David Wahlen, Senior Manager, Strategic Growth for CAPTRUST, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss the market for acquiring financial advisory firms.
CAPTRUST has grown organically and through acquisition, now with 85 offices, 650 advisors, $60 billion in wealth management AUM, and much larger assets under advisement (AUA). The firm believes in aligning incentives, offering equity as a heavy component of compensation, as 950 of the firm’s 1,600 employees are shareholders.
When looking to acquire financial advisory firms, CAPTRUST searches for growth-minded advisors who will be a good cultural fit and have a history of providing holistic service to clients, including financial planning and investment management. Advisors should want to be part of something bigger than themselves and know what they are looking for in a merger partner beyond a big check.
After being acquired by CAPTRUST, advisors remove the complexities of compliance, finance, HR, and marketing from their duties, giving them more time to focus on their team and their clients. CAPTRUST operates a large retirement plan advisory business for ERISA, 401(k), and pension plans with 5 million participants. Wealth advisors affiliated with CAPTRUST can prospect the retirement plan participants as they retire or change employers.
Advisors are encouraged to have conversations with potential funders or acquirers, even if they aren’t currently planning on a deal. Wahlen encourages advisors to have discussions with multiple acquirers to ensure the fit is right and that the acquirer provides helpful services to the advisor. Advisors need to understand the drivers of value for their business, as they may wish to restructure their operations to be as attractive as possible to an acquirer. Starting the process early can allow for an easier transaction when the time is right for a combination. Valuations of RIA firms are very high today, and the competition for acquisitions is growing. Since 2019, an increasing portion of transactions involves an investment banker or a transaction advisor.
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