“When I took over in 2008, I sold the dental business because that market is too small,” Barton says. “My vision for the company was to increase the value proposition. We had done financial planning since Day One, and I wanted to do more. I wanted to be a family office—I call it a limited family office. In 2011 I coined the phrase that we want to be the Mayo Clinic for financial care.”
The company moved its headquarters back to Santa Barbara and slowly built its service offerings by adding tax planning and preparation with a team of in-house CPAs, along with estate planning services with in-house attorneys.
And the client base grew—all of it organically. The firm reached $6 billion in assets before its first acquisition in the first quarter of 2016. In the prior year, private equity firm Genstar Capital bought out Lovell Minnick Partners and became Mercer Advisors’ new largest shareholder and source of growth capital.
The firm took an important step when it bought Houston-based Kanaly Trust Inc., a firm specializing in high-net-worth clients, via a stock merger in 2016. “They had a corporate trustee charter, which was big for us,” Barton explains. “That deal really cemented our family office business model.”
Kanaly was also a portfolio company of Lovell Minnick, which was brought back into the fold as a private equity sponsor of Mercer Advisors. With plenty of financial muscle to flex at that point, Barton began the firm’s active M&A pursuit of smaller RIA firms. It did three deals in 2016 and four in the first half of 2017.
“At that point, the board and I decided that M&A was going to be a huge part of our future,” Barton recalls. “I’m an attorney by trade, and I’m the natural guy. … I’m the modern architect of this business model. And who better to sell the company than me, and I could do the documents too because I’m the attorney and I could negotiate all of the deals because I’m the attorney. It was basically a turnkey package from a sales standpoint.”
So he stepped down as CEO in July 2017 and became vice chairman and head of M&A. That’s when Dave Welling came on board to run the company. Welling previously was a top executive at wealth management software firms Black Diamond, Advent Software Inc. and SS&C Technologies before he joined Mercer Advisors. Earlier, he worked with Schwab in various leadership roles in its advisor custody and 401(k) businesses.
Since he took over, Mercer Advisors has moved its headquarters to Denver and boosted its involvement in sustainable investing, pro bono financial planning efforts and diversity initiatives. The latter includes the InvestHERS program the firm launched two years ago to help attract more women into the financial services industry and better serve the financial planning needs of women.
Integrator Model
RIA firms are selling themselves to larger firms at a feverish pace, according to M&A consultants in the wealth management industry. Among the reasons: Founding partners are approaching retirement and seeking a succession plan; it’s getting more costly, complicated and time consuming to run an advisory practice; and wealth management is an attractive space that’s attracting a horde of potential suitors.
“It’s a seller’s market, because despite the pandemic we’ve seen very little interruption to the deal flow,” says Chris Browne, managing director in the asset management group at investment bank Piper Sandler.
A recent report by the bank detailed the RIA M&A landscape and classified acquirers into three models: The integrating model includes Mercer Advisors, Creative Planning, Mariner Wealth Advisors and certain independent brokerages like LPL Financial and Kestra Financial, among others. The multi-boutique model includes Focus Financial Partners and Hightower. The third model involves firms like Fiduciary Network that take minority stakes in an RIA to participate in the acquired company’s cash flow while leaving control in the hands of the seller and providing less support than those entities offering the other two models.
“If you are a seller who just wants liquidity with some strategic help or support, you’ll likely want to do that with a multi-boutique,” Browne says. “That’s because largely there’s no consolidation and little integration.