Canadian buyer gobbles up $4.5 billion RIA, Balasa Dinverno Foltz

Toronto-based CI Financial has taken another bite of the U.S. wealth management space with its planned acquisition of Balasa Dinverno Foltz, an Itasca, Illinois-based registered investment adviser managing $4.5 billion.

The deal, which is expected to close during the third quarter, marks the fifth RIA ownership stake this year for CI and will bring its U.S. wealth management assets to approximately $11 billion.

Kurt MacAlpine, who took over as chief executive of CI in September, is not shy about telegraphing his appetite for the U.S. wealth management business.

“There’s too much opportunity in the U.S. RIA marketplace for us to think of anywhere else,” he said.

MacAlpine, 39, joined Canada’s largest independent wealth and asset management business last fall from New York-based WisdomTree, where he was in charge of global distribution for the ETF provider.

With a mandate to expand the business, MacAlpine has kept the pedal to the floor. In addition to the five RIA acquisitions since February, there have been three sub-acquisitions among those RIAs, and two deals in Canada, including Wednesday’s announced majority ownership stake in Aligned Capital Partners, a Burlington, Ontario-based full-service advisory firm managing $10 billion.

When the two deals announced this week close, CI will manage $125 billion and have another $75 billion worth of wealth management assets.

“They have built an extensive support infrastructure for the businesses they acquired in Canada and they are in the process of doing that in the U.S. simultaneous with their acquisition of assets under management,” said Daniel Seivert, chief executive of Echelon Partners.

“While they are an asset manager at their core, they see the great opportunity in wealth management on a stand-alone basis rather than seeing it as a means for distribution, which is often not the case,” he added. “The size and quality of this [Balasa Dinverno] acquisition demonstrates the commitment CI Financial has to becoming a major player in U.S. wealth management and to do it through acquisitions.”

As MacAlpine sees it, the U.S. market is a no-brainer for a Canadian wealth management company hungry for growth.

With banks and insurance companies dominating the Canadian wealth management space, CI stands out as the largest independent firm. The potential for growth leads MacAlpine to either the U.S. or Europe.

“The competitive dynamics with the U.S. and Europe are about the same, but the U.S. is four times larger than Europe and a tenth as complex if you think about things like languages, listing and time zones,” he said. “The U.S. market is also synergistic because a lot of Canadians retire in the U.S. and establish relationships there, and the role of financial advice is more important today than ever in history. And the RIA is the single best model in wealth management, which is why we’re looking to lean into that space.”

It all makes perfect sense to the owners of Balasa Dinverno Foltz, a 34-year-old advisory firm that has been gradually transitioning in this direction for a decade, according to Armond Dinverno, the current president and co-CEO, who will take on an advisory role after the deal closes.

“We looked at what’s going on in our industry related to size, scale, maturity and life cycle and realized the best way for us would be to find a partner with the resources that would allow us to continue to scale,” Dinverno said. “We merged our firm in 2001 with the same philosophy. It went remarkably well, and we think the same thing is going to happen here.”

In terms of partnerships, Echelon managing director Mark Bruno sees this one as an easy fit.

“The CI model is now based on buying big firms and doing it with consistency, and BDF is one of the most professionally managed firms I’ve seen,” he said. “This deal says something about the health and perceived value of the U.S. wealth management business. There are a lot of strategic acquirers, and CI is another firm that sees the high quality of this business.”

In terms of how deep into the U.S. wealth management space CI is willing to go, Scott Chan, Canadian equity analyst with Canaccord Genuity Corp., believes MacAlpine is just getting started.

“They are buying, and it started with the CEO change in September,” Chan said. “One of his main priorities, and a mandate from the board, was to grow the wealth management segment and globalize the company.”

MacAlpine was born in Canada but spent most of his career in the U.S. working at WisdomTree and, before that, as a partner in the global asset management practice at McKinsey & Co.

While CI under MacAlpine’s direction has done deals with firms ranging from $400 million to $10 billion, the focus is less about the asset size, he said, and more about the quality of the wealth management business being acquired.

“When I was hired, they presented me with an opportunity to transform the company and to make the business thrive in a new environment,” MacAlpine said. “Aside from Goldman, which owns United Capital, we’re the only other company in this space with a global footprint.”

Starting from scratch less than six months ago in the middle of a global pandemic has become almost a point of pride and inspiration for MacAlpine.

“We’re not meeting people face to face, but you actually have more time when you’re not traveling and doing the usual business things like breakfast, lunch and dinners,” he said. “There’s just more time in the day to get things done and we’ve been taking advantage of that. And I think the pandemic reinforces the need for sound financial advice.”