FWR spoke to the firm about its business of bringing about M&A deals and the balance of inorganic and organic growth that wealth managers go after. Hightower has secured a merger between one of its businesses and a 54-year-old organization.

Hightower says there are no capacity limits to its business line of driving wealth management M&A after it announced yesterday that it has helped secure a merger between one of its businesses, Fischer & Co, with New York-based Stralem & Company, which was founded 54 years ago. 

With Stralem’s $280 million in assets under advisement, the merger builds a new entity with about $800 million in AuA. The group will have 13 employees, including five advisors. The organization serves high net worth and ultra-HNW clients, Hightower said in a statement.

Hightower’s M&A team facilitated the sub-acquisition, providing Fischer with turnkey deal support. Hightower told Family Wealth Report that there is more such work to come, and no major constraints on such business.

“We don’t see a capacity limit, as we continue to grow our integration team in line with our inorganic growth,” Hightower chief growth officer Scott Holsopple, said in an email to this publication. 

“Integration is a critical aspect of M&A, which is why Hightower has an entire team dedicated to it. We view integration as a change management process that encompasses our systems, processes and community. The integration manager and support team stays with a new partner business for up to a year, to help them get through all cycles of their business. The faster we get the advisors and staff to new normal, the easier it is to work together to accelerate their growth,” he said. 

Such comments come at a time when M&A activity across different parts of the wealth management landscape has been brisk, driven by the need for economies of scale in certain areas, a desire by some owners to retire, and to obtain capital to support growth. (See this story about ECHELON Partners’ data on the topic.)

In the latest transaction involving the Hightower M&A team, Stralem’s Hirschel Abelson, Adam Abelson, and Andrea Lustig will join Fischer’s Alan Fischer and David Choe as partners of Fischer Stralem Advisors. 

“Support for inorganic growth is a key part of Hightower’s business acceleration services,” Holsopple said. “Many advisors recognize that, in addition to growing organically, they can expand their businesses through M&A to build out their offerings, add bench strength and talent to their leadership teams, and streamline succession planning.”  

Hightower’s M&A team provides its Hightower advisors with a range of inorganic growth services, including sourcing, valuation, deal structuring, due diligence, legal and regulatory, pre- and post-close integration, and capital resources.

Including this sub-acquisition, Hightower’s M&A team has completed nine such transactions so far in 2020, and four in 2019. As of September 30, 2020, Hightower's assets under administration were approximately $81.4 billion and its AuM was $61.6 billion.

Pipeline 
“Many stand-alone RIAs are realizing that to grow and scale, they need the support of a larger partner. We have some very interesting deals in the pipeline - both acquisitions and sub-acquisitions,” Holsopple told FWR.

“We want to help our advisors grow in a way that is meaningful to them and that makes sense for the organization. That said, we are always focused on helping our advisory businesses grow organically.

"Working with each of them on ensuring they are well positioned to increase referrals from existing clients, reach new prospective clients, and nurture relationships with their centers of influence is core to the type of collaborative consulting we do with them,” he continued.  “If an advisory business is eager to grow inorganically, and we think they are well suited to grow in that manner, and we find another advisory business that will be a good fit - that is when we will assist in those efforts. I guess you can say organic is ongoing and inorganic is opportunistic.”

A question that always arises is, does the end-client benefit from all this activity, given that it can sometimes be unsettling? 

“The end-client benefits because the advisors no longer need to focus on the operations of the business and can focus all of their time and energy on serving their clients. The end-client may also benefit from the scale the advisory business gains from joining Hightower like the upgrade in technology the clients can now leverage to access and view their accounts, the increased investment in cybersecurity to keep their data and investments safe, and reduced fees in some investment solutions,” Holsopple added.