Wealth Enhancement Group, a $11.3 billion wealth manager expanding throughout the country, said Thursday it acquired a firm with over a billion dollars in client assets.
Private equity-backed Wealth Enhancement Group agreed to buy Baltimore-based Planning Solutions Group, an independent, hybrid registered investment advisor and broker/dealer with $1.3 billion in assets. The acquisition was the 12th deal Wealth Enhancement Group has done since the end of 2013. Terms of the deal, expected to close Aug. 1, were not disclosed.
Planning Solutions Group will become the wealth manager's first office in the Baltimore and Washington D.C. area, as it continues a planned expansion on the East Coast and works toward its stated goal of establishing a national brand. Planning Solutions Group, which also has an office in Virginia Beach, Va., has 15 advisors.
"They have had great success, and we will help them take that growth to new levels with our collaborative approach to financial planning, portfolio management and back-office operations,” Wealth Enhancement Group CEO Jeff Dekko said in a statement.
In addition to new assets through acquisitions, Wealth Enhancement Group's advisors have organically grown by over $1 billion in 2017 and 2018, respectively, the company said.
Like other wealth managers seeking the benefits of scale, Wealth Enhancement Group sought capital to help it acquire other firms and grow its revenue. In 2015, Lightyear Capital, a private equity firm that specializes in financial services companies, bought the RIA and has helped it do a dozen deals in half as many years. That is a feverish pace compared with the majority of other RIAs, even in a frantic M&A environment for wealth managers.
Still, just a handful of prolific buyers continue to push deal volume in the wealth management industry to new highs. Barring a cataclysmic event, Carolyn Armitage, managing director at Echelon Partners, said the investment bank expects 2019 to be "another blockbuster year."
But not all capital fueling wealth management mergers and acquisitions will be equal, according to a top consolidator.
Rajini Kodialam, the co-founder and chief operating officer of publicly traded Focus Financial, also an acquirer of RIA firms, warned RIAs against taking money from private equity, because the interests between owners and advisors, not to mention clients, are often not aligned.
Out of the 49 deals involving RIAs in the first quarter of this year, the highest volume in any three-month period since 2013, according to Echelon Partners, Focus Financial Partners accounted for 11 of them. It currently has stakes in 62 independent RIAs, which it provides supporting capital and services to in exchange for part of their revenue, but that is a minuscule portion of the market, Focus executives said at the Capital Markets Financial Technology Conference on Thursday. Focus said there are 1,000 RIAs it can potentially partner with, and through them, another 5,000 potential mergers or acquisitions.
As successful as Focus has been at consolidating RIAs, some in the industry think wealth managers should pause before selling equity to raise capital. Earlier this week, Dynasty Financial Partners said it would begin a forgivable note program for so-called breakaway advisors leaving b/ds. But unlike at a wirehouse, the advisor is not an employee of Dynasty, and once the note expires, they revert to owning 100% of their profitability.
Fidelity Clearing & Custody Solutions also recently said it would begin offering discounted private loans to RIAs in need of capital through Merchant Investment Management, a lender and service provider to money management firms.
Neither Wealth Enhancement Group nor Lightyear could be reached to comment.
