FSI OneVoice 2023: The M&A Landscape For Boutique Firms

Chris Latham, Deputy Managing Editor, Wealth Solutions Report

FSI OneVoice Panel With Larry Roth, Dan Seivert, Shannon Eusey And Laura Delaney Explores The Landscape For Deal-Making

An FSI OneVoice panel conducted Tuesday on the M&A landscape for boutique wealth management firms featured insights from WSR CEO Larry Roth, ECHELON Partners CEO and Managing Partner Dan Seivert, Beacon Pointe Advisors CEO Shannon Eusey and Fidelity Vice President of Practice Management Laura Delaney, who moderated the panel.

The panelists discussed plans for growth that use organic strategies such as recruiting and marketing as well as inorganic strategies that include preparing for both sides of an acquisition, deal structure, deal valuation, reasons that sellers go to market and more. The panelists also addressed potential pitfalls that buyers and sellers should seek to avoid. 

Laura Delaney, Vice President of Practice Management, Fidelity

“It’s fascinating to me that some advisors are looking for a way to monetize a part of their book or still control their book,” Roth said. “Some of the firms I work with are basically doing financing transactions through third-party financing and buying a percentage of revenue. It increases the margin at the enterprise immediately, even with these interest rates, and it causes stickiness.” 

Roth also pointed to firms that acquire minority interests in books of business with a plan to become the natural acquirer of the book over time, in the process transforming initially temporary relationships into more permanent setups. “Some of these firms are seeing 30-plus-percent EBITDA in a model that used to be 5%, and that’s pretty amazing so I think that’s a huge opportunity,” he said.

Larry Roth, CEO, Wealth Solutions Report

Wealth management consolidation has been a result of small and medium sized firms with changing needs encountering large strategic acquirers with access to capital, according to data provided by Fidelity. Those changing firm needs are characterized by new client needs and expectations, capital and technology essential to achieving scale, regulatory costs and risks, lack of organic growth as well as aging advisors with a lack of succession planning.

“We’re seeing record levels of deal flow and we’re seeing a lot from the independent broker-dealer space,” Eusey said. “We’ve never let anybody go on any acquisition that we’ve done throughout the firm. And talent acquisition is hard in this market environment. But we’re fortunate having over 40 offices across the country. We’re allowing our talent to move up through the organization and around the organization … Every employee participates in some sort of equity ownership within the organization, and I certainly think that helps with retention.”

Shannon Eusey, CEO, Beacon Pointe Advisors

The market last year consisted of approximately 288,555 financial professionals representing $30 trillion in assets under management (AUM), according to Cerulli data. Approximately 9% of those professionals changed firms in 2022, representing $2.5 trillion in AUM. 

Of those professionals moving firms, approximately 39% joined a new channel. Of those who joined a new channel, the largest percentage (22%) joined an independent broker-dealer, Cerulli found. Wirehouses were expected to experience the greatest net outflows, at $432.7 billion, while independent and hybrid RIAs were expected to experience the greatest net inflows, at $470.9 billion.

Dan Seivert, CEO, ECHELON Partners

“When we’re selling a firm, most buyers are very interested in what’s going on with the organic growth side of the business,” Seivert said. ECHELON evaluates this in channels or stations that include referrals from existing clients, referrals from centers of influence, social media, conferences and passion-based marketing. “We’re looking for empirics, people who are keeping track and using CRMs to demonstrate the work they are putting into it and the yield they are getting out of it.”

Chris Latham, Deputy Managing Editor at Wealth Solutions Report, can be reached at clatham@wealthsolutionsreport.com

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