In the latest deal reflecting a family business transforming into an RIA aggregator, Wealth Enhancement Group has agreed to make its ninth acquisition of 2022.
Ronald Sadoff and his two sons, Bryan and Michael, of Sadoff Investment Management — a Milwaukee-based registered investment adviser with three support staff and more than $1.6 billion in client assets — will join Wealth Enhancement under an agreement at an undisclosed price, the parties said September 15. The deal will be completed by the end of the month, Michael Sadoff said in an interview.
Costs a valuation over $2 billion in a recapitalization last year by Canadian investment manager Onex Corporation, Wealth Enhancement reached $57 billion in client assets as one of the most active acquirers in the industry. For the Sadoffs, wealth enhancement emerged as the top pick of many choices for potential business partners after the family business began exploring an acquisition last year. A new outside owner can help large practices achieve greater scale by offload operational duties with technology and human resources.
Compliance operations and other services, including lead generation, technology and specialist planning teams to help the Sadoffs with their primarily high net worth client base, led them to choose Wealth Enhancement. The Sadoffs turned to Advice Dynamics Partners for advice in their selection and Alston & Bird for legal counsel.
“Running the business took more time than working with customers and managing money,” Sadoff said. “We were told there was a whole host of companies like Wealth Enhancement Group that could help us.”
A growing number of potential acquirers – often deploying private equity funds – offer firms flexibility in setting up in an effort to attract more teams that have over $1 billion in client assets. After the first half of the year, Wealth Enhancement is second only to Creative Planning, Mercer Advisors, Beacon Pointe Advisors and Mariner Wealth Advisors in acquisition volume, according at investment bank and advisory firm Echelon Partners. Despite slight declines in the first two quarters, wealth management mergers and acquisitions remain on track to set a deal volume record for the 10th consecutive year.
“Any future downturn, driven by macroeconomic headwinds, is likely to be transitory and lead to pent-up demand in years to come,” according to Echelon’s second-quarter trading report. “We continue to believe that we are at the start of a long cycle of RIA consolidation.”
Companies that have reached substantial size and have the desire and business model to grow faster are always on the lookout for buyers. In a panel of dealmakers at the Future Proof Festival last week, Penny Phillips of Journey Strategic Wealth, an RIA aggregator focused on practice management, compared the field of planning to the travel industry. These days, travelers use discount websites to get airfare or “hire a travel concierge to book your flights and create an experience and organize an exciting trip for you,” Phillips said. In wealth management, consumers make a similar decision “between lowest cost or highest value,” she added.
“Advisors who want to differentiate themselves always have the opportunity to do so by displaying the highest value,” Phillips said. “And that just means going deeper into the vertical that you serve.”
The Sadoffs primarily focus on wealthy clients, and they have done so for more than four decades after Ronald launched the company in 1978. Internal company succession also figured in their wealth enhancement pick.
“Look at how Ron built the family business, brought in Bryan and Michael, and established Sadoff Investment Management over several decades of success,” Jim Cahn, director of investment and business development at Wealth Enhancement, said in a prepared statement. “They’re not just taking care of customers today. They’re making sure they can take care of customers tomorrow.”