Deals & People September 25, 2023

Advisory M&A News – 9/25/23

Johnson Financial Group acquires Appleton Group; Bluespring Wealth Partners announces acquisition of Christopher Street Financial; Coutant Group joins UBS.

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Johnson Financial Group Acquires Appleton Group

Johnson Financial Group announced it has signed an agreement to acquire the Appleton Group LLC, a registered investment adviser with $210 million in assets under management based in Appleton, Wisconsin, at the end of the month.

Founded in 2002 by Mark Scheffler, the Appleton Group is a fee-only, independent financial adviser serving private clients, employer-sponsored retirement plans, nonprofit endowments and financial institutions.

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“We’re proud to become part of the largest independent RIA in the state,” Scheffler in a statement. “Johnson Financial Group offers the investment products, technology and service our clients expect.”

“Mark Scheffler and the six employees of the Appleton Group share our values and our culture of serving our clients, our employees and our communities,” Brian Andrew, CIO and president of Racine, Wisconsin-based Johnson Wealth, said in a statement. “This acquisition will expand our footprint in Northeast [Wisconsin] and complement other recent efforts to build our presence in Milwaukee, Madison and Appleton.”

Bluespring Wealth Partners Announces Acquisition of Christopher Street Financial

Bluespring Wealth Partners LLC announced the acquisition of Christopher Street Financial, a New York City-based investment firm with 15 staff members that oversees approximately $700 million in client assets nationwide.

Established more than 40 years ago, Christopher Street Financial is led by President Jen Hatch and CEO Mark Franczyk. The firm specializes in relationship-based, holistic financial planning for LGBTQ+ individuals, couples and families. According to a statement, the firm was “named to commemorate the street in Greenwich Village—a Lower Manhattan neighborhood of New York City that’s associated with events that transformed the fight for equality.”

“Our firm has a 42-year reputation of helping members of the LGBTQ+ community achieve financial well-being, and we are excited to drive this legacy forward with Bluespring’s support,” Franczyk said in a statement.

Christopher Street Financial has been associated with Bluespring Wealth Partners’ sister company, Kestra Financial, for 15 years. Bluespring plans to further support Christopher Street Financial through consulting and business development resources.

Coutant Group Joins UBS

UBS Wealth Management USA announced that a five-person team, the Coutant Group, has joined the firm. The Greenwich, Connecticut-based team manages $700 million in client assets for high-net-worth individuals and families.

The team is led by financial advisers Kevin Coutant and Keith Coutant, who bring nearly 50 years of combined industry experience. They join UBS from Merrill Lynch Wealth Management, where they spent the past 24 and 21 years, respectively.

The pair are joined by Meredith Smith and Kristen Quick, senior wealth strategy associates, and Henry Hamilton, client service associate. They join the UBS Soundview Wealth Management Market team, led by Mara Glassel, and will be based in the firm’s Greenwich office.

“On behalf of UBS, we’re excited to welcome Kevin, Keith and their entire team to the firm,” said Glassel in a statement. “Their industry experience and dedication to their clients will be a great addition to our business, and we look forward to having them help us continue to expand our client offering in this key market.”

Compliance September 22, 2023

Judge Upholds DOL ESG Rule

A Texas judge, appointed during the Trump administration, ruled that the DOL does not violate ERISA by permitting ESG in ERISA-governed plans.

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A U.S. District Court ruled on Thursday against 26 states and other plaintiffs in their lawsuit challenging the legality of the Department of Labor’s final rule permitting retirement plan fiduciaries to use environmental, social and governance considerations in their decision making about investments.

The plaintiffs argued that ESG investing practices would limit the investments that oil and gas companies receive from the public markets, hurting those companies, the states that they operate in, and their employees. Additionally, ESG investing would result in lower returns for defined contribution plan participants, according to the complaint.

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At the core of the plaintiffs’ argument was an allegation that, by expressly permitting ESG in fiduciary decision making, financial interests would be subordinate to politically or philosophically motivated interests.

On Thursday, Donald Trump-appointed Judge Matthew J. Kacsmaryk on ruled in Utah vs. Walsh that the proposal does not explicitly violate the Employee Retirement Income Security Act because ERISA does not forbid ESG investing or a tiebreaker test that includes non-economic factors. The rule, he noted, requires fiduciaries to act prudently and not subordinate financial interests when considering ESG.

If the rule does not expressly violate the statute, then plaintiffs must argue that it is arbitrary and capricious, a test they failed to back, Kacsmaryk wrote. He also explained plaintiffs failed that burden because the DOL argued that they were trying to address confusion and a “chilling effect” identified by commenters about an earlier rule from 2020 which made it unclear if ESG could be considered at all, and this is the “minimal level of analysis from which the agency’s reasoning may be discerned.”

To address this confusion, the DOL said that prudent risk and return considerations can include ESG factors, but they do not need to. However, a fiduciary cannot subordinate financial interests to non-financial interests; they must consider ESG only to the extent that it is a risk-return factor. The ruling noted that the DOL has considered ESG a financial factor since at least 2015, and that the 2020 rule that plaintiffs sought to restore acknowledged that not considering ESG factors in certain circumstances could actually be a breach of fiduciary duty.

The DOL also reworked the tiebreaker test for when a plan may consider non-financial factors when choosing between two investments. The 2020 rule said that the plan must be “unable to distinguish” between the choices, but the 2022 rule says they must “equally serve the financial interests of the plan.”

The latter test is understood to be less burdensome than the former, but Kacsmaryk wrote that the modification really “changes little” and there is “little meaningful daylight” between them.

The judge also ruled that ESG can be used in evaluating a qualified default investment alternative in an employer-sponsored retirement plan as long as that investment is otherwise prudent.

At the end of the ruling, the Kacsmaryk wrote that “while the Court is not unsympathetic to plaintiff’s concerns over ESG investing trends, it need not condone ESG investing generally or ultimately agree with the Rule to reach this conclusion.”

The DOL initially expressed skepticism of the venue, the Amarillo Division of the U.S. District Court for the Northern District of Texas, and requested a venue change, which was rejected.

A separate lawsuit challenging the ESG rule in the U.S. District Court for the Eastern District of Wisconsin Milwaukee Division is still ongoing. That case is called Braun and Luehrs v. Walsh.

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