Private equity firm Lightyear Capital LLC said on Tuesday it bought a majority stake in the independent U.S. Midwestern firm Wealth Enhancement Group as Lightyear seeks another windfall good investment in the wealth management market.
Lightyear, led by former Paine Webber Group head Donald Marron, made $1.6 billion last year on the sale of Cetera Financial Group to RCS Capital Corporation, according to a press release.
Marron said Wealth Enhancement Group has strong leaders and a team-based approach that will enable it to grow quickly to the scale of a firm like Cetera.
"It's smaller than Cetera was (at the time of purchase), but it's more clearly aligned with what we want to do in the future," Marron said by phone.
The terms of the deal were not disclosed, but Lightyear will purchase the stake in the company that was held by a regional investment firm, Norwest Equity Partners, according to a Wealth Enhancement Group statement. Other stakeholders include several Wealth Enhancement employees.
Headquartered in Minneapolis with offices in Wisconsin, Illinois and Iowa, Wealth Enhancement Group's 20 teams of advisors manage about $4.8 billion in assets for mass affluent and affluent clients. The average advisory team manages around $200 million in assets, said Wealth Enhancement Group Chief Executive Officer Jeff Dekko.
With Lightyear, Dekko said he hopes to take the firm national and acquire other registered investment advisors.
In an interview with Financial Advsor, Marron said the attraction of Wealth Enhancement was that it was well-positioned to capitalize on the looming retirement of almost 80 million baby boomers who will need extensive advice planning retirement income. New clients at Wealth Enhancement "work with teams" and are asked "to fill out 50-page questionnaires," two traits that impressed Marron
The firm's typical client has between $500,000 and $3 million. "It's a nice market, " Marron said. "But this size account can't buy [all] these services indvidually."
At a time when the independent advisory business is facing potential attrition as many advisors enter their sixties and approach retirement, Wealth Enhancement's average advisor is 42 years old, according to Dekko. It currently has 20 teams and 32 advisors.
In Marron's the firm's team approach and relative youth gives clients "a feeling of certainty" and eliminates the "fears of succession" issues cleints might have at smaller firms with older advisors.
According to Dekko, access to Lightyear's capital will enhance Wealth Enhancement Group plans to grow both organically and through acquisitions. In recent years, it has purchased firms in Chicago and Iowa and is currently looking to acquire a firm in Texas.
Wealth Enhancement uses LPL Financial as its broker-dealer but also custodies assets for its RIA business at Schwab, Raymond James and LPL.