A New Jersey wealth management firm with aspirations of becoming “the national brand for the ultra-high-net-worth and the RIA space” recently received a big shot in the arm in the form of capital investment.
Englewood, N.J.-based multifamily office Pathstone announced earlier this month a new strategic equity investment from Kelso & Company (Kelso) and Lovell Minnick Partners (LMP) that will be used to fuel its growth.
“We’re going to continue to grow vertically and horizontally,” said Pathstone CEO Matt Fleissig. “We will continue to invest in the RIA practice but at the same time continue to find more services and other companies that complement or add to our offering. Last year we bought a trust company and a direct-indexing firm. Both are businesses that will be key to the growth of Pathstone.”
This marks Lovell Minnick’s second investment in Pathstone—the private equity firm first staked Pathstone in 2019.
That initial investment was supposed to have a five-year time horizon, said Fleissig.
“We completed a five-year plan in about three years, and we were discussing with LMP their typical time horizion, which is four-to-seven years,” said Fleissig. “They wanted to find a way to stay with us and continue to invest in Pathstone even though we had gone through their investment period faster than expected due to good fortune.”
The new round of investments is expected to close during the second quarter of this year.
Pathstone has expanded in recent years to encompass 350 employees across 17 offices, including 180 shareholder-employees, serving institutional, family and individual clients with over $80 billion in assets.
Pathstone’s recent acquisitions include $1.5 billion Rex Capital Partners in February, the $35 billion Wyoming Trust Company, announced in December, WaterOak’s $3 billion advisory business in April of last year, and $2 billion Cornerstone Capital in 2021.
Pathstone has also built a board of directors that includes as independent members former Pershing executive Mark Tibergien, Boston University’s Michelle A. Shell, Focus Financial’s Vamsi Yadlapati and AssetMark co-founder Ron D. Cordes.
Fleissig said that Pathstone is just getting started, with a goal of being a "national brand" for ultra-high-net-worth familes.
“We’re not even in the first inning of what’s occurring in our industry,” he said. “There are 15,000 RIAs out there, and we are seeing concentration, not consolidation: Large firms are going to join forces to compete with the wirehouses and brokerages, and there’s a tailwind of people wanting to invest in family offices, independent advisors and fiduciary advice in general so there’s a persistent trend of assets flowing into the space.
“After what you saw with Silicon Valley Bank and First Republic and others, people are increasingly out looking for independent advice with multi-custodial relations so that they’re not tied up to one bank or brokerages. So in addition to concentration, we’re going to see an acceleration of flows into this space.”