Beacon Pointe Advisors, a Southern California-based registered investment advisory firm overseeing around $28 billion in assets, has completed its first wirehouse breakaway acquisition—a team of six from UBS.
“A $2 billion team, two principals, 50 households. And, more importantly, the two guys that run that team are just off the chart,” said Beacon Pointe President Matt Cooper, on a stage at DeVoe & Company’s annual M&A+ Succession conference last month. “They're like RIAs trapped in a wirehouse environment. Just really, really neat guys. And we're blessed and we're lucky to have them.”
Sitting on an M&A panel with Beacon Pointe CEO Shannon Eusey, Cooper was saying that wirehouse breakaways are “a very hot topic amongst all the acquirers right now.”
“There's an opportunity to look into the wirehouses and buy at a revenue multiple that results in a much lower EBITDA multiple, which then is a greater spread and it's more accretive to the buyer,” he said at the time. “So, that's a really hot subject just from an economic standpoint and the way the deals are structured. We just did our first one here locally. We just haven't announced it yet.”
Publicly announced Tuesday, the new team is led by Russell Crow and William Diehl, former managing directors at UBS Private Wealth Management. Both have become partners and managing directors at Beacon Pointe, joined by senior relationship managers Julie Montgomery and Julie Anderson, Senior Associate Wealth Advisor Pierce Halsted and Associate Wealth Advisor Sarah Stubbs. Their new office is located at the Preston Center in Dallas, Texas.
The decision to join Beacon Pointe was driven by the desire to provide fiduciary advice alongside “a robust and holistic” investment platform and family office services, according to Tuesday’s announcement.
"We seriously considered several fiduciary firms," Diehl and Crow said in a joint statement. “We chose Beacon Pointe because their culture is hard working and squarely focused upon constant improvement for the benefit of our clients.”
Crow and Diehl both served as managing directors at UBS Private Wealth Management for 14 years after spending eight years at Goldman Sachs and four years with Morgan Stanley Private Wealth Management in New York, Houston and Dallas.
The acquisition, which closed on Aug. 18, is Beacon Pointe’s fifth in the Dallas/Fort Worth metroplex region and could bring assets under management in the region to more than $5 billion.
“What they're bringing is their goodwill and reputation, which is an intangible asset,” Cooper said. “That's what we're acquiring. And then, what we look at is their results over the course of 12 months with a couple of milestone dates along the way to see what's evolved. At the end of 12 months, we true up and evaluate what their goodwill and intangibles are worth, and that's quantitatively by the amount of assets that they've generated, revenues and resulting EBITDA.”
He told WealthManagement.com on Tuesday that lower multiples are only one reason Beacon Pointe is making wirehouse breakaways an area of focus.
“That’s maybe number five on the list of why it's attractive. The bottom line is there's a ton of talent in the wirehouse world, and obviously they still possess most of the assets,” he said. “And it’s not so much that they're trading at lower multiples, it's the fact that the existing RIA universe has been bid up dramatically and there are numerous unattractive, less than premium RIAs being priced as premium firms. And so, it just makes more sense to find great people in the wires.”
Cooper said Beacon Pointe considered targeting the sector around 2009, to benefit from advisors departing in the wake of the financial crisis, but that the two worlds were still too disparate then. The subsequent rapid growth of the RIA space and, along with that, myriad headlines regarding the benefits of independence and stories of teams who have made the move successfully, have dramatically changed the conversations they’re able to have.
“They didn't understand what the independent RIA space was really all about, and we didn't understand what paradigm they were operating on from a mental framework,” said Cooper. “So we were speaking past each other. It didn't make sense. Now, the wirehouse advisors really understand the RIA space and what it means to be independent, and the value to their clients and their team.”
While there won’t be any more announcements on that front in the near term, Cooper said it’s an area of focus moving forward. At present, Beacon Pointe anticipates announcing a handful of other acquisitions before the end of the year, at least two of which have already closed.
Among the nation’s most active acquirers in 2021 and 2022, Beacon Pointe got off to a strong start in 2023, announcing six deals by mid-April, and then appears to have taken a beat.
“The rumor is that it's super competitive out there and you can't be selective about who you choose to partner with,” said Cooper. “And that's not the truth. Sometimes it just takes us a couple months to find the right folks.”