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AssetMark’s Move A Sign of More Consolidation to Come

Service providers to wealth managers are beginning to compete on scale.

AssetMark, a turnkey asset management platform, or TAMP, that offers investment and consulting services to financial advisors, said Monday it acquired Global Financial Private Capital in a deal that surprised few in the industry.

Global Financial Private Capital, a TAMP founded in 1991 with more than 300 advisors and $5.7 billion in assets under management on its platform, should fit nicely with AssetMark, observers said. AssetMark is known for offering a premium service, including one-on-one coaching for advisors, and there is a similar hands-on approach at Global Financial Private Capital, said Craig Iskowitz, founder and CEO at Ezra Group Consulting, which advises wealth managers on strategy and technology.

Terms of Global Financial Private Capital’s sale to AssetMark were not disclosed.

The the purchase adds another $5.7 billion to the existing $46 billion on its platform, a factor that was certainly a driver in the sale, as service providers to wealth managers begin to consolidate.

“In the TAMP game, scale matters more than ever,” said Tim Welsh, the CEO and founder of Nexus Strategy, a consulting firm focused on the wealth management industry. He said if AssetMark hopes to catch Envestnet, the TAMP with the greatest market share at the of 2017, then it needs to do it by acquisition; it won't catch up via organic growth alone, he said.

Envestnet had $141.5 billion assets under management on its platform, or a 35 percent share of TAMP assets, at the end of 2017 compared to AssetMark’s $42.4 billion and a market share of 10.5 percent, according to Cerulli Associates.

A deal like this one was “totally as expected” said Michael Spellacy, the Global Leader of the Asset & Wealth Management practice at Accenture.

Spellacy said he expects to see similar transactions as the wealth management industry matures and consolidates. The lion’s share of net new money handed over to wealth managers is going to registered investment advisory firms making them–and the companies that service them–“red hot” acquisition targets, he said. Companies are moving to grow and scale to differentiate themselves, either by way of services others can’t provide or offering comparable services at a lower price, according to Spellacy.

Some smaller companies are already wedging their way into the market with unique approaches. Scott MacKillop’s First Ascent took an early lead in charging advisors a flat fee for outsourced investment management and Rowling & Associates, a San Diego-based RIA, has a platform not very different from what other TAMPs provide but charges a flat annual fee of $6,000 compared to as much as 30 basis points other platforms charge.

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