A private equity-backed registered investment advisor that made its first foray into M&A deals last year added 16 teams of financial advisors with $941 million in client assets in 2022.
Wealthcare Advisory Partners, a West Chester, Pennsylvania-based RIA that uses LPL Financial as its brokerage, topped 170 advisors and reached a new high of $5 billion in client assets after making three deals and recruiting more than a dozen other teams, President Matt Regan said in an interview last week. Private equity firm NewSpring Holdings has owned Wealthcare since 2014, when the firm was much better known for the goals-based planning software platform developed by its sister company, GDX360.
Like other LPL hybrid RIAs that are fueling the brokerage's record headcount, Wealthcare Advisory has been adding to its ranks through a combination of recruiting and M&A. Out of the three deals comprising $330 million in combined client assets, one of the teams had already joined Wealthcare's RIA before being acquired by the firm, Regan said. Wealthcare's board approved his proposal in 2020 to increase the firm's value by investing in advisory practices, in addition to its existing models of recruiting and outsourcing technology and other services.
"The one metric that we track most closely here is how much advisors grow net of market appreciation," Regan said. He noted that the firm's advisors usually hit 13% to 17% per year and reached the "pretty stunning number" of 11% last year despite the slump in stocks and bonds making many people wary of opening new accounts or adding to their existing portfolios.
"I think that's the most powerful message that we send," Regan added. "We are by no means the cheapest offering out there."
Other LPL hybrid RIAs with outside backers, including Private Advisor Group and Wealth Enhancement Group, attract many teams through the external financing and offers of "back-end value to advisors to help them grow their practices," according to recruiter Jodie Papike of Cross-Search.
"It's really the fact that they have the capital to get the deal done on the front end and on the back end continue to grow it," she said.
Wealthcare traces its roots to 1999, when the company launched software for the wealth management industry and began amassing a dozen different patents involving planning and investment goals. Hundreds of advisors use the software and its more than 500 managed portfolios, either independently or through Wealthcare customers such as Wells Fargo Advisors and its "Envision" process and the RIA acquirer once known as United Capital.
The software applies the probability algorithms known as Monte Carlo methods to planning. GDX360, which stands for "goals-driven experience," also picked up new integrations with six other vendors in 2022, including customer relationship management software firm Wealthbox, content marketing company TIFIN Clout and Medicare planning tool Healthpilot.
The RIA side of the business spanned $800 million at the time of NewSpring's first investment in the firm nine years ago, according to a press release at the time. Last year, Wealthcare acquired advisory practices Eagle Financial, Fellows Financial Group and Sommers Financial Management on top of recruiting at least 14 other teams with a combined $660 million in client assets. Wealthcare also started a group for younger planners called NextGen Advisor Group alongside an existing one for female advisors called Wealthcare Women's Forum.
