M&A as Adviser Talent Acquisition Strategy

The retirement planning business is a people business.

Speaking recently with PLANADVISER about the elevated pace of merger and acquisition (M&A) activity in the brokerage and advisory business, Scott Slater, M&A specialist and a vice president of practice management and consulting for Fidelity Custody & Clearing Solutions, emphasized the role that “key talent procurement” is playing.

In terms of the deals that have happened so far in 2020, Slater says, he continues to be impressed by the activities of what Fidelity considers to be “strategic acquirers.” In basic terms, these are firms that already have a strong set of advisory services and an operational infrastructure in place and which want to quickly acquire access to new markets. These strategic acquirers are also seeking to scoop up as many of the expert and trusted local advisers operating in communities across the U.S. as they can.

“One of the things we’ve been talking about quite a lot so far in 2020 is the need for attracting and retaining the best advisers and staff,” Slater says. “There is no question that, for a lot of the large, strategic acquirers, a big part of why they are entering into so many transactions is to capture what is actually a pretty limited amount of top-level talent. This theme will certainly continue to shape M&A during 2020, whatever transaction level we end up seeing.”

Asked whether this dynamic played a part in his firm’s recently announced acquisition of Welch Hornsby, Rush Benton, senior director of strategic growth for CAPTRUST, says that was certainly the case. He notes that the $5.5 billion advisory firm is the 40th to be acquired by CAPTRUST since it put in place a strategic acquisition plan in 2006.

For its part, Welch Hornsby was founded more than 30 years ago and today is led by Co-Founder, Chairman and CEO Edward Welch, Jr. Case in point, Welch is joining CAPTRUST as part of the acquisition, along with 14 financial advisers and research professionals, as well as 12 operational staff.

“Acquisitions of this type are the best way to efficiently add established talent that will not only bring over their existing business but will also help us to grow our business moving forward,” Benton explains. “We all know that advising is very people-oriented business. What you also see with Eddy joining us is a good demonstration of the fact that even the very large, established advisory firms feel they can benefit from gaining scale. This isn’t a fledgling $500 million business with a few principles and staff. This is a significantly larger business that is well-professionalized already.”

Asked to describe the advisory business he sees developing over the mid- and long-term based on the rapid pace of mergers and acquisitions, Benton feels the industry could eventually evolve to look more like the accounting business.

“I do think the industry is going to continue to evolve to the point where there are really a handful of leading national players, similar to what you see with the accounting industry, for example,” Benton says. “We obviously want to be one of those firms, and we want to create a lot of value for our shareholders and clients while we do that. At the same time, the most important thing, of course, remains the organic growth rate. If you’re not growing by winning new clients, then something is wrong.”