At this time last year, CI Financial hadn’t set foot in the U.S. RIA industry.
Yet, by the end of 2020, the company had outpaced Hightower Advisors and Focus Financial as the industry’s fastest-growing RIA consolidator, according to quarterly
The Toronto-based wealth and asset manager, which announced its 14th RIA acquisition this week, has quickly assembled a $30 billion U.S. wealth management business, with no sign of slowing down.
“I think you'll see us grow at a similar rate in 2021 as 2020,” says Kurt MacAlpine, CEO of CI Financial, which had $182 billion in assets in Canada and the U.S. at the end of December. “Maybe a little bit faster.”
What remains to be seen: How will such a quickly growing company ultimately integrate its new firms.
Its biggest deal
CI Financial announced the purchase of Segall Bryant & Hamill on Jan 25. With 122 employees, the Chicago-based firm has $23 billion in assets across multiple lines of business, including $6 billion in wealth management.
“This is the largest RIA that we've acquired,” MacAlpine says.
CI Financial is one of many dealmakers in an RIA market chockablock with private equity investors and RIA consolidators.
Even after a brief slowdown in deals due to the coronavirus pandemic, the number of RIA acquisitions rose last year for the eighth consecutive year, according to Echelon Partners. In the last three months of 2020, there were 69 RIA acquisitions.
“What these consolidators have in their favor is that there is this need for scale and sustainability,” says Carolyn Armitage, managing director at Echelon Partners. RIA business owners are looking to boost efficiencies, purchase more expensive technology packages and enhance cybersecurity, she says. Many of them are also trying to arrange for a succession plan.
Some of these players are acquisition-minded RIAs like Creative Planning or Allworth Financial, which are both backed by private equity money. Companies like Hightower Advisors and Focus Financial offer more room for RIAs to operate independently, with the backing and resources of the larger platforms.
“There might be some new entrants into this space,” says Scott Collins, who was one of four TD Ameritrade employees Allworth
CI Financial is emerging as a new and major player amid all the noise, largely because of the speed with which they’ve moved and the size of deals they’ve signed.
“CI Financial has come on extremely strong,” Armitage says, noting that no one really knew who they were in years prior.
Their deals from 2020 have included $4.7 billion RGT Wealth Advisors, $4.5 billion Balasa Dinverno Foltz and $2.9 billion Roosevelt Wealth Management.
Work ahead
CI’s entrance into U.S. wealth management is part of a three-part strategy MacAlpine developed after joining the company at the end of 2019: modernize asset management, expand wealth management and globalize the company.
CI Financial purchases anywhere from a majority to full stake in each RIA, and pays in cash and equity, depending on preferences of the firms, MacAlpine says. Equity can be for the individual business or the larger corporation, which was listed on the NYSE last year.
While CI Financial is evidently putting resources and funding into its deals, most of the work happens after the agreement is made. Teams have to integrate companies together and blend personalities, different managing styles and clientele.
For CI Financial’s part, it is still deciding what its U.S. wealth platform will look like. MacAlpine says they want to integrate the RIAs while also maintaining each firm’s unique position in the marketplace and allowing them to operate independently.
To that end, MacAlpine is launching an executive committee at the asset manager that will include the RIAs’ business heads. They will set forth an end date for the integration and develop a strategy for what the platform will look like and the plan to accomplish it.
“I don't know what it will look like yet, because we're just in the early stages,” he says.
Waddell & Reed had been working in recent years to transform its “proprietary broker-dealer into a fully competitive independent wealth manager.”
Armitage says CI Financial’s strategy sounds like a “business-friendly approach,” but said it may be challenging to integrate a new platform if that plan hadn’t already been in place.
“I personally have been through numerous firm consolidations, both from the inside and from the outside, and it takes a great deal of transformation to bring together groups that have historically done things slightly different,” Armitage says.
MacAlpine emphasized that CI Financial will be a permanent investor for all RIAs it purchases, and that it will invest and add resources to them, without forcing them into a certain model.
“We have this ultimate goal of being the most client-centric organization. We also want to build the leading integrated private wealth platform in the U.S.,” MacAlpine says.
CI Financial is the primary financial advisor for 330,000 Canadian families, according to the company.
