RIA M&A transaction with a fresh twist

As large broker-dealers look to play in the red-hot mergers and acquisitions market for RIAs, Advisor Group is investing along with its owner, Reverence Capital, in RIA Signature Estate & Investment Advisors.

It’s an RIA financing deal with what appears to be a unique twist: A private equity-backed brokerage firm, in this case the giant Advisor Group network, is investing alongside its owner, Reverence Capital Partners, to acquire a stake in a registered investment adviser, Signature Estate & Investment Advisors, that already uses an Advisor Group firm as its broker-dealer.

The mergers and acquisition market has been anticipating such a deal for most of this year: The new wrinkle is that, essentially, large broker-dealers are looking to play in the red-hot mergers and acquisitions market for RIAs.

Broker-dealers are contemplating investing substantially in large RIA branches or enterprises that already work with them, because this type of transaction would tether the RIA to the broker-dealer before it can be bought by one of the giant RIA roll-ups or aggregators currently scouring the market for deals.

Private equity investors have flooded the market over the last half-dozen years, looking to snap up the assets of highly profitable RIAs. In this case, Reverence Capital Partners is investing in Signature Estate & Investment Advisors, with Advisor Group also taking a piece of the deal, according to its CEO, Jamie Price.

According to the Form ADVs for its two RIAs, Signature Estate & Investment Advisors has $17 billion in client assets. Signature currently uses Royal Alliance Associates Inc., as its broker-dealer. Royal Alliance is one of the largest broker-dealers at Advisor Group, which has 9,700 financial advisors and close to $500 billion in assets.

To make the deal even more intriguing, in the wake of the investment, Signature is opening a new broker-dealer, Signature Estate Securities, and expects to finish moving its brokerage business there by the end of September.

“Advisor Group, when done, will follow behind Reverence Capital in ownership,” Price said in an interview Wednesday, the day the deal was announced. He stressed that the equity investment in Signature Estate & Investment Advisors was to enable the firm to expand geographically and get its money management platform in front of more financial advisers.

Brian D. Holmes is the president and CEO of Signature Estate & Investment Advisors. According to the firm’s website, Signature has 12 financial advisers and another 13 executives or partners who hold the certified financial planner designation. Terms of the deal with Reverence Capital Partners and Advisor Group were not disclosed.

“There are two parts of Signature,” Holmes said in an interview Thursday, “The RIA firm we’ll be hiring advisers to and the [turnkey asset management platform] part we’ll be offering to other advisers.”

Meanwhile, Advisor Group’s investment bankers have been busy recently.

In May, Advisor Group said it had agreed to buy a bank-focused broker-dealer, Infinex Investments Inc., with 750 financial advisers who control more than $30 billion in client assets. The next month, Advisor Group announced that it had struck a deal to buy American Portfolios Financial Services Inc., a large independent broker-dealer with 850 advisers across the country who work with close to $40 billion in client assets.