Pathstone paying more than $294 million to acquire $17B RIA Veritable

Multifamily office Pathstone will pass $100 billion in client assets under advisement with its largest deal of the year to acquire a firm managing about $75 million per client household.

Englewood, New Jersey-based Pathstone — the No. 4 firm listed on Financial Planning's latest annual rankings of the largest fee-only registered investment advisory firms in the country — is acquiring suburban Philadelphia-based Veritable, a multifamily office whose website states it has more than $17 billion in assets under management from 200 client relationships. The parties didn't disclose all of the terms of the deal in their July 17 announcement, but they expect it to close late in the third quarter. Pathstone will pay a subsidiary of giant asset manager Affiliated Managers Group $294 million to buy out its portion of equity in Veritable. 

Pathstone's milestone upon the close of the deal "really underscores how big the market opportunity is in the ultrahigh net worth wealth segment," said Peter Nesvold, a partner of RIA M&A investment banking firm Republic Capital Group. The growth of Pathstone and other multifamily offices like Cresset and AlTi Tiedemann Global reflect an area of wealth management in which the number of client assets defining the word "scale" keeps increasing, Nesvold said in an interview.

"To be a true multifamily office, the breadth of offerings you have to be able to provide really does necessitate operating at scale," he said, noting that the more typically sized deals fold firms with about $3 billion to $7 billion in client assets into larger RIAs. "They're going to find it harder to compete if the client is looking for the full suite of family office services."

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Despite lower volumes of M&A deals in the industry during the second quarter, the rising average size of firms changing hands displays the resilience of wealth management acquisitions amid lingering inflation and concerns about a potential recession, according to experts.

Deals unveiled last week offered the latest examples of significant investments. Hybrid RIA consolidator Prime Capital Investment Advisors secured a minority growth investment from private equity firm Abry Partners, while major LPL Financial branch The Wealth Consulting Group acquired a firm called V Wealth that boosted its size above $7 billion in client assets. Another RIA consolidator, Captrust, acquired an ultrahigh net worth firm called Southern Wealth Management, which has $2.3 billion in client assets, in its fifth deal of 2023.

Newton Square, Pennsylvania-based Veritable launched in 1986 under the name Stolper & Co. before its 1997 rebranding as Hawthorn, a subsidiary of PNC Bank, according to the firm's Form ADV brochure with the Securities and Exchange Commission. The firm took its current name in 2004, when the partners of the firm bought out PNC's interest. 

Eight years later, a subsidiary of asset management firm Affiliated Managers acquired an equity interest of undisclosed size in Veritable, with the firm's senior leadership retaining the remaining interest in the firm. Today, Veritable has at least 87 employees, with 28 registered with state regulators as investment advisory representatives, the Form ADV said.

"We are culturally and philosophically aligned with Pathstone, and this combination will allow us to further deliver on our mission and execute on the generational promise we've made to our clients," Veritable founder Michael Stolper, who's becoming a co-chairman of Pathstone as part of the deal, said in a statement. "While we are proud of what we have built as Veritable, we look forward to this next chapter being one of continued growth, collaboration, and delivering a truly differentiated solution in the independent RIA space." 

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Affiliated Managers, a publicly traded manager with $668 billion in AUM, will use the gross cash proceeds from the deal to repurchase shares in itself, pay off debt and invest in future growth initiatives, according to the firm. At the time of the asset manager's investment into Veritable, the RIA had about $10 billion in AUM, according to the 2012 announcement.

"We are pleased to have had a strong partnership with Veritable, magnifying its growth and success over time," Affiliated Managers CEO Jay Horgen said in a statement. "The Veritable partners and AMG recognized the strategic benefits that would result from a combination with Pathstone, and given our alignment and partnership approach, we supported this successful outcome for all stakeholders, including Veritable's clients, partners, and employees, as well as AMG." 

Pathstone has made at least two other deals this year acquiring firms with at least $1 billion in client assets after folding in a trust firm with $35 billion in December. Private equity firm Kelso & Company invested an undisclosed amount into Pathstone in a deal announced this past March, joining existing equity holder Lovell Minnick Partners. An RIA owned by New York Life Insurance has also provided term loan financing to Pathstone, according to its Form ADV brochure.

"Veritable changed everything in the UHNW advisory business — they have a rich history of creating what today we call a multifamily office, and they understand what it means to deliver differentiating advice to UHNW families," Pathsone CEO Matthew Fleissig said in a statement. "Together we will leverage the combined knowledge and skillsets of our organizations to provide an enhanced level of service to our clients, creating a firm with scale that is unmatched in our industry."