Fresh off of attracting a new private equity investor, Wealth Enhancement Group unveiled an agreement to make its 11th deal of the year, and its largest ever.
Carroll Financial Associates, a Charlotte, North Carolina-based hybrid RIA with 39 financial advisors managing $4.7 billion in client assets, will fold into PE-backed Wealth Enhancement, the firms said on Sept. 9. As part of the deal, Carroll will be leaving Cetera Financial Group’s Cetera Advisor Networks after 27 years to affiliate with the broker-dealer used by Wealth Enhancement, LPL Financial. The parties didn’t disclose financial terms of the deal, which Carroll Financial CEO Kristopher Carroll said in an interview is expected to close on Nov. 1.
With nearly $4.1 billion in assets under management under Carroll Financial’s RIA, the M&A deal and enterprise move represents the fourth-largest recruiting grab in the independent broker-dealer sector this year, according to Financial Planning’s tracking of company announcements. A second-generation CEO of the firm, Carroll has “nothing but positive things to say about” Cetera, he said.
The Wealth Enhancement deal solves the financial side of Carroll Financial’s succession involving six different team leaders over the age of 60 and gives it a “great middle ground” between potential investors that try to call all of the shots at one extreme or leave everything up to the RIA at the other, according to Carroll.
“They have a model where we get to keep a decent amount of independence; we can run our teams and service our clients the way we want to, but within their organization,” Carroll said. “Some of them kind of come in and take over and tell you how to do everything, and that wouldn’t have been a good fit for us.”
Carroll Financial would have stayed with Cetera through the deal if it were possible to do so, he noted.
The firm “has a long-standing history of outstanding client service as an independent, outside RIA (the majority of its business),” Cetera spokeswoman Adriana Senior said in an email. “We wish the Carroll Financial team well in their new venture and greatly appreciate their contributions to Cetera and the industry.”
Its incoming parent unveiled the deal two weeks after Wealth Enhancement’s majority owner, TA Associates, reached another significant agreement of its own. Funds affiliated with TA Associates and Canadian investment manager Onex will become equal capital partners in Wealth Enhancement by the end of the year. The RIA consolidator has emerged as one of the most active buyers of the year: Since June 1 alone, Wealth Enhancement has reached agreements with sellers that have 83 advisors and about $12.5 billion in client assets. Its latest deal will boost its client assets above $45 billion.
“The firm that Larry and Kristopher Carroll have built over the past several decades is truly a paragon of success and reflects the potential of financial planning-based business models in today’s competitive wealth management marketplace,” Wealth Enhancement CEO Jeff Dekko said in a statement. The deal “brings together Wealth Enhancement Group’s substantial scale, resources and industry-leading technology with Carroll Financial Associates’ deep knowledge of the regional market and client-service expertise.”
The parties had first spoken to each other three years earlier, when Carroll Financial had about $3 billion in client assets, Kristopher Caroll said. The deal came together after Wealth Enhancement reached out again four or five months ago. Besides its Charlotte headquarters, the 41-year-old enterprise has offices in Raleigh and Rock Hill, South Carolina. It’s adding another advisor based in Hickory, North Carolina, on the day the deal is expected to close, according to Carroll. As the son of two CFPs, the younger Carroll began working with his father in 1998, according to a video of the two of them posted on the firm’s website.
“When you look at the two of us together, you’ve got 65 years of experience, with two reasonably intelligent good old boys that know finance,” Larry Carroll, who’s now the firm’s chairman emeritus, said in the clip. “And I think the clients benefit from that experience.”
Carroll Financial is Wealth Enhancement’s first location in the Carolinas as part of its notable expansion this year. Wealth Enhancement has already surpassed the $7 billion in assets it acquired last year and $4.5 billion in 2019. In the second quarter, its four deals left it behind only fellow Onex PE portfolio firm OneDigital’s total of five among the most active acquirers, according to investment bank and consulting firm Echelon Partners. Wealth Enhancement and other experienced acquirers are fueling the industry’s record consolidation.
“These firms typically have a business model centered around scale and rely on M&A activity to drive growth and expansion,” according to Echelon’s latest quarterly RIA M&A report. “The number of these experienced acquirers has increased dramatically in recent years and has been one of the core drivers of successful deals as sellers are more interested in engaging with buyers who have previous experience completing deals and successfully integrating a large firm into their ranks.”