NewEdge Capital Group, a young trio of wealth management firms targeting the nation’s top advisors and wealthy clients, says the firm’s growth over the last four years was merely a prelude.
One of two managing partners at NewEdge Capital, Alex Goss told WealthManagement.com the company is set to “ramp up” M&A activity after developing an integration process that accommodates quicker transitions.
Goss is also the co-CEO of NewEdge Capital subsidiary RIA, NewEdge Advisors. That RIA currently comprises around 135 independent practices and some $25 billion in assets. Together with another RIA and a broker/dealer, NewEdge Capital collectively oversees roughly $47 billion and expects to reach $165 billion within the next five years.
NewEdge is owned by EdgeCo Holdings, a tech-focused integrator of wealth and asset management firms backed by Parthenon Capital and Waterfall Asset Management.
Goss recently spoke with WealthManagement.com about the NewEdge ecosystem, what makes it ‘elite,’ and how the firms approach technology, growth and dealmaking.
The conversation has been edited for clarity and brevity.
WM: Can you describe the structure of NewEdge Capital Group and where you sit within that ecosystem?
Alex Goss: I’m the co-managing partner of NewEdge Capital Group along with Rob Sechan. New Edge Capital Group, at its highest level, is a home for elite advisors who have already built successful careers.
Then, we have two different RIAs under that—NewEdge Wealth and NewEdge Advisors. NewEdge Wealth is predominantly focused on ultra-high-net-worth-opportunity families. It’s more of a single-branded, multi-family office dedicated to providing ultra-high-net-worth service options to those types of clients. We typically define UHNW in the $25 million and up range.
NewEdge Advisors is our more traditional independent channel; most of our advisors own their own practice and take their own brand. They can be UHNW or mass affluent; it’s more about the independent nature of those practices.
And then NewEdge Securities is the broker/dealer we have. It predominantly supports the UHNW side but will often support NewEdge Advisors as well.
WM: You also have a technology division. What are the core components of the firm’s tech stack?
AG: In the RIA space, leading-edge technology is really the integration of third-party technology. We’re not in the business of trying to develop our own proprietary trading software or CRM. It’s really about how you get all those leading-edge, third-party technologies to work together and create a client experience that doesn’t feel fragmented.
Salesforce and Orion are probably the two largest tech providers we use. And Salesforce is not a CRM, and Orion is not a trading technology. They truly are operational platforms that you can really customize and build based on your own individual objectives. That’s where we spend. We have dedicated people who are exclusively Salesforce developers and dedicated people who are effectively exclusive Orion developers.
WM: And is this technology shared across both RIAs?
AG: All of the advisors and the end clients within NewEdge Wealth operate on the exact same tech stack, the exact same experience. Whereas on the NewEdge Advisors side, there’s a little bit more customization allowed. We have a third-party technology department that helps the NewEdge Advisors team. Those advisors can pick from two or three different financial planning software options or risk tolerance tools and integrate those into their client experience.
WM: Are you rolling out any new services or tech tools in the near future?
AG: On the NewEdge Wealth side, we just launched a new UHNW proprietary client portal.
We’re also rolling out one of the first true digital multi-custody account opening platforms. Our tech team built that in-house. Our advisors and clients can digitally open accounts regardless of where the client is. You don’t have to stick with one custodian’s platform or the other. This really accelerates the speed of transition.
Virtual services continue to be in high demand from our advisors, so we’re focusing on virtual administrative, planning, marketing, and CFO services.
One of the things we’re most excited about is what we call our bridge program. This is for any of our NewEdge Advisors practices that have a UHNW opportunity and feel they might need some experience and resources to help them close. They work closely with our NewEdge Wealth team to close those accounts. We launched it two months ago, and we’ve already had four or five $25 million-and-up opportunities closed. We have $800 million in that pipeline.
WM: How is the firm looking at the use of generative AI technologies?
AG: We joke about that. AI is essentially just predictive technology. We’ve all been using AI in one way or another, but it is becoming a bigger piece of client-facing technology like risk tolerance and financial planning. In its ability to really understand and deliver output to end clients, AI is really important. It’s becoming an important tool in prospecting as well. We use it across the firm for client prospecting via LinkedIn or other digital social platforms and identify target prospects. We’re seeing some success there.
WM: What are we going to see over the coming year?
AG: A ramp-up in our M&A activity for sure, within both RIAs. The firm and its current brand are only three years old, which is unique for our size. And building an M&A machine does not happen overnight. It’s also not for the faint of heart.
We feel very confident in our M&A pipeline expanding, but there’s another side that I think often gets overlooked. You can buy a practice, but can you successfully integrate it? We purposely did a lot of these deals until we felt we had our integration piece built out and ready for prime time. You’re going to see an increase in M&A activity, but not necessarily because we’re finally hitting our stride. It’s because we purposely made sure we were going to be ready for that volume that we have knocking on our door to be integrated in an effective manner.
WM: What will the firm’s dealmaking look like going forward?
AG: We had our biggest year last year with $9 billion, roughly, of teams that we brought on, about 75% of which were 1099 independent practices. We expect to be close to, if not over, that number, and we think it will be more evenly split between the two RIAs. Our first quarter pipeline is about three times the size of our first quarter pipeline from last year.
Our goal is to grow smart and methodical. We’re targeting roughly $6 billion a year of new assets to the firm on the NewEdge Advisors side, we expect $30 billion in five years plus growth from our existing partners. We’ll probably be close to that $100 billion by that point.
WM: What makes the firm “elite?”
AG: Our advisors. We don’t create elite advisors; we partner with them, and then we support them in their efforts to continue that elite service. What makes us different from some of our competitors is, it’s not ‘come to NewEdge, and we will make you successful.’ If you’re already successful and you already know how to find and service clients, come to NewEdge and we’re going to give you the jet fuel to reach new levels.
WM: Can you give me an example of ‘jet fuel’?
AG: On the UNHW side, it would be the expansive access to bespoke alternatives and intellectual capital that you can’t get or grant access to at the wirehouses, or even on your own. You can manage $5 billion of assets and still not have enough to gain access to what NewEdge Wealth either has internally or has access to.
On the NewEdge Advisor side, the multi-custody RIA space takes a lot of effort and work to build and support. Most of our advisors want that and need that, but their main focus is really the end client. So we give them the ability to continue to focus on the client and deliver what the client needs without having to spend the time, effort, and money to build the chassis or the platform to deliver that.
WM: A lot has happened in the industry since you launched four years ago. Can you tell me a little bit about the challenges you’ve faced as a firm?
AG: Everyone has become more aware of institutional capital in this space, and it’s more prevalent than it ever has been. Six years ago, we were just trying to help explain to advisors—usually at wirehouses—why the RIA channel is so valuable to them versus where they are. Now, the RIA space is established and mainstream. Now, we’re trying to help advisors understand that not every deal is the same. Not all equity is created equal, and just like in the wirehouses, just because somebody’s offering you a lot of money doesn’t mean it’s necessarily the best place for you or your end client.
WM: What about the advisors coming out of the wirehouses? What are their greatest challenges in trying to make that move?
AG: Probably the biggest challenge is that the teams that are leaving are larger than in the past. By design, they’re more complex. You’ve got more staff; you need to create more office space and more infrastructure for them to move into.
In addition to the added complexity, I think hitting the ground running is more important than it was in the past because there’s so much competition out there for clients. We’ve really focused on the speed of transitioning assets from the wirehouse to our platform and the ability to get our advisors up and running, so they can immediately go back to servicing their clients.
Six years ago, a six-month transition was the norm. That’s not the case anymore. If you’re not helping get your advisors up and running within 30 days and a massive percentage of their assets transitioned over in that timeframe, you’re behind the ball.
WM: Is NewEdge completing most of these transitions in under a month?
AG: We're able to get them up and running, and the vast majority of their assets transitioned within the first 45 days.
WM: How are advisors joining you and what else can they expect? Can you tell me about your options?
AG: Our bread and butter has always been independent. You can join us as a 1099, where you 100% own your practice and leverage our resources to continue to expand. And then, we have an acquisition model where we’ll either buy a percentage or all of your business, you are taking our brand and you are using more of a consistent, consolidated tech stack. Typically, the valuation we provide is competitive, and there’s usually a component of stock and cash.
WM: Why do you think advisors choose NewEdge over your competitors?
AG: This is what scared us—when we started looking at all of the other acquisition models out there, it seemed to us the majority of the firms that were being acquired were retiring advisors looking for succession. They were doing a deal to monetize their life’s work and turn over their business to one of these competitors’ infrastructure.
We didn’t want to buy retiring advisors. The average age of an advisor at our firm is 49, so we have relatively young, larger advisors and really thought the acquisition models out there missed the mark. They weren’t compelling for advisors with decades of career path still ahead of them.
Our model is squarely focused on mid-career, successful advisors who aren’t looking to hang it up in the next three to five years. One way we do that is by offering them compelling economics and a share in our firm’s equity. They basically trade their equity for ours. Another way is by using our M&A engine to buy practices for our acquired firms. Once we buy a firm, we send our recruiting team out in their geographic region to buy other firms for them to continue to help them grow and replace cashflow they just sold to us.
It’s been successful, and, honestly, when we’re dealing with advisors that really do want to stay and grow in the business, we often win. And we win without having to pay the highest price.
WM: What custodians do you work with?
AG: We use Schwab, LPL, Fidelity, Raymond James and Goldman Sachs.
WM: How do you approach diversity at NewEdge Capital?
AG: We’ve naturally found just an incredible amount of diverse advisors. If you look at our network, it's incredibly diverse by race and gender. From an HR standpoint, we have more women working with us and more women in leadership roles than men. It’s been incredible to see diversity take a major role in the firm.