Our US correspondent examines developments at Wealthspire – now under new ownership – and how the firm intends to compete with a number of significant businesses. It is part of a trend of private equity firms moving to "true platform acquisition," in the words of an industry figure.

Wealthspire wants a seat at the big kids’ table.

The RIA’s new owners, Chicago-based private equity firm Madison Dearborn Partners, is integrating the five firms it bought in September from management consultant firm Aon into what it hopes will be a wealth management powerhouse that can compete with industry leaders like Creative Planning, Focus Financial Partners, Hightower, Wealth Enhancement Group, Captrust, Mariner Wealth Advisors and Mercer Advisors.

Wealthspire is the third large PE-backed RIA this year to outline a comprehensive integration plan, following the leads of Focus and Hightower, a clear indication that the RIA industry has entered a new phase, say industry observers.

“Wealthspire’s evolution fits the broader shift we’re seeing as PE-backed firms move from roll-ups to true platform integration,” said Michael Magnan, CEO of wealth management software vendor AdvizorPro. “The industry has matured past aggregation for scale’s sake. Those aiming for real market leadership now need enterprise-level synergies, strong branding, and shared infrastructure across wealth, institutional, benefits, and retirement lines.”

“Creating an integrated firm is a savvy business strategy,” agreed Chip Roame, managing partner, Tiburon Strategic Advisors. “The market spoke through the lower P/E multiple given to an unintegrated Focus Financial Partners and now firms are working furiously to integrate.”

National mega-firm?
Madison Dearborn is combining US RIA Wealthspire Advisors and Canadian wealth manager Newport Private Wealth, business management firm Ground Control and retirement plan managers Fiducient and NFP Retirement under the brand name Wealthspire.

Industry veteran Michael LaMena, CEO of Wealthspire Advisors, will become chief executive of the newly-combined company. Carl Nelson, who headed mergers and acquisitions for NFP, the financial services firm specializing in property and casualty insurance that had been Wealthspire’s parent company before it was bought by Aon in late 2023, will be president of Wealthspire.

Does the newly-integrated firm aspire to be a national mega-firm and compete with industry leaders?

“One hundred per cent,” answered LaMena in an interview with Family Wealth Report. “We have a lot of room to continue to grow.”

The combined RIAs have about $80 billion assets under management, and the retirement plans advise on approximately $500 billion, according to LaMena.

Advantage over Focus and Hightower?
When it comes to integration, Wealthspire has an advantage over rivals Focus and Hightower, LaMena argued. “We have a smoother path ahead,” he said. “We’re not a loose affiliation of firms. Under NFP, we’ve had a consistent track record of collaboration. Full integration is in our DNA.”

Industry observers expect Madison Dearborn, which is reportedly pursuing a nearly $1.3 billion debt capital raise, to use its restocked coffers to accelerate growth through M&A. “The naming of Carl Nelson as president signals to me that more acquisitions will follow,” said Roame.

LaMena maintained that Wealthspire won’t rely on inorganic growth but will use M&A primarily for talent acquisition. But since NFP combined the RIAs Bronfman Rotschild and Sontag Advisory to form Wealthspire in 2019, the firm has been known as a strategic and prolific acquirer. 

Platform play
Wealthspire doesn’t have plans for a direct-to-consumer marketing campaign LaMena said, but will instead concentrate on promoting the new brand to the industry as well as “internal education.” 

“We have a lot of opportunity to bring business lines together to solve more problems for clients,” he explained.

Or, as Magnan put it: “This looks like a long-term platform play designed to position Wealthspire among the top-tier integrated firms. Madison Dearborn is betting on the next generation of multi-channel advisory platforms. The combination also broadens wallet share across verticals and helps mitigate fee compression in traditional wealth management.”

By integrating workplace retirement and wealth businesses, Madison Dearborn hopes to drive lead generation within Wealthspire’s higher-margin wealth businesses, Roame pointed out.

Will it work?
Based on numbers alone, Wealthspire “jumps right into the top tier with firms such as Captrust and Creative Planning” measured by assets under management, administration and advisement, Roame said.

And if its integration strategy succeeds, “Wealthspire is a legitimate competitor to firms like Mercer or Creative Planning,” said Magnan. “But brand, culture, and cross-border integration will be the real test. This is not an easy thing, and others have a head start.”

Even LaMena concedes that by jumping into the industry’s top tier, Wealthspire has entered an extremely competitive “arms race” and that integration means that Wealthspire must “remove friction from the system.”

Part of that friction removal will no doubt come from planned layoffs outlined in investor material reviewed by CityWire RIA that said Madison Dearborn plans to realize about $8 million in cost savings by a round of layoffs of full-time employees in NFP Wealth’s technology, operations, sales and finance departments.

But Madison Dearborn’s $2.7 billion bet on Wealthspire is clearly a long-term play that the PE firm hopes will result in a significant expansion of the RIA’s multiple. 

Whether that gain will be realized via an eventual IPO, sale or merger is yet to be determined. “I think the industry will provide the answer in about a half dozen years,” LaMena said.