First Republic Bank buys Luminous Capital

The deal gives First Republic a much bigger presence in the California wealth management market — particularly with high- net-worth investors

Nov 5, 2012 @ 3:33 pm

By Andrew Osterland

Luminous Capital Holdings LLC, a fast-growing registered investment advisory firm based in Los Angeles, sold itself to San Francisco-based First Republic Bank on Friday in a major deal in the wealth management industry.

“Luminous Capital clients will have full access to the substantial resources and capabilities of First Republic, one of the strongest and most client-centric private banks in the United States,” Luminous Capital chief executive Eric Harrison said in a statement.

Added Jim Herbert, chief executive of First Republic: “Luminous Capital is an opportunity to acquire a highly successful wealth management firm with the same commitment to extraordinary client service as First Republic.”

The deal gives First Republic a much bigger presence in the California wealth management market — particularly with high- net-worth investors. “First Republic is buying a growth engine and none of the Luminous principals are planning to retire,” said David DeVoe, managing principal of M&A consulting firm DeVoe & Co.

Launched by former Merrill Lynch advisers Mark Sear and David Hou in the middle of the financial crisis, Luminous has been an RIA juggernaut. The firm's assets under management have grown from approximately $1.7 billion in mid-2008 to $5.5 billion as of Sept. 30. Luminous currently ranks as the 17th largest RIA in the InvestmentNews RIA Data Center.

The departure and success of the two former Merrill advisers attracted a lot of attention in the wirehouse world.

“They were pioneers of the breakaway broker movement,” said executive recruiter Danny Sarch, founder of Leitner Sarch Consultants Ltd. “They were a mega-team, and it was big deal when they left Merrill.”

It's also a big deal that they managed to sell their firm less than five years after leaving Merrill. The deal was all cash, according to First Republic's press release, and the six Luminous partners all signed “long-term employment contracts as part of the transaction.” The combined firms will manage $29 billion in assets. No other details of the deal were disclosed.

While Luminous is selling itself to a bank soon after gaining its independence, the complementary geographic footprints and skill sets of the two businesses are a good fit, said Elizabeth Nesvold, managing partner of Silver Lane Advisors LLC, which advised First Republic on the deal. “It's always a little scary for advisers to sell to a bank, but this is not a typical bank. First Republic found its way to independence as well,” said Ms. Nesvold. “They have a common vision of where they want to take the business.”

First Republic gained its independence from Merrill Lynch in 2009 — about a year after the latter was acquired by Bank of America — as executives executed a leveraged buyout with the help of private-equity investors.

The market for advisory firms has been strong for the last 18 months, said Ms. Nesvold. And given the possibility of a hike in the capital gains tax rate next year, there could be more deals to come in the next two months. “We never counsel clients to do deals for tax reasons alone, but if the transaction is in queue, it's better to do it at a 15% rate rather than at who knows what next year,” she said.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Why broker-dealers are on a roll

Deputy editor Bob Hordt and senior columnist Bruce Kelly discuss last year's bounce-back for IBDs.

Latest news & opinion

8 podcasts advisers listen to when they aren't working

Listening to podcasts for the fun of it.

UBS continues to cut loans to recruits, while increasing compensation to brokers

The wirehouse reduced recruitment loans 20% and increased bonus loans 68% in the first quarter.

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.

Brokers accept proposed SEC rule on who can call themselves an adviser

Some say the rule will clear up investor confusion, but others say the SEC didn't go far enough.

SEC advice rule: Here's what you need to know

We sifted through the nearly 1,000-page proposal and picked out some of the most important points.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print