Donald Marron is back in the investment advice business.
On Tuesday, Mr. Marron, chairman and founder of private equity investor Lightyear Capital, said the firm
had agreed to take a majority stake in Wealth Enhancement Group, an independent wealth management firm with $4.7 billion in client assets.
Wealth Enhancement Group is a hybrid firm; it clears its securities transactions through LPL Financial and uses a variety of custodians for its registered investment advisory business.
The Lightyear Capital fund is buying the majority stake in the wealth manager from Norwest Equity Partners, a middle market investment firm. A number of Wealth Enhancement Group partners will continue to hold a stake in the firm.
Terms of the deal were not disclosed.
TRUE BELIEVER
A veteran investor, Mr. Marron, 81, is a true believer in the financial advice business. He ran Paine Webber Group Inc. for more than two decades through 2000, when he struck a deal to sell the retail brokerage to UBS AG for more than $10 billion. He was opportunistic after the market collapse of 2008 and 2009; Lightyear Capital
in February 2010 completed its acquisition of three ING Groep NV broker-dealers and then rechristened them under the Cetera Financial Group brand.
Continuing its growth in 2012, Cetera Financial Group bought another independent broker-dealer, Genworth Financial Investment Services Inc., from Genworth Financial.
A year ago, Mr. Marron
sold Cetera Financial Group for $1.15 billion in cash to RCS Capital Corp.
“In the RIA space, we did Cetera and expanded the retail network space dramatically,” Mr. Marron said in an interview Wednesday. “We had a very good management team, and we wanted to be in that business again because that's the future,” he said, pointing to long-term trends of baby boomers retiring and the move from defined benefit plans to defined contribution plans as drivers for the need of financial advice.
“We think Wealth Enhancement Group tracks into the same market but is even stronger,” he said. “The size of accounts is larger [than those at Cetera] and the advisers have a team approach to clients so the range of services is broader.”
EXPANSION PLANS
Based in the Minneapolis area, the firm has as strong presence in the upper Midwest but will work on expanding nationally, he said.
“This is a highly fragmented industry but it's consolidating,” Mr. Marron said. “You can do acquisitions but they have to fit, with a focus on values and respect for how the business is done. We think this model works well on a national basis. You have to invest more capital back into the business, and you must have good management. We did that with Cetera.”
Wealth Enhancement Group has already been kicking the tires on potential acquisitions, according to CEO Jeff Dekko.
“Over the last 18 months we started to pursue acquisitions, but the strategy is different from the aggregators,” he said. “It's about an integration of services, not just the split on profit and then running the business autonomously. We have one RIA and a centralized investment management group. Unless you integrate, you can't get that efficiency.”
Wealth Enhancement Group has 13 offices throughout Minnesota, Iowa and Illinois and works with over 10,000 households, according to a statement from the two companies.
