Sammons investing in $5B RIA as some insurers double down on wealth

Annuity and insurance firm Sammons Financial Group is buying a major registered investment advisory firm that's seeking to double its size over the next two years.

West Des Moines, Iowa-based Sammons secured an agreement to acquire NorthRock Partners — a fee-only Minneapolis-based RIA with 20 financial advisors and 117 other employees managing $5 billion in client assets — the firms said Oct. 20. While Sammons is best known in the industry for annuities and other insurance products, the firm and a handful of other insurers have taken the opposite tack from most that have sold off their wealth management holdings in recent years amid tougher regulatory scrutiny and more competition. Sammons and a few others are investing in the adjacent financial service rather than leaving wealth management. 

In 2021, Sammons purchased turnkey asset management and wealthtech firm Beacon Capital Management, which had about $3 billion in client assets at the time of the announcement. Today, Beacon manages more than $5.1 billion, according to its website.

NorthRock grew fivefold to its current size from $1 billion in 2017, with capital assistance since April 2019 from minority RIA investor firm Emigrant Partners. NorthRock's prior investor liquidated its equity position in the firm in the transaction, which has undisclosed financial terms and an expected formal closing date in December, according to NorthRock CEO Rob Nelson. The RIA works with 1,500 clients from professional sports, corporate executive roles, business owners and family offices, and NorthRock has created divisions for athletes and entertainers, hockey players and philanthropists and foundations.

Nelson's team plans to meet its expansion goal through M&A deals, new clients and deeper ties with existing customers.

"We're building an organization that's designed to be sustainable for decades," Nelson said in an interview. "It was the right time to find the partner to take a long-term perspective, and Sammons was the right fit."

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Jenny Souza, the CEO of Emigrant, expressed her congratulations in a LinkedIn comment to NorthRock on its post unveiling the Sammons deal last week.

"The evolution of your business over the past several years has been nothing short of remarkable! It has been a pleasure working with you, and we are excited for all that's to come from your new partnership with Sammons Financial Group Companies," Souza said.

Insurance companies such as Northwestern Mutual, Equitable Financial Life Insurance and MassMutual maintain large wealth management arms, even as competitors like Securian Financial Group, John Hancock and Jackson National Life Insurance have spun off most of their advisory holdings. In the RIA channel specifically, insurer NFP backs $20 billion firm Wealthspire, while giant insurance brokerage Lockton sold its retirement business spanning $110 billion in assets to Creative Planning in 2021. In the latter deal, the two firms created "Lockton Retirement Services, an Offering of Creative Planning" and Lockton received an equity position in Creative.

The success of the collaboration between an RIA with an insurance firm as a parent revolves around "whether the insurance company will want to use the RIA as distribution" for its products, according to investment banker Peter Nesvold, a partner at Republic Capital Group. While most RIAs "don't want to be in that business," the structure works best when the parent firm and the incoming subsidiary help to enlarge each others' services, Nesvold said in an interview.

"We haven't seen a lot of those types of deals recently," he said. "There is something to be said about the pairing. … It's going to be increasingly important for a lot of clients, so it makes sense to combine wealth management with other financial services."

There "wasn't one element of this partnership that we talked about anything with cross-product selling" from the other firms owned by Sammons, Nelson said, adding that the firm gives its subsidiaries a "high level of autonomy."

Sammons' employee stock ownership plan appealed to NorthRock, and the future parent company's capital will enable the RIA to buy two to four large firms each year while bolstering the client base, Nelson said. NorthRock will unveil the purchase of an advisory firm with around $1 billion in client assets in coming weeks, he noted. In addition, the firm anticipates adding $500 million in new assets from current clients, plus $400 million to $700 million in new flows.

"The depth of what we have I think is really where the industry is going right now," Nelson said.

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As a firm, Sammons owns Midland National Life Insurance Company, North American Company for Life and Health Insurance and retirement firm Sammons Institutional Group in addition to Beacon, according to its website. The firm has $117 billion in total assets, with $360.4 billion worth of in-force life insurance and more than 605,000 annuity contracts. 

After the first half of the year, Sammons Financial Companies ranked No. 15  among annuity issuers in 2023 with more than $4.3 billion in sales, according to industry research organization LIMRA's sales data.

"We've been carefully assessing market opportunities to grow our successful business — specifically in wealth management, which is a natural fit for us given our economic strength, stability and decades' long track-record of leadership in financial services," Sammons CEO Esfand Dinshaw said in a statement. "As we defined our strategy, we conducted a comprehensive search, and NorthRock Partners consistently rose to the top of our list."