Deals & People September 11, 2023

Advisory M&A

Cetera acquires tax-focused wealth manager Avantax for $1.2B; Investment Consulting Group joins Osaic; Hub International acquires assets of Dieffenbach Benefits Group; and more.

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Cetera Holdings Acquires Avantax

Cetera Financial Holdings Inc. will acquire all of the issued and outstanding equity of Avantax Inc. in an all-cash transaction valuing Avantax at approximately $1.2 billion, inclusive of Avantax’s net debt, the firms announced Monday.

Avantax, a tax-focused financial planning and wealth management firm, and its 3,078 financial professionals will become a stand-alone business unit within Cetera, representing $83.8 billion in assets under administration and $42.6 billion in assets under management, as of June 30.

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Fidelity will serve as a custodial partner for Cetera, according to the announcement.

“This acquisition will establish a strategic relationship between Cetera and Fidelity, which will enable Cetera to expand further into a multi-custodial platform, enhancing Cetera’s capabilities to provide tools and functionalities for its affiliated advisors,” Adam Antoniades, CEO of Cetera Financial Group, said in a statement. “Our tax-centric Cetera Financial Specialist team has already created a formidable presence in our industry, and we are delighted that after the closing of this acquisition, we will be able to offer all of our advisors even greater opportunities to expand into tax and accounting.”

Holders of shares of Avantax common stock will receive $26.00 in cash per share, without interest and subject to required withholding taxes. The purchase price represents a premium of approximately 30% on the closing price of shares of Avantax common stock on September 8, the last full trading day prior to announcement of the transaction. The transaction is expected to close at the end of 2023, subject to approvals.

Investment Consulting Group Leaves Wells Fargo for Independence with Osaic

Osaic Inc., a provider of wealth management solutions, announced that the Investment Consulting Group LLC will join Osaic’s newly rebranded and consolidated firm.

Headquartered in Birmingham, Michigan, Investment Consulting Group includes managing partners and co-founders Christopher DeWolfe and Jason Franklin, vice presidents Judd Allen, Mark Ivanovic and Spencer Schmale and financial adviser Clay Franklin. Investment Consulting Group, previously affiliated with Wells Fargo, will bring more than $600 million in total client assets to Osaic.

Investment Consulting Group offers investment management, estate planning, tax optimization and retirement strategies. The firm serves a variety of clients, including corporate executives, small business owners and high-net-worth individuals.

“We chose to go independent with Osaic due to its open architecture and growth-oriented culture,” Franklin said in a statement. “We are excited about the tools they provide our team to offer clients an elevated service experience. At the same time, their dedicated marketing support, practice management solutions and business-building resources will ease our transition and help us achieve our long-term growth goals.”

Hub International Acquires Assets of Dieffenbach Benefits Group

Hub International Ltd. announced that it has acquired the assets of Dieffenbach Benefits Group LLC, doing business as F.A.R.E. Healthcare.

Located in St. Louis, Missouri, F.A.R.E. Healthcare provides comprehensive group benefit packages, life insurance and employee health care. Co-Founders Mollie Dieffenbach and John Byrne, along with the F.A.R.E. Healthcare team, will join Hub Mid-America and become the first official Hub office in St. Louis.

“Combining F.A.R.E. Healthcare’s service reputation and network of relationships with Hub’s vast capabilities and resources establishes a major presence in St. Louis and the surrounding areas, which is a strategic focus for Hub Mid-America,” Paul Cohen, Hub’s president of Kansas and Missouri, said in a statement.

Modern Wealth Management Announces Acquisition of Midwest Financial

Modern Wealth Management announced it has acquired the assets of Midwest Financial, located in Glidden, Iowa.

Established in 1983, Midwest Financial is led by father-son team Brian Johnson and Jeremiah Johnson. The firm offers investment and risk management, social security planning, tax planning and strategies, estate planning and other wealth management services.

“We’re excited to be joining the Modern Wealth ecosystem, drawing from the leadership and insights provided by its executive team,” Brian Johnson said in a statement. “We look forward to ushering in greater operational efficiencies at the firm, along with providing our clients an expanded menu of financial planning services.”

The acquisition marks Modern Wealth’s fourth full transaction, following its recent acquisitions of Barber Financial Group, Osiwala Financial Group and Financial Security, since its April launch, bolstered by $200 million in equity financing from Crestview Partners.

Manulife Investment Management Completes Acquisition of Serverfarm

Manulife Investment Management announced it has completed the acquisition of a controlling interest in Serverfarm LLC, a data center platform.

The transaction, together with ongoing financial support from Manulife IM and NantCapital LLC, is intended to allow Serverfarm to expand its data center portfolio and enhance the market reach of InCommand, its cloud-based data-center-management-as-a-service platform.

“We are excited to be joining the next chapter of Serverfarm’s growth,” Recep Kendircioglu, global head of infrastructure at Manulife IM, said in a statement. “[Serverfarm CEO] Avner [Papouchado] and the Serverfarm team have built a powerful platform and strong customer relationships. With this transaction, Serverfarm is even more well-positioned to serve its customers’ increasing demands for data center capacity.”

Serverfarm currently operates a portfolio of eight data centers across North America, Europe and Israel that aggregate more than 1.5 million gross square feet and 125 megawatts of IT capacity, and it has secured additional land for future data center developments.

Dakota Wealth Management Acquires Jonathan D. Pond LLC

Dakota Wealth Management, an independent investment management firm based in Palm Beach Gardens, Florida, has entered into an agreement to acquire Jonathan D. Pond LLC, a Newton, Massachusetts-based investment advisory firm managing approximately $350 million.

The acquisition brings Dakota’s assets under management to approximately $3.8 billion. This is the third Massachusetts office for Dakota, which now has 14 offices in 11 states. Jonathan Pond will join Dakota as a managing director, along with his advisory team, Nicolé Keane and John Annino. Keane will assume the role of director and senior wealth adviser.

“Jonathan has built an exceptional team centered around highly effective wealth management solutions for their clients,” Peter Raimondi, founder and CEO of Dakota, said in a statement.

Jonathan D. Pond, LLC was founded in 1987 with a focus on retirement and estate planning goals, insurance, tax minimization, gifting strategies and controlling investment risk.

Data & Research September 11, 2023

Economic Slowdown, Inflation, Top List of Adviser Concerns in PGIM Study

A new survey by the asset manager also shows that more than half of respondents view U.S. Treasurys, investment-grade corporate bonds and municipal bonds as attractive investments.

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When it comes to client portfolios, financial advisers are most concerned with an economic slowdown, followed by inflation and market volatility, according to the latest survey from PGIM Inc., the asset management arm of Prudential Financial.

When looking at the year ahead, advisers are most concerned, in order, with an economic slowdown (56%), inflation uncertainty (53%), stock market volatility (44%) and both interest rate uncertainty and geopolitical events (38% each), according to PGIM’s On the Minds of Advisors survey for the year’s second quarter.

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The survey, taken quarterly, saw interest rate concerns fall out of the top three portfolio management concerns, according to PGIM. In Q1, the top concerns were inflation uncertainty (65%), stock market volatility (52%) and interest rate uncertainty (43%). But a sense that the Federal Reserve is slowing what had been aggressive interest rate hikes intended to cool inflation has brought general economic slowdown and inflation to the forefront.

The concerns, according to PGIM analysts, have merit.

The firm noted in the report that, in PGIM Fixed Income’s “Q323 Quarterly Outlook,” Chief Global Economist Daleep Singh said that “one of PFI’s economic scenarios calls for ‘weakflation’ over the coming year—a combination of sluggish growth and declining inflation that hovers above the Fed’s target rate.”

Allocation Insights

When asked if they would make any allocation changes to portfolios during a pause in rates, investors were mixed. A slight majority said they would maintain course both in fixed income (49%) and equity allocation (46%). Meanwhile, 38% of advisers said they would increase fixed-income holdings, and 42% said they would boost equities. Just 13% in both categories said they would decrease holdings.

When it came to alternative investments, advisers were more solidly in the camp of holding pat (57%), with 18% planning to add alts to portfolios, 7% planning to decrease and 18% not offering the investment option.

Bullish on Treasurys

When it came to their most favored fixed-income sectors, advisers ranked, in order, U.S. Treasurys (67%), investment grade corporate bonds (64%), municipal bonds (61%) and high-yield bonds (42%) as the most attractive. That’s a reversal from the same period in 2022, when advisers ranked U.S. Treasurys as one of their “least-attractive” sectors, according to PGIM.

Meanwhile, two sectors that made gains between the first two quarters of the year were agency mortgage-backed securities (to 34% in Q2 from 24% in Q1) and asset-backed securities (to 22% in Q2 from 12% in Q1).

PGIM analysts also remain optimistic about municipal bonds, according to the report.

“This sector could rise further as the negative effects from the debt ceiling debate, interest rate uncertainty, and the banking crisis dissipate,” PGIM wrote in the report.

The survey questions were asked as part of Escalent’s Cogent Beat Advisor data gathered from May 24 through June 7 from a representative sample of 379 financial advisers. Q1 data was obtained from February 24 through March 7 and included responses from a representative sample of 476 financial advisers.

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