Cleveland-based MAI Capital Management has taken a minority, non-control investment from the newly formed Wealth Partners Capital Group of Florida as the latter company looks to aggregate a network of wealth management businesses and arm those firms with capital to make acquisitions of their own.
MAI is one of three firms WPCG has taken minority stakes in, in addition to Forbes Family Trust of New York and EP Wealth Advisors of California. Terms of the deals were not disclosed. The WPCG holding company was formed as a result of these investments.
MAI managing partner Rick Buoncore, who purchased the firm in 2007, said he’s been approached about being acquired consistently over the years, but simply hasn’t wanted to sell. It wasn’t until principals at WPCG — which comprise John Copeland, Rich Gill and Sean Bresnan, who were previously senior executives in the wealth management business of Florida’s Affiliated Managers Group Inc. — reached out to Buoncore in late 2016 about a minority stake and a fresh business proposition that MAI became interested.
“This is an opportunity to grow business together and be partners on the bottom line,” Buoncore said. “But the key for us is I can maintain control of our company.”
MAI had about $900 million in assets under management in 2007 when Buoncore became involved and has grown significantly since then. According to a recent public filing, the firm marked 67 employees and AUM of about $3.9 billion. Buoncore said that looks more like $4.4 billion in AUM and 94 people today. Outside its Cleveland headquarters, the firm also has offices in Florida, New Hampshire, California and Columbus.
“We are focused on our partnerships with these three leading wealth advisory firms, run by deep and experienced management teams,” said WPCG managing partner John Copeland in a statement. “As the independent wealth management industry continues to grow and mature, a long-term solution for smaller firms in need of business and operations support will be critical. We believe FFT, EPWA and MAI offer compelling opportunities to these firms.”
Copeland added that “MAI’s track record of growth and exceptional organizational strength make it an ideal fit for Wealth Partners Capital Group.”
Buoncore said MAI has invested some $10 million in the business in the past five years supporting general operations, technology and compliance. Those are costs harder for smaller firms to absorb as the financial advisory business evolves. Those financial pressures, along with other changes brought on by elements of the Department of Labor’s fiduciary rule and other factors, are expected to foster consolidation in the financial advising industry, setting up large firms to acquire smaller operations looking for partners or simply a transition out of the business.
“(The fiduciary rule) wasn’t the reason we did this,” Buoncore said, noting the DOL wasn’t a driving impact in this move, though it’s a factor creating opportunities for acquisitions all the same. “But it’s shaking loose people we never envisioned would be part of the conversation that we’re looking at.”
MAI sees itself as an acquirer. And the capital provided to them, along with WPCG’s other partners so far, is largely designed to fuel those firms’ own acquisitions, capitalizing on the confluence of events leading to industry consolidation today.
Buoncore undoubtedly has smaller advisers on his radar. He said he’s looking at north of seven acquisitions on the table already. Those could come just about anywhere in the country — though he does clearly have an eye on the Northeast Ohio marketplace.
Buoncore noted how partners drew a circle around Cleveland encompassing about anything within 30 minutes of the city. He said that circle revealed 91 RIAs of $100 million in AUM or less. And while not every firm will be a fit, those smaller advisers are likely roll-up targets.
“The ones that look like us, but are only smaller versions, I would argue we could offer them a better platform than they have today,” Buoncore said.
He described their acquisition strategy as a hub-and-spoke approach. Cleveland could be a hub, along with any of their other U.S. offices or locations where they’ve yet to establish. From there, smaller advisers will be acquired to build out other platforms in their scalable business model.
The same approach is to be employed by WPCG’s other partners.
“I just think this is a rare partnership where a great firm located in Florida has picked a firm in Cleveland to be one of their platforms,” Buoncore said. “We think it’s a game-changer for our industry that will create tremendous opportunity for lots of firms — that maybe didn’t make that investment they should have — to align themselves with a firm that did and took that sacrifice.”
MAI is the third largest investment adviser in Northeast Ohio, according to Crain’s research, with at least $3.8 billion in local assets under management in 2016.
Buoncore is also very excited about the growth the future should hold for MAI itself following this partnership.
“I’m more excited about the next 10 years than I was about the first 10 years,” he said, “and the first 10 weren’t so bad.”