Two Seattle-area registered investment advisors are coming together to create a $5.7 billion wealth management firm. Seattle-based Coldstream Wealth Management, with $4.3 billion in client assets, announced it will merge with Mercer Island, Wash.–based Paracle Advisors, an RIA with about $1.4 billion in client assets, under the Coldstream brand. The deal was completed with no private equity or outside equity capital, and the combined firm will remain 100% employee-owned.
“When we talk about private equity and the consolidators and the different options available to RIA business owners to deal with some of these issues around succession planning and the need to scale, we believe it’s really important and unique, as we learned from our experience, to maintain alignment between the owners and their clients and all the constituencies,” said Kevin Fitzwilson, Coldstream’s managing shareholder. “We believe the optimal way to own and operate businesses like this are with 100% employee ownership, and not having outside capital influencing decisionmaking.”
Since its founding in 1996, Coldstream has had experience with various ownership structures, including starting out with having one-third of the firm owned by outside wealthy families, Fitzwilson said. For about a decade, Boston Private bank had a minority stake in the RIA, but the management team bought out the bank in 2011 to become fully employee owned.
“You come into situations where there are these groups, particularly if they are private equity backed, with finite fund term structures; they have a duty to their investors to drive equity multiples and IRRs, and sometimes that’s counter to what is best for the end client,” Fitzwilson said. “That’s a conflict.”
Paracle co-founder and Managing Director Anne Marie Stonich said her firm has been 100% employee owned since it was founded in 2004. Before deciding to merge with Coldstream, she and her leadership team conducted a national search for another firm to combine with, but most of them were backed by private equity.
“We feel [employee ownership] is really important as far as attracting and retaining really good talent and people who are entrepreneurial in spirit and intelligence,” she said. “They should participate in the success of the company as it grows.”
The combined firm will have 103 professionals, with a management team that includes leaders from each firm. Paracle co-founders and managing directors Stonich, Josh Harris and EJ Brink will serve as Coldstream’s chief wealth strategist and marketing lead, managing director of corporate development, and portfolio manager, respectively. Paracle Managing Partner Duane Duim will serve as team lead and relationship manager, with responsibility over the client service experience.
Coldstream focuses on providing comprehensive wealth management, insurance and financial planning to high-net-worth clients. In 2016, Coldstream merged with George R. Pierce & Associates, another Seattle-based RIA with about $325 million in assets. And in 2017, Coldstream made a deal to acquire The Rainier Group, a Bellevue, Wash.–based RIA with about $760 million in assets at that time.
Paracle specializes in providing wealth management, financial planning and investment management services for families underserved by traditional brokerage firms, banks and investment companies.
“We knew we needed more infrastructure, like full-time HR, full-time compliance, more marketing support. And that was truly so the founders could get back to doing and focusing on what we love,” Stonich said.
Details of the merger, expected to close this summer, were not disclosed.