Developments in Wealth Management: week ending Sept 21st, 2024

Broad Themes

1.??????? While the trend of Wealth Management firms pursuing scale via M&A activity, as Voya Financial acquisition of OneAmerica, and Canaccord Genuity’s acquisition of Brooks MacDonald Intl arm shows, firms are showing a more selective bent toward their bolt on approaches either in relation to the client base, or to where the operational model can provide additional share of wallet opportunity.? These acquisitions also underscore that in more specific segment focused businesses, an inability to create efficient growth inevitable leads to a more stagnant performance profile and ultimately, a sale.

2.??????? There continues to be an appetite by investors for advisor technology, with strong indications that the presence of various types of AI and Machine Learning approach will inevitably change the nature of the conversation/engagement approach that advisory firms adopt, and the overall level of operational efficiency and return on investment that can be achieved. ?Despite the fact that platforms are definitely expanding their own capabilities front to back, and bringing more automation and integration into their solution designs, there is still an appetite, in a crowded landscape for VC to back point solutions that are breaking the US$5ml ARR and building some scale through larger network partnerships, or deals with bigger firms.

3.??????? The broad expectation of more investment into Alt products continues to be an investment area for those providing back office, custodian and fund administrative services to both product manufacturers as well as to distributors. ?There remains a strong belief that the overall infrastructure for acquiring, managing, reporting and liquidating alternative assets needs an upgrade, with BNY being the latest custodian to announce its own platform and marketplace.

Deals and Funding of note in last 10 days

Oaktree to Buy Close Brothers Asset Management / https://www.pehub.com/oaktree-to-acquire-close-brothers-groups-wealth-management-unit-for-200m

Commentary: There had been rumours of this a few months back so confirmation of the deal was not that big a surprise, although the overall valuation for the business did, in terms of the structure of the deal did imply that the enterprise value was more in line with other assets rather than at a premium.? Close Brothers is an organization that has been restrained in terms of non/organic growth to scale in recent years, so the presence of Oaktree would seem to imply CBAM will be back in the market looking to acquire well run midsized regional advisory businesses soon. ?The presence of Oaktree would also infer investment capital will be available for investment into areas like client experience, and the advisory/IM desktop to complement an externalization outsourcing operational model approach.

Stifel Management rumoured to be interested in B Riley-s Wealth Management Business / https://www.reuters.com/markets/deals/stifel-financial-talks-buy-b-rileys-wealth-management-unit-source-says-2024-09-20/

Commentary: ?With its share price reduced to about 12% of its price back in May 2024, rumours have abounded about the fate of different business areas controlled by B. Riley, despite his own effort to orchestrate a take private transaction.? The latest rumours concern the US$25bl AUM wealth management arm which generated US50ml of revenue in the first quarter results, and seems to be a profitable business line in its own right.? ?Should the rumours prove true, it would suggest that the entirety of the remaining consulting, capital markets, and industrial advisory businesses are worth far less than they have been earning.

Wealth.com raises US$30ml in Series A round led by Google Ventures / https://www.wealth.com/resources/articles/wealth-announces-series-a-led-by-google-ventures

Commentary: What was perhaps most interesting to me on the deal was the presence of GV in the lead position in this round of financing. There participation suggests that while Estate Planning hasn’t yet become a highly common advisory capability that wealth firms offer on their own, or through collaboration with specialist legal and tax advisors, if you are expecting the intergenerational wealth transfer to start to become a more common and larger opportunity in the next decade, than investing in a full estate planning platform starts to make a lot of sense. My read on Wealth.com is that they have made it a lot easier to bring together Wealth Management with Estate Management, both from a visualization, as well as document generation and management perspective. This provides wealth firms with the potential for significant operational advantages, bringing more basic document provision in house, and offering holistic planning for the household.

Cashmere raises US$3.6ml in a Seed Round led by Fintech VC veteran firm, Canopi Ventures / https://fintech.global/2024/09/10/cashmere-raises-3-6m-in-seed-funding-to-enhance-wealth-management-client-acquisition/

Commentary: While there are certainly a number of different types of companies seeking to help advisors address improving their client acquisition capabilities, Cashmere have received funding because of their focus on using a broader set of data and sourcing inputs to try to identify the right type of clients for the most appropriate and suitable advisors. This plays off the idea that while firms might have a generic set of capabilities, each advisor will actually deliver a variation in their own underlying skill set alongside a unique engagement approach. As a result, matching advisors to prospective clients requires more enriched data attributes as well as more characteristics about both the perspective client and the advisor. This is where Cashmere is trying to push its competitive advantage, and value.

?