Cresset, a $65 billion registered investment advisor based in Chicago, started as a family office serving its two founders, Eric Becker and Avy Stein.
Before launching the business in 2017, Becker made his money starting and backing others, including private equity firm Sterling Partners. Stein, for his part, had been involved with kickstarting, investing in and growing more than 150 companies, and was CEO of private equity firm Willis Stein & Partners.
It’s this grounding as a family office, with the care and attention to clients such firms require to succeed, that helped Cresset land on this year’s RIA Edge 100 list, according to Susie Cranston, company president and chief operating officer.
“Unlike a lot of traditional firms, our two co-founders had their own family offices and couldn’t quite find what they wanted in the market,” Cranston said. “We have a very strong culture around putting clients first and always looking at everything through the client lens.”
The RIA Edge 100 is an annual list of SEC-registered investment advisors that serve high-net-worth individuals as more than half of their client base and manage at least $500 million in assets. The firms that make the list excel in the year of the ranking in terms of AUM growth over five years, the ratio of employees to clients, AUM per advisor and the percentage of employees with the CFP certification.
According to Cranston, Cresset made the list partly due to its family office roots that have been key to the firm’s success in growing about one-third organically, one-third by recruiting advisors with a book of business and one-third through acquisitions.
“Today [family office] is very much a buzzword, and lots of people claim they have family office services,” she said. “We actually have more than 10% of our company in client-facing family office services … there are a lot of firms that talk about family offices, but maybe don’t have the dedicated teams yet or do not have as much built out in terms of the infrastructure.”
Cranston touts Cresset’s work in developing the various teams and functions needed to get private family offices to turn over their keys. She cites examples outside of traditional wealth management, such as bill pay, tax and estate planning, tax preparation and banking and lending support.
“You don’t even have enough fingers to go through all the things you need,” she said.
Other ingredients in Cresset’s secret sauce that Cranston pointed to were Becker and Stein’s background in private equity. They got clients into PE investments through those connections before it became the rage.
“They knew that the ability to benefit from not just the public market investments, but private market investments, was going to be a critical part of continuing to grow wealth for clients,” she said. “We’ve now had, if you will, a 7 1/2-year head start on really thinking about how you support clients, not just across their public investments, but also across their private investments.”
Earlier this year, Cresset spun off its private markets business into a separate entity, Peakline Partners, though it maintains a close relationship to leverage for its client base.
Careful Sailing
Cresset’s fast rise from family office to full-service wealth manager started through organic growth and recruiting. In recent years, it has begun a minimal number of acquisitions relative to the industry, with a goal of no more than two a year, albeit relatively large ones, according to Cranston.
“We are not a serial M&A shop,” she said. “We do maybe one M&A deal per year, sometimes two, but it’s very spaced out. It’s very deliberate and always fully integrated into the platform.”
The firm had previously been making those moves without external backing. Then, in December of last year, Cresset took its first external investment from minority stakeholder Constellation Wealth Capital.
“The partnership between Cresset and Constellation even in the short period of time has blown away my expectations,” Karl Heckenberg, Constellation’s president and managing partner, said via email. “It’s a world class firm with amazing people and will continue to be the leader in the UHNW space and we are excited to be a part of the journey.”
According to Cresset, the funding is going to technology advancements and advisor recruiting, and Cranston stressed that it did not change the nature of the RIA. Ownership shifted just slightly from about 66% employee-owned and 33% client-owned to 60/30, with Constellation at a little less than 10%.
“Nothing has changed for us,” she said. “We are operating to be a 100-year company, so we must control our destiny. We need to be able to drive the ship.”
Cresset hired Cranston a little over a year ago to help steer the ship by adding an operational leader. She came from a leading operations role at J.P. Morgan Chase and, before that, First Republic Bank.
The firm’s growth run has not been without its bumps, specifically at the leadership ranks. In early 2023, Cresset hired RIA M&A guru Liz Nesvold to a newly created role as president. About nine months later, she resigned, with sources telling WealthManagement.com at the time that she felt limited in the role and frustrated by shifting mandates. She later joined Emigrant Bank as vice chair, working with divisions including its investment banking arm.
Cresset had no comment on Nesvold’s leaving.
According to Cranston, the RIA is not planning to ramp up acquisition volume with the funding from Constellation. Rather, it will continue to take a deliberate approach.
One of those recent acquisitions was Mike Silverman’s CH Investment Partners, at the time a $6.2 billion Dallas-based multi-family office.
Silverman said the firm had interest from about 15 buyers when it started exploring a deal. Ultimately, Cresset had the right combination of providing a large capital base to provide better investment opportunities for clients, a wider array of adjacent services and superior technology ranging from the wealth stack to cybersecurity protection.
Cresset also ensured that Silverman’s team would be integrated into the firm long-term, including on the investing and operations sides.
“When people are recruiting you they always say the right things, right? But when you read between lines, it was pretty obvious that there were several firms that would have reduced our head count,” he said. “That was not going to work for us.”
Finally, Silverman said he was attracted to the fact that Cresset was not relying on a controlling stake by PE, which might put his clients at risk for further change in another five years.
“Cresset’s long, long-term game plan and view of this being a very long-term partnership and a great partnership among the principals and the employees was really attractive,” he said.
Brand Building
Cranston said the firm’s vision also includes continued investment in its brand. She noted the firm’s early move to invest in digital marketing, which is now flowing into new technology such as ChatGPT.
She said that, while it may be counterintuitive for a family office targeting clients with billions of dollars, the firm’s digital presence has helped it grow among the newly wealthy.
“There’s so much wealth creation happening in the country, and there are so many people who are first-generation founders and entrepreneurs who don’t know who to talk to,” she said. “It’s an awkward conversation sometimes to have with a peer, especially if they don’t have the same level of wealth as you do.”
Currently, the firm is leveraging artificial intelligence for areas such as cybersecurity to guard against phishing and other scams. In the future, Cranston sees it playing more of a role in the firm’s daily operations to improve efficiency and results.
“I would say my biggest goal is to make sure that everybody at Cresset feels very comfortable in using and piloting with AI,” she said.
That integration may take time. But Cresset, according to its president and COO, is not one to hurry.
“I don’t think you can serve the wealthiest families in the country if you are a fly-by-night thing,” she said. “You have to be in it for the very long term, and, if you’re in it for the long term, that means you think long term.”
#Cressets #Family #Office #Roots #Drive #Growth #65B #AUM