Coldstream Wealth Management in Seattle has increased its assets under management to $6.7 billion after merging with Rosenbaum Financial in Portland, Ore.

This is the second deal this year for Coldstream, an employee-owned independent registered investment advisor, the first being the May acquisition of Seattle’s Paracle Advisors. Rosenbaum Financial brought $463 million in assets and a like-minded culture that will help in Coldstream’s objective of becoming one of the largest independent wealth management firms in the Pacific Northwest, said Coldstream CEO Kevin Fitzwilson yesterday.

“We believe we’re taking the path less travelled. We believe this is different. We want advisors who have built and invested in their businesses to know they don’t have to sacrifice economics,” Fitzwilson said of his company’s strategy of not using outside capital in acquisitions and remaining employee-owned. “They can have what they want financially but maintain what they built in the business, retain that independence and not be beholden to a private equity firm or third-party financing.”

With this acquisition, there are 120 team members within Coldstream, and 75 of them will own equity, although all team members have that opportunity, Fitzwilson said.

Mark Rosenbaum, CEO of Rosenbaum Financial, said that finding the right next step for his firm was a five-year process. “As we were evaluating various suiters, the company that said, ‘We’re buying you and providing our systems and you won’t need to do a thing,’ was just ignoring everything we’ve learned in 65 years,” he said. “And that was in stark contrast to the company that said ‘We’re like you and we want to learn from you.’”

At the top of Rosembaum’s checklist was culture and fit, depth of service and how the value of service was exemplified. “It all comes down to respect for the organization and respect for the client,” he said. “Every conversation we had from the beginning increased our confidence that this was right. They checked all the boxes.”

Kim Rosenberg, CFP and managing principal of Rosenbaum Financial, said she had been impressed with Coldstream’s being open to new ideas and learning about her firm’s best practices. “They have a nimbleness and ability to grow and pivot no matter what’s happening in the market,” she said. “And that’s a big differentiator. That will have a real impact with our clients in having confidence in the merged company.”

For advisory firms that want to remain employee-owned, it would be very hard to go the route of turning to private equity when top management is looking for an exit strategy, Fitzwilson said. “It’s about what your objectives are and what your experience and journey will be in the time frame of your experience. There are defined time frames for the funds, sometimes very short time horizons. And then you have new board members coming in, people that you don’t know. That’s not necessarily attractive to all of us.”

When looking at potential deals, there are three primary criteria Fitzwilson hopes to see in addition to great people: the top members should still have eight or more years before they would want to retire or exit the industry; those members should believe that private equity ownership is something that inevitably disrupts the alignment of interests that should exist among a firm, an advisor and the end client; and they should be committed to growth at a reasonable pace within the structure of a 100% employee-owned firm and believe that is the ideal model in the independent wealth management space.

Rosenbaum will lead Coldstream's Rosenbaum team as relationship manager and team lead, while Rosenberg will be relationship manager and wealth planner.