CI Financial sells RIA stake in new expansion strategy

CI Financial, a giant Canadian asset manager, said Thursday it was selling its minority stake in Congress Wealth Management of Boston to a large private equity firm.

Toronto-based CI reached a deal to sell the stake to Audax Private Equity. The Canadian company bought the interest less than three years ago, but its expansion strategy has since shifted to focus on acquiring advisory firms outright. 

One of the most aggressive buyers of registered investment advisory firms in the U.S., CI has snapped up more than two dozen independent firms since entering the market in early 2020. Its U.S. headquarters are in Miami; the company managed more than $391 billion in client assets, including U.S. wealth management assets of $187.5 billion at the end of March, a 28.6% jump on the levels of a year earlier.

Last April, CI said it would sell up to 20% of its U.S. wealth management business through an initial public offering in the U.S. At the time, CI's stable of RIAs were the largest chunk of the company and comprised roughly $133 billion in assets. The company filed forms to take the chunk public last December, but that move has stalled amid a slump in IPOs and market volatility.

Kurt MacAlpine, CI's CEO, said in a statement Thursday that the sale of the Congress stake came about due to changes in CI's partnership model, CI Private Wealth.

"To fully benefit from its features, only active contributors to the business can be CIPW Partners," he said. "Unfortunately, the ownership structure at Congress precludes it from fully integrating into CIPW. CI and Congress believe that minority ownership is not the best structure to maximize the client and employee experience," MacAlpine said, adding that Boston-based Audax "will be an excellent partner to support the next chapter of growth for Congress."

The statement said that CI reaped three times its initial investment of an undisclosed amount in Congress and would use the proceeds from the sale to pay down debt. As of Dec. 31, 2022, the company had more than $4.2 billion in total debt, money it borrowed to fuel its acquisitions. Its stock is down 53% over the past 5 years, including nearly 5% this year.

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Congress Wealth President Paul Lonergan said in the statement that "the investment from CI was extremely productive and we are exiting on the best of terms." He added that "in addition to finding a solution that works for our ownership, we are also eager to pursue additional M&A opportunities thanks to the backing from Audax Group."

When CI bought a chunk of Congress, that firm managed $2.3 billion in client assets. As of the end of last December, Congress oversaw $5.1 billion. In 2021, CI helped Congress buy Pinnacle Advisory Group, a then-$2.4 billion advisory firm in Columbia, Maryland.

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Dan Seivert, the CEO of Echelon Partners, a boutique investment bank focused on M&A and succession planning for the wealth and investment management industries, said that CI's sale didn't signal the company was tapping the brakes on its aggressive push into the U.S. wealth management market.

"Definitely not," he said, adding that Congress was one of CI's first minority investments but that CI had moved on to a different model of buying advisory firms outright. 

"They changed the structure in which they do deals, but their strategy continues to be the same — to grow the wealth management business in the U.S.," he said. "This won't be the last one they get out of."