Wealth management’s evolving take on ‘location, location, location’
Wealth management’s geographic landscape is shifting from big cities to the entire country, according to one of the industry’s top dealmakers. Despite the higher shares of population and wealth that drive the number of financial advisors, asset levels and property values in places like New York, California and Florida and other big metropolitan areas, the traditional and simple industry emphasis on cities that have National Football League teams is falling by the wayside, said Jim Cahn, the chair of the Investment Committee and chief strategy officer with Wealth Enhancement. The private equity-backed, Plymouth, Minnesota-based acquirer of registered investment advisory firms has topped $96 billion in client assets while altering its approach to the geographic factors in dealmaking and new client lead generation in particular regions, Cahn said in an interview. “We went to Chicago first, and we also had concentrations on the East Coast, because that’s where there were concentrations of people,” he said. “There are wealth management clients in all parts of the country. You have a lot more advisors, but you also have a lot more people who need advisors. The truth is, there really isn’t a bad market.” However, the location of an advisory firm is one of many factors driving how much potential buyers are willing to pay to acquire it, according to a webinar held last month by M&A consultancy Succession Resource Group on its annual study of RIA transactions. Regional variance in RIA M&A deal prices, 2020-2024 Source: “The Succession Resource Group 2025 Advisor M&A Report” Out-of-state buyers carried out a third of transactions last year, which is a larger share than in 2023, and they paid purchase prices that were 11% higher than the amount forked over by those from the same state. The out-of-state premium was even larger, at 16%, in deals struck between 2020 and 2024, Parker Finot, Succession Resource‘s director of transaction advisory services, noted during the webinar. During that span, RIAs in the Northeast fetched the highest average price multiple compared to yearly revenue, 3.09x, followed by the South (3.07x), the West (2.9x) and the Midwest (2.7x). “We have observed some shifting in a reduction to southern multiples over time, and the multiples of the West and the Midwest regions increasing over time,” Finot said. “That out-of- state price premium does still exist during this time frame. In fact, it was elevated to compared to what we’ve seen in 2024, and we’ve really determined that that was driven by higher price asymmetry in ’21 and ’22 during that period of time when the world was really reacting and acclimating to the post-pandemic reality, working from home, office closures, all of those types of things. There was just a little bit more fervor for these remote acquisitions. But it’s cooled slightly since then.” Regardless, those figures reflected “a broad brush, and individual results are going to vary from across the region, state, county and city levels,” Finot said. How housing data can shed a light on RIA growth A ranking of metropolitan areas with the largest number of homes of above average value per square mile might, then, offer a more precise geographic lens for potential RIA acquisitions or prospective customers. Using data from real estate databases, luxury bathroom product firm Badeloft found last month that Miami had more than double the number of high-value homes per square mile than any other metro area, with 105.44. The other cities in the top 10 — New York (38.03), Las Vegas (26.08), Philadelphia (23.93), Washington, D.C. (17.93), Boston (14.42), San Antonio (14), Detroit (13), Chicago (12.12) and Honolulu (12.08) — had far fewer. Beyond the property-tax ramifications to client’s plans and an understanding of local real estate dynamics, the value of an area’s housing stock won’t sway wealth management dealmakers very much or offer advisors many hints about where to approach prospective customers, Cahn said. Perhaps using publicly available data tracking a home’s value compared to the size of the mortgage could suggest some trends relevant to finding out which households have a large number of savings and investable assets, he suggested. The high property values in an area like Miami may also come with high rates of foreclosure in the bursting of a real estate bubble. And Wealth Enhancement’s clients tend to focus much more on their families, careers, emotional state and involvement in their communities than on buying a pricey home, Cahn said. “How people live doesn’t tell you as much about their investable assets as you might expect,” he said. “For the types of wealth management clients that we’re serving, I don’t think we can rely on a sort of mansion index.” The exurban trend in wealth management On the other hand, Cahn has noticed more deals involving advisory practices from exurban areas and those with local and regional expertise that are sought by clients. For example, Wealth Enhancement’s vast and growing network of independent advisory teams include at least a couple catering to Mandarin speakers in parts of California and Texas, and he recalled how a radio show that was successful in generating new customer leads in Minnesota “didn’t have the outcomes we expected” in Connecticut. The exurban trend extends to areas that are about a two to four hours’ drive from cities like Atlanta or regions such as upstate New York and Charleston, West Virginia that “still identify with the city, but they also have their own identity,” he said. The residents likely root for the city’s NFL team and tell those from outside of the area that they’re from there. Some of those parts of the country are “maybe a little underserved, or have smaller firms that don’t have the depth of resources that we have,” Cahn said. “Understanding your community, understanding how to market your community,” is a critical part of advisors’ value to clients and possible acquisition partners alike, he said. “Being part of the community — not just someone who uses the community — is really critical.” Disclaimer This article was first published by Tobias Salinger. The original article can be found here. All rights to the original content are
Carson Group Hires Former Envestnet Executive as CTO
Ramesh Vaswani will take over as Carson Group CTO, which has been run by a technology council for the past year and a half. Carson Group, the mega-RIA based in Omaha, Neb., has snagged a senior-level Envestnet executive to run its technology operations after it had been overseen by a “technology council” over the past couple of years. Ramesh Vaswani had been the global group head of engineering, overseeing a team of more than 250 people and reporting directly to Envestnet CTO Robert Coppola. Now, he’ll be joining the $41 billion Carson Group to develop and executive technology strategy across its network of roughly 50 advisor offices and 150 partnered advisories through Carson Partners, its RIA channel, the firm announced Monday. Vaswani is the second senior executive from Envestnet Carson has hired in the past two years. In April 2024, the firm hired former Envestnet chief strategy officer Dani Fava to take the same role at Carson Group, replacing now-CEO Burt White. While Vaswani’s CTO role is not new, he will be the first sole leader of tech operations in about a year and a half. Carson’s first-ever CTO, Nimesh Patel, was hired in 2022 but left in the summer of 2023 for RIA Corient in a move that Carson described as a “mutual separation.” Since then, the firm’s technology capabilities have been run by a four-person “technology council.” Now, Carson execs have decided they’d like a CTO leader to help give its advisors and advisor network access to the best wealth management technology and ensure recruiting competitiveness. “Our mission is first and foremost to create ease and confidence for advisors, and we are building a tech stack and broader technology strategy with that mission at its core,” Fava said via email. “We want to be known as a curator and integrator of the best technology solutions to support our advisors and our technology strategy is designed to do just this.” She added that Vaswani’s career has been focused on “aligning technology goals with business goals for financial institutions, and he has a proven track record of turning those ideas into reality.” David Grau, founder and CEO of advisor consultancy Succession Resource Group, said Carson is a firm that seems to have managed leadership succession planning well, including last year when founder Ron Carson stepped down to be replaced by then-managing partner and chief strategy officer White. Having smooth leadership exchanges is “so impactful to the culture and operations of the firm, and their ability to continue recruiting,” Grau said. “All of those roles require proactive succession planning, especially at a firm of Carson’s size.” Vaswani is leaving an organization going through its own transformation. Envestnet, one of the industry’s largest technology providers, was taken private last year through an acquisition led by Bain Capital. Vaswani had been with Envestnet for over nine years. As group head, he oversaw a team of developers, architects, and analysts focused on automation and efficiency projects, including the adoption of artificial intelligence. In a statement, Vaswani said of the move to Carson: “I’m passionate about aligning business and technology to drive results and I see an incredible opportunity to integrate technology in a way that promotes growth and creates ease and confidence for our advisors.” Former Carson CTO Patel has since moved on to the technology-focused custodian Altruist. In February, tech-focused RIA Savvy Wealth, which recently topped $1 billion in AUM, hired its first CTO with Eric Hurkman, formerly of valuation software firm Carta. Disclaimer This article was first published by Alex Ortolani. The original article can be found here. All rights to the original content are held by wealthmanagement.com.
Why RIAs are Giving Synthetic Equity a Hard Look
First-generation RIA owners like those at CGN Advisors increasingly use synthetic or phantom equity structures to give employees access to a firm’s growth while deferring actual ownership. Justin Nichols, managing principal at CGN Advisors in Manhattan, Kan., and his two partners were looking for ways last year to give employees access to the firm’s growth without the “complexities” of making them owners or asking them to pony up what would be steep buy-ins. With the help of a consultant, they decided to set up a program to provide so-called “synthetic” or “phantom” equity, in which employees are guaranteed a share of the firm’s growth at a future date or around a triggering event, such as a sale of the firm, a founder leaving or the firm merging with another RIA. Similar to a deferred compensation program, such as when publicly traded companies issue restricted shares, the setup can also provide a pathway for a younger advisor to eventually put accrued equity toward purchasing a stake in the firm. “We have a bunch of great employees, and we really want to retain them,” Nichols said. “This was another tool in the toolkit to retain and even attract talent in the long term.” According to Nichols, the competition for RIA talent in Manhattan, Kan., is no joke. The firm of 16 people with about $1.6 billion in client assets is located about 45 minutes from Overland Park, Kan., home to mega-RIAs including Creative Planning and Mariner. David Grau, CEO and founder of Succession Resource Group, worked with CGN on the program. The succession consultant said he has been advising on synthetic equity structures for larger RIA firms for years but that it has more recently moved downstream to smaller RIAs. “Now, we’re working with five and 10-person teams, and they’re doing phantom equity,” he said. “They’re contemplating these equity structures that, 10 years ago, would have made their eyes roll into the backs of their heads.” Grau said the landscape has shifted to a place where advisors understand there is value in their firms that they can sell. However, giving ownership stakes, and often voting rights, is not always a fit, particularly if the owners don’t feel ready to cede those things to younger advisors. He said it can also go the other direction, by which a younger advisor doesn’t feel ready to put up a large share of cash to buy in but wants that opportunity in the future. “Talk about your quintessential golden handcuffs,” Grau said. “In an industry where we are all fighting to attract and retain great young talent, you can build a phantom equity plan where they can start to accrue $10,000, $20,000 or $30,000 worth of an equity balance.” The owners can also set the vesting schedule for the equity, meaning it can be flexible in terms of how long it will be illiquid for employees and when it will become a liquid asset. There are also clauses for payouts should an RIA sell to a private equity firm or some other triggering event occur. To be fair, Grau and other consultants are interested in these setups as well because they are complicated and require guidance. However, other consultancies reiterated that they have seen growth in interest and uptake for these types of deferred ownership programs as the RIA market has matured and continues to see waves of capital driving competition for talent. Real Growth Eric Leeper, CFO and principal with consultancy FP Transitions, said synthetic equity is still in its “relative infancy.” However, it is increasingly being used to solve RIA compensation structures that have historically been based on “eat what you kill,” where the advisor is often responsible for business development and serving clients. Today, Leeper sees two factors changing the efficacy of that model. One is that larger RIAs are running more like businesses—with advisors still wanting to be compensated well for their work—and new advisors, on the other hand, prioritizing financial planning and working with clients over business development. “There’s a major issue that the industry has with the division of the role of the advisor being a planner and the advisor being a salesperson,” he said. Advisories must set up structures such as bonuses or deferred compensation to move away from the “eat what you kill” model. The synthetic equity model can provide a middle ground while both owners and advisors prepare for real ownership. “You have an issue of affordability for next-generation talent at the company,” Leeper said. “This is where we really started to lean into synthetic equity.” Leeper said that equity is almost always based on a percentage. For example, a contract might offer 5% of company profits so long as the advisor is a member of the firm in good standing. To design the equity, however, a firm may target a capital value of, for instance, $100,000 five years out and calculate the percentage that would most likely get them to that amount. Leeper also noted the employees could gain a tax advantage from the setup, as synthetic equity is not taxed on issuance as company stock or capital ownership would be. The model, however, does come with some complexity. Synthetic equity structures are regulated under the Internal Revenue Service’s 409A, or nonqualified deferred compensation, which requires specific plan documentation and compliance oversight. On the positive side, Leeper noted, it does not show up as a “contingent liability” on the balance sheet of the issuing firm, as it would if it were a defined benefit or guaranteed payout. That can be particularly attractive for a firm that, at some point, may be looking to sell and wants to show buyers a strong bottom line. Recruiting Tool Brandon Kawal, partner with Advisor Growth Strategies, said his firm has worked with about 24 clients on synthetic equity programs over the past year. He ties the current interest in the structure partly to the aggregators backed by private equity money going after advisor talent at independent RIAs. “Compensation, and then ways of getting people equitized,
