Pathstone acquires $35B trust firm amid industry's estate planning push

One of the largest fee-only registered investment advisors purchased a giant trust and fiduciary services firm, as estate planning needs prompt more firms to bring the services in-house.

Pathstone — a private equity-backed family office that is the No. 4 firm on Financial Planning's RIA Leaders rankings of the biggest fee-only planning companies — acquired Willow Street and its $35 billion in assets under administration on Dec. 1 for an undisclosed amount, the firms said earlier this month. The deal displays the approach of Englewood, New Jersey-based Pathstone as a "single family office for multiple families" seeking to answer a "constant question" among its ultrahigh net worth clients about passing down wealth, CEO Matt Fleissig said.

"You really have to be a multigenerational firm," Fleissig said in an interview. "A large missing piece of the puzzle to be a multigenerational firm, in our opinion, was having trust services in our business."

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Industry publication Citywire RIA first reported the deal, which comes as the industry refines its strategies in light of the looming transfer of tens of trillions of dollars in assets from Baby Boomers. Trusts and estate planning play a major role in navigating challenges such as divorce cases, family succession and tax avoidance. Like other aspects of private banking, the services also represent an area that wirehouse and employee financial advisors can tap into through their own firms, while independent advisors often send clients to outside estate and trust firms.

Jackson, Wyoming-based Willow Street, for example, refers clients among its group of 170 families in the U.S. and abroad to certain RIAs when they have investment management needs, according to CEO Phil Harrington. Neither those arrangements nor its leadership and service teams across its roughly 30 employees will change after the Pathstone deal, he said.

"We act as sister companies with Pathstone," Harrington said. "We share common ownership, but we're able to execute largely independently."

Pathstone's move came five days before the Canadian arm of Raymond James purchased a trust company and four years after independent wealth management firm Kestra Holdings acquired a large trust firm it has since rebranded as Arden Trust Company. The unit of Kestra, which has two brokerages, a breakaway channel and an RIA M&A arm under its umbrella, has 110 employees in seven offices with 5,000 trust accounts and $10 billion in AUA. 

Trusts are "part of the wealth management world that hasn't been commoditized," John Amore, Kestra's executive vice president of wealth management, said in an interview. "Because it's an extension of the Kestra family, our advisors can get more service and more attention than they would get if they went to another company."

Independent financial advisor Anh Tran of SageMint Wealth and John Wong of Modern Wealth Law are connecting the two separate businesses together this month, in terms of moving their offices to the same location in Irvine, California. Tran and Wong have been married for eight years and collaborating on each other's businesses for longer, they said in an interview.

"We've noticed in the last five or six years or so that we're just sharing more and more clients," Tran said. "We've found that clients really do appreciate that we work together, so that they're able to get financial planning and estate planning advice."

Professionals in the two fields find it "difficult to bring up one without talking about the other," Wong said, noting that outside successor trustees are likely to take the clients' books of business elsewhere in the future as well.

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Pathstone has reached about $40 billion in client assets after its own growth and other acquisitions, such as its purchase earlier this year of a portion of Eaton Vance WaterOak Advisors from Morgan Stanley spanning $3 billion in holdings. In May, it acquired technology firm Advisor Partners, which provides tax optimization and automation in investments to wealth management firms, independent advisors and other family offices.

In addition to the minority-stake investment from private equity firm Lovell Minnick Partners, Pathstone has received a term loan from Madison Capital Funding, which is an RIA ultimately owned by New York Life Insurance, according to the firm's latest Form ADV filing with the Securities and Exchange Commission. Pathstone had previously referred some estate planning and other business to New York Private Trust and used National Advisors Trust for certain trust services, the document said.

The company didn't immediately respond to a follow-up request after the interview to know whether those agreements remain in place after the deal.

Pathstone's future as a business moving forward with Willow Street revolves around "talent and culture and people," said Fleissig.

"There's this generational opportunity in the ultrahigh net worth space where there is not a leading independent firm," he said. "By doing this, it really puts us into a category of one."