Maryland-based RIA Greenspring Advisors and New York-based Wealthstream Advisors have merged to form a fully employee-owned $10 billion RIA without any outside capital investors — a rare feat in a consolidating RIA market that’s consumed by private equity.
The combined firms will operate under the name Greenspring Advisors, LLC. It spans 70 employees including 23 current equity-holding partners and plans to offer ownership to more employees starting as soon as January. “We had this strong feeling that the outcomes for clients and team members tended to be better if we were employee owned versus if we were private equity backed,” Greenspring Advisors co-founder Pat Collins told InvestmentNews.
“Part of the goal of this merger is that we will hopefully not have to take private equity backing,” Collins added. “The decision-making that gets done for the firm and for clients, we believe if those types of decisions are being made by people working on the front lines, working with clients, managing the day-to-day operations — you're going to get better outcomes versus when people making those decisions are shareholders of a publicly-traded company that care mostly about profits, or private equity that similarly has investors they need to deliver results to.”
The all-stock merger combines Wealthstream’s private wealth business of roughly $1.8 billion in assets with Greenspring’s roughly $2.3 billion in private wealth assets. Greenspring also has an institutional business managing 401(k) retirement plans spanning about $6 billion, pushing the new RIA’s collective AUM to over $10 billion. Collins founded Greenspring in 2004, which is the same year Michael Goodman founded Wealthstream Advisors. Goodman told InvestmentNews that Greenspring will prioritize organic growth over further M&A moves.
“We want to continue to have an amazing team that's going to have great clients to refer more clients to us and develop our growth primarily from organic means through referrals, firm activities and the marketing that we do,” said Goodman. “We are open to inorganic growth, we've both done transactions in the past. But it's much more important about making sure we maintain the values that we have within our firm first, and inorganic growth second.”
Greenspring Advisors will operate across locations in Towson, MD; New York, NY; Lancaster, PA; and Paramus, NJ. Investment bank Echelon Partners served as the exclusive advisor to both firms on their merger, which is the RIA industry’s latest example of recent merger of equal-type transactions. In August, the Chicago-based mega RIA Cresset merged with Monticello Associates to combine for nearly $200 billion in assets, and the same month saw MAI Capital Management nearly double its size to $60 billion AUM after merging with Evoke Advisors.
Examples of other RIAs that have employee equity programs include Mercer, HB Wealth, Snowden Lane, &Partners, Bogart Wealth, and Steward Partners, among others. Collins told InvestmentNews that he’s heard the RIA industry consists of about 40 firms that are both 100% employee and have more than $3 billion in assets.
“There's a lot of employee-owned firms that are five or 10 people. It's harder when you hit a $10 billion mark to find that. So we do think it's different, and it will give us some competitive advantage with both team member recruiting and clients,” Collins said.
David DeVoe, founder of RIA consulting firm DeVoe and Company, previously told InvestmentNews that offering equity was key for “firms that want to optimize retention of employees.” DeVoe’s recent survey found RIAs are tending to perform “shockingly low” on employee compensation metrics.
“We think this is a really big part of the career track, we think that it is a differentiator,” Goodman said of Greenspring’s 100% employee-owned structure. "The idea here is that we're going to get the best people that have a mentality that this is a place where they can grow, develop and become an owner and stay. And we're finding that when we talk to younger people, that as part of their career path, a track to ownership is exciting to them.”
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