Wealth management is a highly competitive financial service attracting everyone from Swiss behemoths like UBS and Credit Suisse to traditional wirehouses like Merrill Lynch and Charles Schwab. But dealmaking opportunities are growing among smaller firms. Here’s why.
Gerry Goldberg, CEO of GYL Financial Synergies in West Hartford, Conn., sees growth opportunities for smaller outfits like his.
“We are seeing a migration of assets from wirehouses to registered investment advisers,” he says, as high-net-worth investors seek individualized treatment tailored to their needs.
GYL just announced the acquisition of Financial Partners Capital Management, giving it a presence in New York City as the Connecticut firm builds what Goldberg calls a land bridge between New England and the mid-Atlantic states.
Wealthy individuals famously are leaving New York because of high taxes, but that doesn’t faze Goldberg.
“I wouldn’t give up on New York so quickly,” he says. The city has challenges, Goldberg acknowledges, but many people need the kinds of services New York has to offer. “It’s dynamic, cosmopolitan, and will always have its own gravitational pull.”
Even with its regional focus, GYL has clients in 38 states and the addition of FPCM and its investment managers increases its footprint.
One plus for the Connecticut firm was FPCM’s international clientele, or global citizens outside the U.S., as Goldberg put it. The acquisition exposes GYL to different investment modalities that expand the scope of what it can do.
“It helps that Aaron Cohen and I have known each other for about 25 years,” says Goldberg, referring to the president of FPCM. “One key to a successful merger is a shared vision.”
The GYL acquisition reflects a modus operandi for Focus Financial Partners, which owns GYL and now lists 85 partner firms in its network.
Other recent acquisitions in the Focus network were St. Louis-based Buckingham Strategic Wealth’s addition of Cincinnati-based Oxford Financial Partners and the combination of Chicago’s Kovitz Investment Group Partners with Origin Holding Company, a private real estate fund manager also located in Chicago.
Both of those acquisitions were announced in January and followed three other merger announcements in December. Focus is the brainchild of Austrian entrepreneur Rudy Adolf, who started the group in 2004 and took it public in 2018.
The Focus expansion is taking place against a backdrop of two other major trends besides the movement of assets to smaller RIAs. “There is a massive intergenerational transfer of wealth,” Goldberg notes.
And there is a consolidation among advisory firms since the regulatory burdens are growing – as are the expectations of clients. These expectations can include demands for more cybersecurity and innovative infrastructure, entailing greater investment and more resources.
The traditional wirehouses can provide these things, but they also have a raft of their own products and the producers are competing for shelf space, targeting the large firm’s clientele.
“The markets and investors are getting more sophisticated,” comments Goldberg. Investors now look for both strong investment capabilities and a culture centered on the client. This is why Focus puts such an emphasis on a shared vision.
Consolidation has another benefit for wealth management firms, according to Goldberg. As financial advisors age, it becomes more important for firms to channel young talent into positions of responsibility.
“It’s a recruiting tool,” Goldberg says. “Instead of just hiring one individual, you can hire several talented people at once.”
–Darrell Delamaide
