Chicago-based HighTower owns stakes in 107 advisory businesses in 34 states with $72.7 billion in assets. The firm provides cash to help the advisors grow their businesses and also offers support services. It lets its new affiliates keep their independent identities, which means clients don’t notice any change, according to Egan.
Flip It
Steve Morton chose to sell his firm in 2018 to another aggregator, partner-owned Captrust Financial Advisors. He said he selected Captrust because, unlike private equity-backed consolidators, Captrust has no debt and won’t be subject to a forced sale or refinancing.
“Nobody’s trying to flip it or pump earnings short term,” Morton said. “Everybody’s in it for the long term.” His Greensboro, North Carolina-based firm increased assets more than 16% to almost $470 million since the sale.
Like Egan, Morton said he can spend more time with clients -- even while he takes 12 weeks of vacation a year. He charges lower fees for trades and other services because Captrust’s scale gives it more negotiating leverage with vendors than his solo practice. Morton, 66, said he can ease into retirement while continuing to woo new clients.
“I’m looking forward to 2020 being a really fun growth year for us,” he said.
Neither Egan and Morton would disclose the value of their deals, but both said they received equity in the acquiring firm.
Meanwhile, the big players have been dealing. In November, Advisor Group, which operates a broker-dealer network with more than 7,000 advisors backed by New York-based buyout firm Reverence Capital Partners, agreed to pay $1.3 billion for publicly traded Ladenburg Thalmann Financial Services Inc. The transaction was financed with $875 million in debt, according to a Dec. 26 filing.
Big paybacks aren’t guaranteed. Focus Financial Partners, an aggregator whose largest shareholders are private equity firms Stone Point Capital and KKR & Co., has traded below its July 2018 $33-per-share initial public offering price since May. A key long-term issue is the level of leverage, according to analysts at Goldman Sachs.
Many wealth advisors worry that consolidation could lead to a misalignment of interests as founders lose control or private equity backers try to squeeze out profits. A survey released in December by HighTower found 70% of advisors said they are “anxious or worried” about the thought of partnering with an aggregator.
Not Egan. He said he sleeps easier now that HighTower is handling office leases, tech support and compliance.
“I’m back to spending 85% of my time with clients,” he said. “I’m back to loving what I do.”
This article was provided by Bloomberg News.