more deals in the future, he says.
RIA acquisitions are at an all-time high across wealth management — and the size of firms on the auction block are getting bigger. In the first three months of 2021, there were at least 76 deals, according to data by Echelon Partners, and the average seller managed more than $2.3 billion in client assets.
“The size of the companies is definitely creeping up,” Lauzon says.
Pinnacle is a former employer of financial advisor and wealth management blogger Michael Kitces, who occasionally writes forFinancial Planning.
Editor’s Note: This article was updated on May 5 to include comments from Paul Lonergan, president of Congress Wealth Management.
