While industry mergers and acquisitions have dried up in the last year, United Capital Financial Advisers has just purchased two registered investment advisor firms with a combined $625 million in assets.
M&A activity was lackluster in 2014, with a total of 54 deals worth $47.4 billion in assets completed across the RIA industry, flat from 2013, according to Schwab Advisor Services. Forty-one percent of the deals in 2014 were completed by RIA firms, compared to 38 percent by strategic acquiring firms, such as Focus Financial and United Capital.
Despite the industry trend, United Capital has acquired CS Capital Management in Indianapolis, Ind., and PRI Investments in Chapel Hill, N.C. Both states represent new markets for United Capital.
Mike Surenkamp, managing director at CS Capital Management, said his firm politely declined the initial offer to join. But he continued the conversations with the firm to get ideas for improving his back office, financial planning software and investment platform.
“Our original thought process was, if we can take a look at what they’re doing, we don’t have to join up with them; we can just pick their brain and save me all that time and energy going out and visiting with all the vendors,” Surenkamp said. “Finally we sat down with them and looked at the investment platform, and that’s really what put us over the top.”
United Capital’s investment platform was much cheaper than the one CS was using. For example, Surenkamp pays Morningstar about 55 basis points to do a dividend portfolio.
“[United Capital has] got an alternative doing the same thing for half that price,” Surenkamp said. “If I can cut my clients’ expenses by 30, 40, 50 percent, I need to do it.
“We think, just like Joe [Duran], that the investment side is going to become more and more of a commodity and there’s going to be some compression on the fees.”
Andrew Blass, managing director of PRI Investments, said he got tired of having to make all the decisions about the business.
“As much as I valued all of that freedom and decision-making, there is an element of when you’re running your own business and making all these decisions, you can become a bit isolated,” Blass said. “As much as you would think you’re capable of going out and finding the best solutions on your own, I think there came a point for me and my team here that working with other people and getting help—it just seemed like the right time for us.”
Blass said the relationship with United Capital has already freed up more time for him to spend with clients. For example, he was having a technology issue on Sunday morning, and got a response right away from United Capital’s help desk.
“It’s really a whole new world. In the past, it was me going and dealing with these things," Blass said. "Now I can really feel confident and rely on someone else, who probably is better at dealing with those things than myself.”