This story previously misstated the status of Defiant Capital Group. It is not an RIA, nor is it part of Dynasty Financial Partners.
Two separate sets of wealth management groups are joining forces to expand beyond their traditional advisory services.
Interchange Capital Partners, a Dynasty RIA, and Defiant Capital Group are forming a joint venture, Defiant Interchange Advisors. It will offer merger and acquisition advisory to midmarket companies worth $25 million to $500 million.
And Sanctuary Wealth, based in Indianapolis, has formed a joint venture called 6 Degrees with two of its Texas-based partner firms, Concenture Wealth Management and G Squared Private Wealth. It will help advisors start independent practices with the support of a larger network, provide exit strategies for advisors looking to retire and help partner firms grow through mergers and acquisitions.
John Eubanks, director at Park Sutton Advisors in New York, which specializes in M&A advisory for wealth management and asset management firms, said that on the surface, this move is a pretty easy call for firms.
“A wealth management advisor may be an advisor to an individual who owns a manufacturing company,” he said. “When that business owner client gets ready to sell the company, the wealth management advisor wants to be in a position to manage the proceeds of the sale.”
But Eubanks pointed out that a lot of wealth managers don’t have people with the necessary experience.
“It’s hard to find people who have M&A experience to come into a wealth management firm and launch this type of service. It’s harder to accomplish than it actually sounds,” he said.
But if experienced merger professionals can be found, he said, this service can strengthen bonds to a client base.
“It can create some real stickiness to the clients, the less they have to rely on other advisors,” Eubanks said. “It probably increases the chances that that wealth management firm is going to capture the proceeds from the sale to manage on behalf of that client.”
The larger wealth management firms have investment banks that advise clients on M&A, Eubanks noted, singling out Mariner Wealth and Creative Planning as examples.
For Sanctuary, CEO Jim Dickson said having partners outside its traditional focus helps ease the way for deals.
“It gives us a local face and relationship,” he said. “Now in Texas we have people with local wisdom. We can invest together and expand our M&A capabilities. It allows [the partner firms] to grow.” And that’s in an inorganic way, he said, since most of their growth tends to be organic.
Eubanks said previously, when Sanctuary would go into an M&A situation, it would take about a year to consummate a deal.
“But if we are brought in by a local partner, it could be just three or four months,” he said. “It was just an evolution. We saw this coming.”
Dickson also said there’s likely to be a redirecting of capital. “Capital will go to the large firms but will be poured down to the local level,” he said.
The M&A craze among RIAs, he pointed out, has been fueled by large private equity firms, with those like Sanctuary and Dynasty the benefactors. Now the partner firms want their opportunities to participate in merger activity.
Dickson also said demographics are driving RIAs to look for partners and fueling the trend toward these types of joint ventures.
“People are looking at succession strategies,” he said. “A lot of advisors are in their late 50s and want to find a partner they can work with. It’s yet another Baby Boomer trend.”
