GeoWealth acquires First Ascent as M&A fever spreads to TAMPs

In marriages as well as mergers, it's often good when each party has different strengths. 

GeoWealth, a Chicago-based TAMP known for its technology, announced on Thursday that it had acquired First Ascent Asset Management, a smaller TAMP in Denver known for its service. GeoWealth is not disclosing how much it spent on the acquisition, but the firm's president and CEO, Colin Falls, told Financial Planning it was a "primarily cash" deal with an equity component. 

"I'm very excited," Falls said. "When we entered the opportunity, the excitement was around the opportunity to get into a different market with a new offering. I think now that's changed to excitement to work with [First Ascent CEO] Scott [MacKillop] and the team — this is just a great group of people with an entrepreneurial spirit."

Of the two firms, GeoWealth was decidedly the bigger fish. According to the TAMP's most recent ADV form, filed in March 2022, GeoWealth had 39 employees and a total of $7.89 billion in assets under management. First Ascent, as of March 2023, had 12 employees and $1.37 billion in AUM. 

Today, GeoWealth said, those numbers are significantly higher. The TAMP said it now employs about 90 workers, and after its acquisition of First Ascent, its combined total client assets are now $21 billion.

GeoWealth also has backers with deep pockets. Its majority owner is the private equity firm Globe Resources Group of Wichita, Kansas, and a minority stake is owned by JPMorgan Chase and Kayne Anderson, an alternative investment firm in New York City.

In recent years, TAMPs, also known as model marketplaces, have emerged as a place for registered investment advisors to outsource some of the nuts-and-bolts work of portfolio management, such as reporting and accounting, so they can concentrate on working with clients.

"Advisors have very good recipes for their portfolios, but so do these TAMPS who are spending all day doing due diligence, portfolio research and all these other things that an advisor usually doesn't have time for when they're acquiring clients, servicing clients and meeting with clients," said Scott Smith, the director of advice relationships at Cerulli Associates, a research group in Boston that studies the financial industry.

TAMPs managed roughly $2.5 trillion in assets last fall, according to a study in January from The Wealth Advisor. Advisors have moved roughly $300 billion in net new client assets onto the platforms since 2020. Envestnet, the gorilla of the industry, has $341.1 billion in assets under management and $367.4 billion in assets under advisement (meaning assets it doesn't formally manage). Competitors including AssetMark and Orion also appeal to advisors who ditch wirehouses to set up their own advisory practices. 

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Different TAMPs have different talents. GeoWealth prides itself on its user-friendly technology, which allows advisors to customize models of their clients' investments. First Ascent, on the other hand, provides a wider array of services for RIAs. Falls called the combination of the two companies — high-tech and full-service — a "natural alignment."

"From a synergy standpoint, we get to go across the entire RIA spectrum with the same technology platform in two different service models," Falls said.

First Ascent CEO Scott MacKillop expressed excitement as well.

"When we first met the GeoWealth team, I remarked that First Ascent should have been built on top of its integrated technology — that's how seamless and user-friendly it is," MacKillop said in a statement. "I'm thrilled to join forces with GeoWealth as we share a dedication to outstanding service and empowering advisors to deliver top-tier investment management programs."

The deal comes as wealth management remains a hotbed of mergers and acquisitions. In 2022, there were 341 M&A transactions in the industry, an 11.1% increase from the previous year, according to Echelon Partners, an investment bank in Manhattan Beach, California — and that was after a nearly 50%  increase in 2021.

Smith sees the GeoWealth-First Ascent deal as just one example of the broader trend of consolidation in the fragmented wealth management space.

"I think we're seeing a transition from 10 years ago, when everybody wanted to pick and choose all their own components," he said. "If you can get more than one thing from a single provider and they work very well together right out of the box … you're going to get very comfortable very quickly."

But Smith also saw the logic of this particular union.

"I think the key here is creating a path of least resistance for advisors and for the firms themselves," he said. "Scott has built a tremendous brand at First Ascent based on the actual ingredients and recipes that go into the portfolio, but GeoWealth is supplying a great kitchen and great tools, if you will."

From now on, First Ascent will function as an "independent subsidiary" of GeoWealth, the companies said in their joint statement. The smaller firm will keep its name, as well as its investment offerings, service model and flat-fee schedule.

Falls said bringing First Ascent into the fold gave him a familiar sense of promise.

"It feels like some of the earlier days at GeoWealth," the CEO said. "The idea of integrating that type of excitement … into GeoWealth, and expanding to a market that we're not in — it's just a great feeling and we're very optimistic about how this could help companies."