Wealth management has been the focus of Lightyear Capital since its founding in 2000 by Don Marron, a financier, art collector and lifelong New Yorker. Prior to launching the private equity firm, Marron was CEO of PaineWebber, the retail brokerage firm, and engineered the firm’s sale to UBS. Marron passed away in 2019.
But brokerage expertise still flows through his firm. Mark Vassallo, managing partner and member of Lightyear’s investment committee, worked alongside Marron at PaineWebber and had an integral role in negotiating and managing the sale. Recently, Lightyear brought on Tom Naratil, former co-president of UBS Global Wealth Management, as an operating partner.
“In today’s environment for financial services, there are obviously a significant number of great opportunities and management teams and companies that are looking for growth capital,” Naratil said. “And there’s a lot of growth capital out there as well. But what portfolio companies are looking for is more than just a check. They also want to see that domain expertise.”
Lightyear put that insider expertise to work when it completed its first deal in the wealth management space, acquiring three independent broker/dealers from insurance giant ING in 2010. The private equity firm rebranded the business to Cetera Financial Group. In 2012, with Lightyear’s help, Cetera acquired Genworth Financial Investment Services.
“Once there really was a separation between manufacturing and distribution, these (insurance) firms began to divest what ultimately became non-core,” said Max Rakhlin, a managing director at Lightyear, who works on the wealth management investments.
“Because of the legacy of [Lightyear] and the expertise, knowing too much in effect, the firm was able to unlock these businesses and really stand them up. In many ways, they were at scale startups that just didn’t have control over their own destiny.”
The four b/ds were bought by RCS Capital in 2014, the independent b/d network led by Nicholas Schorsch, in a $1.15 billion cash deal, a nice return for Lightyear and what many in the industry said was a steep multiple at the time.
Lightyear made another splash in 2016, when it picked up another b/d network, Advisor Group, from AIG. Like Cetera, that involved pulling a network of advisors out of an insurance company and standing it up on its own. They hired current CEO Jamie Price, the former head of the wealth management advisor group of the Americas at UBS.
In 2019, they sold the network to private equity firm Reverence Capital Partners for $2.3 billion.
Lightyear has since invested in several registered investment advisory firms, including Wealth Enhancement Group, and currently owns Allworth Financial and Cerity Partners, both fast-growing RIAs and active acquirers.
Lightyear will typically come in as a majority owner, and Vassallo says there’s no prescribed time horizon for exiting.
He acknowledges that in the early days of private equity investment in the industry, there was angst over taking private capital and how it would impact the company’s work with advisors and its duty to clients, and what a “monetization event” would mean for everyone involved—good and bad.
“I think all that anxiety is now gone because there’s adequate proof points that, in fact, these businesses grow,” he said. “They do better by the advisor, they do better by the client, they’re putting in adequate compliance and technology structures. But there was this big, ‘Please don’t ever exit until everyone (is in a position to do) really well.’ And then, all of a sudden, it’s expected that firms will go through their lifecycle and have multiple partners as they continue to grow and scale.”
With billions of dollars invested, PE firms are driving the industry's rapid consolidation. Here are some of the most active participants:
Thomas H. Lee Partners - The Active Operators
Genstar - The Majority Partner
Bain - The Structured Dealmaker
Stone Point Capital - More Opportunities Than Capital
