$1.6B family-owned firm seeks to grow with Wealth Enhancement Group

In the latest deal reflecting a family-owned firm folding into an RIA aggregator, Wealth Enhancement Group agreed to make its ninth acquisition of 2022.

Ronald Sadoff and his two sons, Bryan and Michael, of Sadoff Investment Management — a Milwaukee-based registered investment advisor with three support staff members and more than $1.6 billion in client assets — will join Wealth Enhancement under a deal at an undisclosed price, the parties said on Sept. 15. The agreement will close by the end of the month, Michael Sadoff said in an interview. 

Fresh off a valuation above $2 billion under a recapitalization last year by Canadian investment manager Onex Corporation, Wealth Enhancement has reached $57 billion in client assets as one of the most active acquirers in the industry. For the Sadoffs, Wealth Enhancement emerged as the best fit among many choices for potential deal partners after the family firm began exploring an acquisition last year. A new outside owner can help large practices reach more scale by taking operational tasks off their hands with technology and staff resources.

Compliance operations and other services including lead generation, tech and specialty planning teams to assist the Sadoffs with their base of predominantly high net worth clients led them to pick Wealth Enhancement. The Sadoffs tapped Advice Dynamics Partners for advice in their selection and Alston & Bird for legal counsel.

"Running the business was taking more of our time than working with clients and managing the money," Sadoff said. "We were told there's a whole flurry of firms like Wealth Enhancement Group that can help us."

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A growing number of prospective acquirers — often deploying private equity capital — are offering practices flexibility in their setup in an effort to attract more teams that have upwards of $1 billion in client assets. After the first half of the year, Wealth Enhancement trailed only Creative Planning, Mercer Advisors, Beacon Pointe Advisors and Mariner Wealth Advisors in the volume of acquisitions, according to investment bank and consulting firm Echelon Partners. Despite slight drop offs in the first two quarters, wealth management M&A remains on pace to set a record for deal volume for the 10th straight year.

"Any future slowdown, driven by macroeconomic headwinds, will likely be transitory and result in pent up demand in future years," according to Echelon's second-quarter deal report. "We continue to believe we are in the early innings of a long cycle of RIA consolidation."

Firms that have reached a substantial size and have the desire and the business model to grow more quickly are still looking for buyers. In a panel of dealmakers at last week's Future Proof Festival, Penny Phillips of practice management-focused RIA aggregator Journey Strategic Wealth compared the planning field to the travel industry. These days, travelers use discount websites to get airline flights or "hire a travel concierge to book your flights and create an experience and curate an exciting trip for you," Phillips said. In wealth management, consumers are making a similar decision "between lowest cost or highest value," she added.

"Advisors that want to differentiate still have the opportunity to do so by showing the highest value," Phillips said. "And simply that means getting deeper within the vertical that you're serving."

The Sadoffs are focusing primarily on high net worth clients, and they've been doing so for more than four decades after Ronald first launched the firm in 1978. The firm's internal succession figured in their choice of Wealth Enhancement as well.

"Look at the way Ron built the family business, brought Bryan and Michael in and set up Sadoff Investment Management for many decades of success," Wealth Enhancement Chief Investments and Business Development Officer Jim Cahn said in a prepared statement. "They're not just taking care of clients today. They're making sure they can take care of clients tomorrow."