Pradeep Jayaraman, president of Kestra Financial’s acquisitive Bluespring Wealth Partners, has been prospecting.
But he’s not just crisscrossing the country looking for teams of advisors to join the registered investment advisor, which has announced four acquisitions so far this year. He is also searching for business development experts to further bolster his M&A team.
“We want to invest in M&A and business development in-house, because nobody can ultimately know the types of people we want to be our partners as well as we do,” Jayaraman said. “For us, it’s beyond numbers. It’s about having the right strategic fit, having the right cultural fit, and finding people who see the vision of the platform we are building and the business we are building.”
Jayaraman said some metrics are more uniform when it comes to acquisitions, such as looking at organic growth and second-generation advisor succession planning. But other areas are more platform-specific and best considered by an in-house team.
“What I’ve seen in the industry is that, when people are starting off on the journey of acquisitions they may depend on a third party, but as firms get more sophisticated, as they’re building a platform, that strays toward having the in-house talent to be able to do it,” he said.
According to Fidelity Investments’ tracking, the number of unique acquirers in the RIA space has grown 27% in the past year, from 82 at the end of the first quarter of 2024 to 104 at the same point this year. As more firms climb past the multi-billion asset level, there’s not only a push to land more deals, but also a decision on whether to acquire through the growing network of bankers, M&A consultancies, minority investment partners or build their own team.
“There is clearly a growing emphasis among RIAs on building dedicated in-house M&A functions, and for good reason,” said Louis Diamond, CEO of Diamond Consultants. “Having an internal corporate development leader is a prerequisite to being a legitimate, consistent acquirer.”
In-house M&A is not essential to doing deals, of course. CEOs, presidents and other leadership team members have no shortage of contacts, referrals and sell-side bankers offering potential targets. Some firms, even of a large scale, stick with third-party support specializing in the space, including valuation work and due diligence.
However, according to Diamond and RIA leaders, firms increasingly see the need to pay for in-house expertise to align the firm’s goals and culture from prospecting through to integration.
“With the market flooded with buyers (who have massive M&A teams and/or a PE sponsor behind them), it takes immense time and energy to triage opportunities, let alone to drive a deal through to closing and ensure cultural and operational integration post-close,” Diamond said. “The RIAs that take M&A seriously are treating it like its own business unit with dedicated people, processes and infrastructure. That’s the mindset required to win in this environment.”
Hiring Acquirers
The drumbeat of M&A hires is visible in the past few months alone. In June, mega-RIA Captrust Financial Advisors hired Mike Wunderli from Echelon Partners to take over as head of M&A after the departure of Rush Benton to start his own consultancy. Mariner hired M&A practitioner Rob Sandrew to lead the growth of its independent 1099 channel.
Smaller, but still over $10 billion-plus firms Soltis Investment Advisors and Caprock both hired in-house business development leaders from Carson and LPL, respectively. This week, Snowden Lane Partners bolstered its breakaway recruiting team with two new positions, and St. Louis-based RIA Parkwoods Wealth Partners hired former Advisor Growth Strategies and Barclays M&A specialist Kevin Reilly.
At the start of the year, David Wahlen was one of those M&A experts hired away—in his case from Captrust—to lead in-house efforts at Merit Financial. At that point, the Alpharetta, Ga.-based RIA had grown to more than $12 billion in client assets but had goals to keep scaling.
Wahlen, Merit’s vice president of strategic partnerships, stressed the importance of in-house business development teams that are closer to the firm’s goals and long-term mission than a third-party consultant or investor.
“All of the large RIAs are going to get our share of banker-led processes coming to us, but there’s an advantage when you’ve got an in-house team that lives and breathes your culture,” Wahlen said. “They’re incentivized via equity and/or variable comp to act in the firm’s best interest. They know what a fit is or isn’t more intimately than a buy-side banker would be able to.”
Wahlen said that in-house teams work with the banker community and get great value from those relationships. But they can better guide the types of firms their RIA is interested in and what to look for in vetting and due diligence.
“My first role when I came in was to say [to the bankers], ‘Send us everything, or when in doubt just reach out and let’s discuss it,’” he said. “I said, ‘Don’t vet the list. We’ll do that on our side.’”
The proof has been in the pudding thus far, with Merit on track to book the most deals since its founding in 1998, and having climbed to more than $15 billion in assets.
“This isn’t a hobby,” Wahlen said. “If you’re going to do M&A, you’re competing against private equity-backed, institutionalized teams … organic growth and those other centralized support functions have to be there, of course. But those private equity investors often put M&A near the top of the agenda because it can be more meaningful and influential for the share price and ultimately to their return.”
Bradley Knapp: Clearstead is looking to make an M&A hire this summer.
Bradley Knapp, president and CEO of Clearstead, said his $47 billion Cleveland-based RIA is looking to hire an M&A head before the end of this summer. Clearstead has completed about a dozen acquisitions sourced primarily from its advisors and senior leaders, not sell-side bankers, after selling a majority stake to private equity firm Flexpoint Ford in 2022.
“We have been building that [M&A] muscle, and it’s something that we have in-house resources we’ve been using,” he said. “But we now feel that we have the size, scale and muscle to professionalize the M&A …. we want to cast a much wider net across the United States to find like-minded firms that may want to tie up with Clearstead or advisors and teams that may fit culturally.”
The search is focused on candidates who can source RIAs working with upper-high-net-worth and high-net-worth families and their affiliated institutions.
“It’s important that that person knows that space in the market and also knows the types of firms that are good at it, or that are growing, and may be a fit for Clearstead,” Knapp said.
Clearstead had already hired, earlier this year, former J.P. Morgan recruiter Albert Leshinsky to head its advisor lift-out recruiting efforts.
Knapp said one driver of that hire, and the new M&A role, is having learned from searching the importance of knowing the “cultural fit” up front to avoid wasting time.
“If that cultural fit is not there, it is not worth that second or third conversation,” he said. “If it’s not going to work, it’s better to go our separate ways. As we really try to hone that and speed that up, we need someone in-house who feels the Clearstead culture, knows the capability, knows the strategy, and can have that conversation.”
Industry Expertise
Not all RIAs feel the need to have an in-house team. Andree Mohr, president of Integrated Partners, said that after Sandrew left for Mariner, the Waltham, Mass.-based RIA decided to approach bankers to contract with them.
Integrated has been more recent to the acquisition space, garnering organic growth over the years through its CPA Alliance referral program. Even so, acquisitions are a core strategy for the more than $21 billion AUM RIA, but Mohr makes the case that it is best done through “an expert in the space.”
“There’s the component of keeping up with what’s going on in the industry, and because there’s so much happening within our industry, it can be hard to have an internal person who is also an expert on what’s going on in the industry,” she said. “There’s so much time spent learning and talking to a group of people to get to that ultimate end result.”
Integrated’s Andree Mohr: Not all firms are looking to hire internal M&A teams.
Mohr said the internal team can focus on the goals, strategies and philosophies of the RIA and its direction. Regarding the M&A space, the firm is searching for a banking relationship that will ensure they are digging “behind the headlines” of the deal space and have a complete and dedicated view of the opportunities.
“Part of what you have to talk to potential deals about is how you stack up against the industry,” she said. “And I think that industry-connection piece is very hard to do with an internal unless that’s a very large component of their role. There’s a new M&A deal announced every day, and as you see where shifts and trends are going that, for us, is where a consultant’s value really lies.”
Mohr said Integrated has been in talks with various consultants and will soon decide who they plan to work with. Meanwhile, she will remain significantly involved with the M&A process, as will Integrated’s other senior leaders, as they always have.
Of course, it’s not all about getting the deals done. Jayaraman of Bluespring discussed the importance of in-house dealmakers being there for the aftermath, whether they continue to grow, and why.
“It’s not just about the price that you pay on a deal,” Jayamaran said. “It’s about post-deal. Is the partnership set up a success? Is the team that we are investing in ultimately a success? Is there visibility beyond just the equity owners? When you think of a deal, you think about deal consideration, multiples, but that’s all one piece. It’s a small milestone in what will hopefully be a multi-decade partnership.”
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