In June, Allworth Financial, the Folsom, Calif.-based registered investment advisor with over $30 billion in client assets, acquired Indianapolis-based sister firms Salzinger Sheaff Brock and Sheaff Brock Investment Advisors. The acquisition added more than $1.5 billion in combined assets, a high-net-worth client base, and specialized investment management capabilities.
But the deal signals a broader shift in Allworth’s M&A strategy, away from high-volume rollups to acquiring larger, more sophisticated firms with higher net worth clients.
Allworth CEO John Bunch said the RIA has completed over 40 acquisitions since 2017, when private equity firm Parthenon Capital bought a stake. (In 2020, Parthenon sold its stake in the RIA, with Lightyear Capital and Ontario Teachers’ Pension Plan Board buying in.)
Up to now, the M&A strategy has focused on scaling the firm and aggressively growing in the markets it was already in, such as Sacramento and Northern California. A fair number of past acquisitions also involved founders who were transitioning out of the business over three to five years.
“What we’re doing now is looking for firms that are larger that give us a strategic advantage, but also have a strong management team and second generation of advisors,” Bunch said.
Allworth was founded over 30 years ago, serving the “millionaire next door” type of client. But it has worked recently to move upmarket. Year-over-year, the average size of the RIA’s prospects has increased nearly 50%. In its scaled marketing and sales growth channels, the average new client size is up nearly 43%.
Further, a big focus of Allworth’s past acquisitions was on adding financial planning capabilities, with investments “a far second decision point,” Bunch said.
“We still believe in financial planning as the core of the business, but we think that increasing our competency and investment management, as much as we focused on the depth of our financial planning, is the right strategic move to make us a stronger firm for the next 50 years,” he said.
Bunch said the last four deals, including Salzinger Sheaff Brock and Sheaff Brock Investment Advisors, were acquisitions of assets and the capabilities of the firms’ investment management teams. The other deals include George McKelveya Manasquan, N.J.-based firm with more than $1.1 billion in client assets; and Stewart and Patten Company, a Lafayette, Calif.-based firm with $1 billion in client assets.
Salzinger Sheaff Brock, co-founded by Mark Salzinger, brings specialized investment management capabilities. For decades, Salzinger has produced The No-Load Fund Investor, a monthly investment newsletter that contains his commentary, model portfolios and current data on nearly 1,000 no-load funds and ETFs. Before founding the RIA, he served as executive editor of Louis Rukeyser’s two financial newsletters, working closely with the famous host of Wall Street Week. During that work, Salzinger spoke to many of the preeminent investors and portfolio managers, including Sir John Templeton, Peter Lynch, Martin Zweig and Jack Bogle, to name a few.
“In the 1990s, I would interview people who had been great investors since the ‘50s,” he said. “It was hundreds of people. I think what I bring is that perspective, that sort of institutional knowledge of the wisdom of these great investors of the past.”
When Salzinger was looking for a buyer, he was concerned that his investment approach might not outlive him. So he wanted to find a firm with strong core research capabilities, and he found Allworth’s investments were compatible with his own. In addition, his clients get access to Allworth’s financial planning capabilities, including estate and tax planning, which he didn’t offer.
“It’s key to really combine creative investment management with the elite financial planning and estate planning tools and people that Allworth has,” he said. “There’s a desire out there for more than just plain vanilla investment management, whether it’s risk-adjusted return, focusing on lowering risk, but still making a lot of money, or it’s private investing, or it’s Bitcoin.”
Bunch said Allworth is likely to do fewer but larger deals going forward, with a target of adding about $10 billion to $15 billion in assets per year. Target firms will have an average account size of over $2 million. They’ll be financial planning-based with strong investment expertise.
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