Integrated Partners, a Waltham, Mass.–based hybrid registered investment advisor with $13 billion in assets, may soon join the growing list of RIA acquirers. Rob Sandrew, Integrated’s chief growth officer, recently said the firm expects to expand into the RIA M&A space for the first time since its founding in 1996.
Integrated has grown significantly over the past several years, increasing its assets from about $8 billion in 2019 to $13 billion today. Sandrew said the firm has been seeing larger teams interested in its model, with the average group joining having over $200 million in assets.
“There’s a lot of firms $5 billion and below that are doing very well, but they do recognize that firms like ours that are $10 billion-plus, we continue to add on capabilities and continue to go where the puck is going, rather than where it is,” Sandrew said.
The firm recently added Missouri-based Nold Bryant, a practice with $230 million in client assets, to the platform from Stifel. The practice is run by advisors Christian Bryant, 28, and Austin Nold, 36, who have decided to drop their FINRA licenses and go fee-only under Integrated’s RIA.
Integrated is focused on working with independent, entrepreneurial-driven advisors that are planning oriented. It’s also looking for advisors that want to grow and plug into Integrated’s resources, including its CPA partner and business owner platforms and marketing and social media support.
“I think we do a great job with the right groups, because we provide a ton of value for them to help them grow—that’s one of the key levers that we’re looking for,” he said. “It’s a logical next step for us to play in that M&A space, and it’s something we’re very interested in doing.”
That might mean Integrated buys an RIA firm outright, or it may be structured where the firm buys a portion of their revenue to take part in that RIA’s success. If it did buy an RIA, that firm would come under Integrated’s ADV, but its doing business as (DBA) would remain the same.
Louis Diamond, president of Diamond Consultants, a financial advisor recruiting firm, said there's a need in the RIA market for that type of a revenue-share model.
“There are some, but I think the industry could use more—I call them ‘platform acquirers,’" Diamond said. "Platforms like Integrated who can help an advisor monetize some of their business and take chips off the table, but still let the advisor run relatively autonomously. There’s a ton of roll-ups and aggregators who will buy you, pay you out, but then you’re kind of giving up your name and control.”
“Advisors do look to diversify their personal balance sheet, because with most advisors, their net worth is mostly their business. So it’s a way to take chips off the table, when valuations are still aggressive.”
Sandrew said an M&A target would not be a good fit if the RIA does not have a desire to leverage his firm’s resources.
“We have a great deal of data around our success and how groups within our ecosystem can continue to build by leveraging our resources,” he said. “We want to make sure that these organizations buy into that, and they find a lot of value in that. If they don’t and they just want to do their own thing—meaning not leverage these resources, we’re probably not a good fit for them.”
That includes Integrated’s long-time CPA Alliance, a program that partners advisors with CPAs. The firm has 140 CPA relationships and works with CPAs to build out a wealth management business within their company. An Integrated advisor can then step in to run that part of the company.
Integrated also helps CPAs identify the right clients to introduce to the advisor, then helps them build a process not only with the client but also with the CPA.
In 2019, Integrated’s president and founder, Paul Saganey, recognized a significant opportunity for his advisors to engage with those CPAs’ thousands of business owner clients, many of which are near retirement. That’s when he launched the business owner platform. The idea is, the firm has built the planning infrastructure for the business owner, preparing them to get ready to sell.
“We built out a business owner platform that is very heavy on the advanced and estate planning side, but we’re doing things on valuations with business owners; we’re helping them clean up their balance sheets to get ready for sale; we can actually participate in the transaction of the sale; we’re managing the assets after the sale, in many cases,” Sandrew said.
The average transaction size on the business owner side has been $50 to $75 million, with a few in the hundreds of millions.
CPAs can also benefit from the platform. Once a business owner client sells the business, that corporate tax engagement goes away. But for CPAs that partner with Integrated, they’ll get a share of the revenue generated through the business owner platform.
“The revenue pickup they’re getting from our relationship typically well exceeds what they were doing on the tax engagement corporate side,” Sandrew said.
“What makes [Integrated] different is the massive CPA referral network," Diamond added. "Almost every advisor, especially those who want to go independent, are looking to grow. Even if they feel like they’ve been growing their own, being plugged into CPA firms as a way to bolster their organic growth is very attractive.”
RIA M&A activity slowed slightly in the first quarter of this year, with Echelon Partners recording 94 transactions during the quarter, down from a record 99 in the fourth quarter 2021. But that’s still very high compared with historical periods.
Echelon says the first quarter activity was dominated by “strategic and consolidator” acquirers, most of which are backed by private equity firms. Integrated currently does not have a capital partner. Echelon’s RIA M&A Deal Report had a positive outlook for M&A, citing the number of buyers in the space and new entrants.
Overall, Echelon expects we could see deal volume as high as 338 for 2022, up from 307 in 2021.
