LPL and Baird reach major staffing and M&A deals

Two of the industry’s biggest hiring and M&A deals this year reflect a market that experts say is not slowing from its record pace, despite some signs of slowing.

On May 21, the approximately 550 financial advisers of CUNA Mutual Group CUNA Brokerage Services and the first $11 billion of the $36 billion in expected client assets moved to LPL Financial’s institutional services in what is likely to be biggest hire of the year in the independent channel. Three days later, employee wealth manager Baird completed its largest acquisition in three years with the close of his purchase of Hefren-Tillotson and its 90 financial advisors with $18 billion in client assets. Recruits and potential sellers are driving the consolidation of records by connecting to bigger platforms or retreat into larger parent companies downright.

According to Steven Levitt, founder of investment bank RIA M&A and advisory firm Park Sutton Advisors, there has been “absolutely no” decline in M&A deals during the equity volatility of recent months amid inflation and Russia’s invasion of Ukraine. In fact, Levitt’s New York company agreed May 25 to merge with Chicago-based investment bank Waller Helms Advisors for reasons ‘very similar to our clients’ when Park Sutton’s advised practices strike deals to join larger firms offering scale services , technology and compliance, Levitt said.

“I really wanted to focus on closing deals and not be bogged down by the administrative challenge of running the business,” Levitt said. “I love what I do and I want to continue doing it for many, many years. But I want to take that stuff away from the team. We really want to be able to focus on what we do well.

These factors will likely keep potential sellers interested in the constantly expanding group firms seeking to recruit or buy firms, although some individual players are backing off this year. Earlier this month, during CI Financial’s first quarter earnings call, CEO Kurt MacAlpine disclosed plans for the fast-growing RIA consolidator to do just that – even if the Canadian asset manager is in the process of acquiring a company with $11 billion in client assets and spin his American wealth management company in an IPO less than two years after entering the market. An analyst asked MacAlpine whether the company plans to scale back or halt RIA acquisitions or conduct stock buybacks in an effort to boost profit margins. MacAlpine answered “yes” to both questions.

“2021 has been a very unusual year,” said MacAlpine, according to a transcription by Seeking Alpha. He noted that the company has only unveiled two deals so far this year, with one not expected to close until the fourth quarter. “So we have absolutely slowed down the pace of acquisitions [and] are focused on integration. [We’ve] I’ve only scratched the surface around the integration we’ve had in the platform. »

Anyone expecting a decline in industry transaction volumes due to a pullback from one of the most active acquirers of the past two record years is likely to be wrong, however, according to the bank’s latest quarterly transaction report. investment and consulting firm Echelon Partners. After 94 transactions in the first quarter reached the highest level of any period outside the fourth quarter of 2021, volume is on track to set a record for the 10th consecutive year.

“Transitory trends such as rising rates and volatility in capital markets in [Q1] could be seen as headwinds to mergers and acquisitions across the wealth ecosystem,” the report states. “However, to date, the realized effect has been little to no, as M&A volumes have remained high and valuations continue to be supported by fundamental factors such as buyer appetite and funding. , the quality of business performance and low funding costs relative to historical averages.Given the number of active buyers in the space and the arrival of new entrants, we expect M&A volumes to continue near trend levels unless macro conditions deteriorate significantly from here.

The Baird acquisition is the fifth largest of the year in terms of client assets, according to Echelon. Hefren-Tillotson, a 75-year-old firm with six branches in and around Pittsburgh, will be fully integrated into Baird by October, expanding the Milwaukee-based wealth manager’s footprint to 1,400 advisors and $415 billion in revenue. customer assets. The seller’s management team of Kim Tillotson Fleming, Craig Tillotson and Don Belt retain their roles at Baird, which faced a key challenge in any wealth management transaction by recruiting all Hefren-Tillotson advisors. The company declined to say whether it paid retention bonuses.

“Today is a day of celebration as Hefren-Tillotson and Baird move forward as a unified company,” Tillotson Fleming said in a statement. “As the last few months have confirmed, we have found in Baird an exceptional partner, a firm that embodies the same culture and the same values ​​that are at the heart of our business.

At LPL, the company’s latest mega-hires are following at least three others into the banking and credit union channel over the past two years – an influx that has helped grow your advisor workforce above 20,000 for the first time. CUNA Brokerage is working with more than 250 credit unions that have wealth management programs in a channel that needs to launch more and hire more advisors to follow the possible opportunity. The first wave of directly held assets migrating to LPL consists of $10 billion in brokerage accounts and $1 billion on the advisory side of CUNA Brokerage’s business. Another $21 billion will be transferred over the next few months.

The official move to LPL last week marks a “step forward for us in our mission to serve more members with personalized guidance that can help them achieve their important life goals,” CUNA Brokerage President Rob Comfort said in a statement. a statement.

“With access to economies of scale and LPL’s innovative technology platform, combined with our advanced data capabilities, experience and leadership in serving this market, we can accelerate advisor growth. and credit union investment programs that we are committed to and continue to support,” he said. said. “Our strategic alliance with LPL Financial creates a transformative value proposition for the credit union industry that we believe will enable many more members to receive the critical help they need.”

According to Savant Wealth Management CEO Brent Brodeski, such menus of resources around operations and areas such as investment products, planning, tax, estates and insurance attract practices or small businesses to s associate with larger companies. He compares the current industry consolidation to the pivot undertaken by Apple in 2007 when it dropped the word “computer” from its name in light of the rise of iPhones, iPods and Apple TVs. Combining increasingly commoditized services for a “full suite of capabilities” under one roof will continue to prove attractive to recruits and potential salespeople, Brodeski said earlier this month.

“Maybe it’s the next holy grail,” he said. “The real differentiation is really bringing all the different services together and creating a better life for our customers.”