In its 11th acquisition this year, Wealth Enhancement Group is purchasing Carroll Financial Associates, headquartered in Charlotte, N.C. With $4.7 billion in assets under management, Carroll Financial represents the largest single acquisition in WEG’s history and will bring the Minneapolis-based management firm’s total client assets to more than $45 billion. Terms of the deal were not disclosed.
WEG’s CEO, Jeff Dekko, said he characterized the deal as a strategic opportunity to partner with a like-minded management team when it comes to continued expansion. “The question for us was, how do we take over the Southeast? We’ve come from the Northeast, worked our way down the coast, and this is our first opportunity there,” he said.
While the typical acquisition for WEG has been in the $1 billion to $2 billion range in assets under management, the outsized Carroll deal is a direct result of the partnership with Carroll’s CEO, Kristopher W. Carroll, Dekko said. “This really is a platform for us in the mid-Atlantic, Southeast region. It was a unique opportunity where we can do more activity there with Kris leading it. I expect the next one or two acquisitions would be at that [$1 billion] sweet spot.”
Carroll Financial, an independent RIA, has three offices with 39 financial advisors in both Carolinas and specializes in comprehensive financial planning, retirement planning, investment management, estate planning, education planning and transition planning. The firm was founded in 1980 by Larry W. Carroll, but recently has been led by his son, Kristopher.
Since 2014, WEG has been on the hunt for increasing numbers of acquisitions, and over the years has ramped up its M&A pace. The 11 deals it has done so far this year (there are a few more to go) have kept the firm very busy, according to Dekko, but that’s just making hay while the sun shines. “If you’re going to use inorganic activity as a method of growth, you have to buy when people are selling,” he said.
Across the industry, M&A has been up in 2021, Dekko said. He said the main driver of the consolidation has been business owners’ concerns about the capital gains tax rate rising in the future, which could pinch the money they make on sales of their business. Also, more baby boomer business owners are wanting to cash out, and scale is mattering more in the RIA space as firms try to deliver value to clients. These trends have been in place a while, he said. “But with the change of [presidential] administration and control of Congress, you’re seeing a lot of discussion around the capital gains rate. Even if you weren’t really thinking of selling but now you think that the 20% will go to 28% or even 40%, you might [think] this is the time to do it.”
Firms such as Focus Financial, Creative Planning and Mercer Advisors are operating in the same hunting ground as his firm, he said, but he adds that the pace of consolidation across the board has created more clarity of choice for sellers. “Our competitors are both good and ferocious,” he said. “Focus comes in as a capital partner but allows an [investment advisor representative] to run on their own, so that’s one offering. On the other end, everything is extremely tightly defined, and Creative Planning does that nicely. Also Mercer. We’re in the middle—we provide the scaled benefits but aren’t prescriptive and allow some entrepreneurial energy.”
When the deal closes in November, Larry Carroll will serve as senior vice president, financial advisor and Kristopher Carroll will serve as managing director at Wealth Enhancement Group. As part of the transaction, the practice will be moving its brokerage assets to LPL Financial.