Pathstone to acquire $2 billion RIA catering to tech entrepreneurs

One of the largest fee-only registered investment advisory firms will top $80 billion in assets after the closing of its latest billion-dollar deal.

Private equity-backed Pathstone agreed to acquire Austin, Texas-based Brainard Capital Management, an RIA catering to ultrahigh net worth clients who are primarily technology entrepreneurs with about $2 billion in total client assets, the firms said on May 1. The deal marks Pathstone's second of the year for a firm with at least $1 billion in client assets, and it follows a new investment of undisclosed size into Pathstone in March by private equity firm Kelso & Co. As a firm with offices in 17 cities with 180 shareholders and 350 employees, Pathstone was the No. 4 firm on Financial Planning's RIA Leaders rankings last year.

"The strategic plan is to try to become the family office or the national brand for ultrahigh net worth clients," Pathstone CEO Matt Fleissig said in an interview.

Other company announcements last week underscore the sheer number of billion-dollar RIAs that are changing hands as private equity-backed consolidators like Pathstone and its rivals snap up large advisory practices. 

On April 25, a newly launched firm called Modern Wealth Management said it had acquired the assets of Barber Financial Group, which has $1.5 billion in client assets. The following day, Wealth Enhancement Group announced it had acquired New Era Financial Advisors, which has six advisors and $1.1 billion. The latter deal was Wealth Enhancement's second billion-dollar deal of 2023, as well.

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Seeking scale
Despite some signs that the overall volume of deals is dropping off this year amid worries about the economy falling into a recession, most experts expect M&A transactions to continue at a significant pace for the foreseeable future. 

The addressable market for RIA acquisitions amounts to firms with $3.7 trillion in client assets, including about $2.6 trillion tied to looming advisor retirements, $588 billion from "growth-challenged" advisory practices seeking scale and $506 billion from moves into the independent channel, Stephen Caruso, a research analyst in the wealth management division of consulting firm Cerulli Associates, noted in a webinar last week.

"Between the last decade of growth and the availability of private capital to supercharge that growth, we're going to see this continue over the next decade," Caruso said. "Over time, we're going to see capital continue to invest, and, really, where capital is coming is the market opportunity."

Pathstone's latest incoming RIA has 10 employees under founder Owen Brainard and Managing Director Clark Davis. Brainard's RIA lists $853.8 million in assets under management from a client base that includes 93 high net worth individuals, according to its latest SEC Form ADV. It derives the remainder of its $2 billion in client assets from accounts that it advises on that are held outside the firm, according to Fleissig. Investment bank Republic Capital Group acted as the advisor to Brainard during its search for a buyer.

"After getting to know the Pathstone team, we couldn't be more excited to join forces with a group that we are both culturally and philosophically aligned with," Brainard said in a statement. "We believe that combining the resources and skill sets of our organizations will enhance our ability to service our clients at all stages of their wealth planning."

Kelso's investment in Pathstone came four years after an earlier influx from Lovell Minnick Partners. Pathstone also has term loan financing from Madison Capital Funding, an RIA owned by New York Life Insurance, according to its Form ADV brochure. In December, Pathstone acquired trust company Willow Street, which has $35 billion in assets under administration.