The 4 Types of Advisor Acquirers that May Be a Good Fit for Your Business

The 4 Types of Advisor Acquirers that May Be a Good Fit for Your Business

Many independent firms reach a point in their business when they’ve hit the proverbial ceiling. That is, they recognize that they cannot sufficiently grow or compete any further on their own. The ability to break through that ceiling, gain scale and even solve for succession typically means considering a merger or acquisition opportunity. Yet finding the right M&A partner can be an arduous task.

Even though most firms in the market consider themselves “acquirers” – and just as many business owners feel they are ready to start taking meetings from these would-be acquirers – not all connections are poised to create a perfect marriage. Understanding the requirements and “personalities” of those seated on both sides of the table is key to creating a successful merger. So before you start taking those meetings, it makes perfect sense to educate yourself on the different profiles of typical acquirers and the types of firms they are seeking to fill a need in their business plans.

Meet the Acquirers

We find that most acquirers fall into 1 of 4 categories:

Standalone RIAs

These firms are exemplified by a “one brand, one firm, one investment” approach. The most successful acquirers in this group manage more than $500mm in assets and have a similar culture, operating structure, and approach as the firm they acquire. They tend to do a small number of deals, so they are typically more strategic in nature than financial. The benefits of these firms are that the seller can likely maintain an active voice in steering the direction of the ship, become a relatively significant equity holder (if so desired), and have the opportunity to still run your office the way you want. Additionally, all back office and “business operations” will be taken off your plate.

Another important distinction comes for those who become an equity owner. There is still a very significant liquidity event down the road if they take on an investor or sell the firm.

Examples: Multi-billion dollar wealth management firms, such as Aspiriant, RMB Capital, and Wescott

A good fit for: Principals who have a longer runway to retirement and are still looking to retain some managerial duties, and those who are most focused on a good cultural fit.

Not a good fit for: Sellers who value maximum upfront money or those wanting more of a national footprint or brand. Anyone looking to remain fully in charge of operations, since to an extent, investment management and financial planning are standardized across the firm. Also, those looking to get a deal done quickly might steer clear of this category as these standalone firms tend to be less experienced deal makers.

Aggregators or Rollups

These are firms that are prolific deal makers, and since they are very well capitalized, they are positioned  to do so. They excel at operations, streamlining businesses, standardizing processes, and maintaining strong communities of like-minded advisors. They will take over the entire investment management program, financial planning process, and essentially everything aside from client service and business development.

Examples: Mercer, Beacon Pointe, Mariner, United Capital, and Edelman

A good fit for: Firms that believe the acquirer has built a better “mousetrap” and are in complete lockstep with the acquirer’s values (i.e., a hard-core focus on financial planning). Also a fit for smaller firms looking for an exit strategy or to gain considerable scale, and those wanting to step away from the day-to-day operations and just focus on clients.

Not a good fit for: Any principal who has not made peace with giving up full control.

Platform Acquirers

These are organizations with many different types of businesses under one roof, but with common middle- and back-office infrastructure. While they want you to leverage their platform and scale, they are all about letting businesses continue to operate in silos.

Examples: HighTower Advisors, Kestra Financial, and United Advisors

A good fit for: Those who are seeking a partial liquidity event or looking to step back from business ownership, yet still value being involved with portfolio management, financial planning, prospecting, and running their own P&L.

Not a good fit for: Advisors who are close to retirement yet do not have a succession plan; those who truly want to retain a hands-on client management role; or, those who want to focus only on business development.

Related: The 7 Drivers of Enterprise Value

Private Equity-Backed RIAs (“Tuck-ins”)

These offer the same benefits and story as standalone RIAs but have deeper pockets, stronger deal-making expertise, and a more professionalized acquisition process. There’s also stronger possibility to leverage them for your own M&A activities. The firm would take all the operations, compliance, HR, and administrative activities off your plate, yet still allow you to retain local operating control.

Examples:  Focus Financial Partners, the industry’s leading investor in the independent space now has 50 individual partner firms under its umbrella, (any of which could be a solid acquirer with strong capital backing, including Colony Group, Buckingham), Wealth Partners Capital Group (e.g., MAI, Forbes Family Trust), and AMG (Affiliated Managers Group) Wealth Partners (e.g., Welch & Forbes, Veritable)

A good fit for: Those who value maximum upfront cash, are looking for a more boutique organization, and in the case of opening a new office, maintain some local operating control.

Not a good fit for: Advisors looking to remain fully in charge of operations since, to an extent, investment management and financial planning are standardized across the firm.

Playing the Match Game

Options are a great thing, but if a prospective seller is not strategic about who they engage, the exploration process can become a full-time endeavor. Put another way, without having real clarity on your own business goals, jumping into meeting with a multitude of acquirers will likely be a thankless task. This means that one must first align their goals with that of an acquirer’s business model.

So what must a principal gain clarity on? Consider these 6 questions to start with:

  1. How much control am I willing to give up? Am I comfortable with handing off just the middle- and back-office activities or can I make peace with absolving myself of investment management and financial planning?
  2. What do I value most in a deal structure: cash, equity, or maintaining maximum upside potential in my own business?
  3. Are there any “sacred cows” or red-line issues in my firm, such as preserving my staff, retaining my brand, maintaining investment approach, or running my own P&L?
  4. What exactly am I looking to solve for and how essential is it to solve for these items?
  5. How do I want to live the rest of my business life: As a manager of people, developing business, focused on investments, or transitioning clients to the next generation?
  6. Do I have a set time horizon for retirement?

Depending upon the answers to the above questions, many acquirers can instantly be ruled out because their goals, business model, and organizational structure will simply be incongruent with yours. For example, if your primary objective is to offload compliance, but you want to maintain your investment process, then “roll-up” firms are likely not the best fit because these types of firms centralize all investment management decisions. On the flipside, if a principal wants to spend his days as an asset-gatherer and relationship manager, then they may find a roll-up firm to be just the right fit.

A merger or acquisition can benefit both parties involved, provided you can find a partner that is equally motivated and has compatible needs and goals. To get to that point, however, can be a winding road of countless meetings, which typically leads to more questions than answers. Alternatively, you can define a strategic path towards finding the right opportunity as defined here, and get focused on starting a new chapter for your firm.

Louis Diamond
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Growing up with both parents who are business leaders in the financial world, Diamond Consultants became a natural environment for Louis: one you can say he was in training fo ... Click for full bio

Here’s Why Bitcoin Won’t Replace Gold So Easily

Here’s Why Bitcoin Won’t Replace Gold So Easily

What a week it was.

First and foremost, I’d like to acknowledge the horrific mass shooting that occurred in Las Vegas, the deadliest in modern American history. On behalf of everyone at U.S. Global Investors, I extend my sincerest and most heartfelt condolences to the victims and their families.

The memory of the shooting was still fresh in people’s minds during last Tuesday’s Hollywood premiere of Blade Runner 2049, which nixed the usual red carpet and other glitz in light of the tragedy. Before the film, producers shared poignant words, saying that in times such as these, the arts are crucial now more than ever.

I had the distinct privilege to attend the premiere. My good friend Frank Giustra, whose production company Thunderbird Entertainment owns a stake in the Blade Runner franchise, was kind enough to invite me along. Despite the somber mood—a pivotal scene in the film even takes place in an irradiated Las Vegas—I thought Blade Runner 2049 was spectacular. Even if you’re not a fan of the original 1982 film, it’s still worth experiencing in theaters. Hans Zimmer and Benjamin Wallfisch’s synth-heavy score is especially haunting.

CNET recently published an interesting piece examining the accuracy of future tech as depicted in the original Blade Runner, from androids to flying cars to off-world travel read the article here.

Still in the Early Innings of Cryptocurrencies

Speaking of the future, I spoke on the topic of the blockchain last week at the Subscriber Investment Summit in Vancouver. My presentation focused on the future of mining—not just of gold and precious metals but also cryptocurrencies.

Believe it or not, there are upwards of 2,100 digital currencies being traded in the world right now, with a combined market cap of nearly $150 billion, according to

Obviously not all of these cryptos will survive. We’re still in the early innings. Last month I compared this exciting new digital world to the earliest days of the dotcom era, and just as there were winners and losers then, so too will there be winners and losers today. Although bitcoin and Ethereum appear to be the frontrunners right now, recall that only 20 years ago AOL and Yahoo! were poised to dominate the internet. How times have changed!

It will be interesting to see which coins emerge as the “Amazon” and “Google” of cryptocurrencies.

For now, Ethereum has some huge backers. The Enterprise Ethereum Alliance (EEA), according to its website, seeks to “learn from and build upon the only smart contract supporting blockchain currently running in real-world production—Ethereum.” The EEA includes several big-name financial and tech firms such as Credit Suisse, Intel, Microsoft and JPMorgan Chase, whose own CEO, Jamie Dimon, knocked cryptos a couple of weeks ago.

To learn more about the blockchain and cryptocurrencies, watch this engaging two-minute video.

Understanding blockchain in two minutes

Will Bitcoin Replace Gold?

Lately I’ve been seeing more and more headlines asking whether cryptos are “killing” gold. Would the gold price be higher today if massive amounts of money weren’t flowing into bitcoin? Both assets, after all, are sometimes favored as safe havens. They’re decentralized and accepted all over the world, 24 hours a day. Transactions are anonymous. Supply is limited.

Have gold and bitcoin peaked for 2017

But I don’t think for a second that cryptocurrencies will ever replace gold, for a number of reasons. For one, cryptos are strictly forms of currency, whereas gold has many other time-tested applications, from jewelry to dentistry to electronics.

Unlike cryptos, gold doesn’t require electricity to trade. This makes it especially useful in situations such as hurricane-ravished Puerto Rico, where 95 percent of people are reportedly still without power. Right now the island’s economy is cash-only. If you have gold jewelry or coins, they can be converted into cash—all without electricity or WiFi.

Finally, gold remains one of the most liquid assets, traded daily in well-established exchanges all around the globe. Every day, some £13.8 billion, or $18 billion, worth of physical gold are traded in London alone, according to the London Bullion Market Association (LBMA). The cryptocurrency market, although expanding rapidly, is not quite there yet.

I will admit, though, that bitcoin is energizing some investors, especially millennials, in ways that gold might have a hard time doing. The proof is all over the internet. You can find a number of TED Talks on bitcoin, cryptocurrencies and the blockchain, but to my knowledge, none is available on gold investing. YouTube is likewise bursting at the seams with videos on cryptos.

Bitcoin is up 350 percent for the year, Ethereum an unbelievable 3,600 percent. Gold, meanwhile, is up around 10 percent. Producers, as measured by the NYSE Arca Gold Miners Index, have gained 11.5 percent in 2017, 23 percent since its 52-week low in December 2016.

Related: Gold and Bitcoin Surge on North Korea Fears

Look Past the Negativity to Find the Good News

The news is filled with negative headlines, and sometimes it’s challenging to stay positive. Take Friday’s jobs report. It showed that the U.S. lost 33,000 jobs in September, the first month in seven years that this happened. A weak report was expected because of Hurricane Irma, but no one could have guessed the losses would be this deep.

The jobs report wasn’t all bad news, however. For one, the decline is very likely temporary. Beyond that, a record 4.88 million Americans who were previously sitting out of the labor force found work last month. This helped the unemployment rate fall to 4.2 percent, a 16-year low.

Have gold and bitcoin peaked for 2017

There’s more that supports a stronger U.S. economy. As I shared with you last week, the Manufacturing ISM Purchasing Managers’ Index (PMI) rose to a 13-year high in September, indicating rapid expansion in the manufacturing industry. Factory orders were up during the month. Auto sales were up. Oil has stayed in the relatively low $50-a-barrel range, which is good for transportation and industrials, especially airlines. Small-cap stocks, as measured by the Russell 2000 Index, continue to climb above their 50-day and 200-day moving averages as excitement over tax reform intensifies.

These are among the reasons why I remain bullish.

One final note: Speaking on tax reform, Warren Buffett told CNBC last week that he’s waiting to sell assets until he knows the plan will go through. “I would feel kind of silly if I realized $1 billion worth of gains and paid $350 million in tax on it if I just waited a few months and would have paid $250 million,” he said.

It’s a fair comment, and I imagine other like-minded, forward-thinking investors, buyers and sellers will also wait to make huge transactions if they can help it. Tax reform isn’t a done deal, but I think it has a much better chance of being signed into law than a health care overhaul.

Frank Holmes
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Frank Holmes is the CEO and Chief Investment Officer of U.S. Global Investors. Mr. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm ... Click for full bio