For an update on the Tiedemann Advisors' deal, see Tiedemann SPAC deal clears major hurdle to listing.
Circumstances in the world of finance, in our case the financial advice industry, at times feel as if they change faster than the pages on the calendar, outpacing even the seasons. That's probably because there is so much money involved. The promise of cold, hard cash tends to speed up time and quicken the pulse.
Think about it. At this time last year, the stock market was roaring, registered investment adviser firms were being acquired at prodigious rates by private equity-backed aggregators, and a giant of the RIA industry, Tiedemann Advisors, with $26.6 billion in assets under management, said it planned to go public via a merger.
On the RIA side, the proposed combination, which was expected to close by March and then got delayed to the end of last month, was Tiedemann, a New York-based investment and wealth management firm, and Alvarium Investments Ltd., a London wealth management and investment firm with global reach and an RIA in Miami.
Those two firms said in September 2021 that they had entered into an agreement to combine with Cartesian Growth Corp., the SPAC. Known as blank check companies, special purpose acquisition companies were the darlings of the Covid-19 pandemic. The financial advice industry at the time had high hopes for the deal, with one of its most prominent firms soon to be open for investment by the public.
It was a clear sign that the RIA industry, after decades of growth and then consolidation, had gotten to the size and maturity to participate in the financing bonanza of the U.S. public markets.
Indeed, the potential for the RIA industry at the end of 2021 appeared almost limitless.
My oh my, how times have changed.
This year, the broad stock market has hit bear territory, with the S&P 500 down 25.5% through Wednesday. Some significant RIA buyers have hit the brakes on deals for more firms because of the high valuations demanded by sellers and the rising cost of borrowing due to higher interest rates.
And the plan for Tiedemann to go public appears to have stalled, at least for now. As industry publication Citywire noted last week, the proposed deadline for the merger, Sept. 30, came and went with no deal.
The deal between Tiedemann, Alvarium Investments and Cartesian Growth Corp. could get back on track, of course, but right now it looks to be on the fritz. A spokesperson for Tiedemann declined to comment for this article.
SPAC investors are leery of taking their companies public right now because they could easily be caught in the downdraft of the current down market, pushing share price valuations well below the $10 per share level at which many are priced.
Meanwhile, Lefteris Acquisition Corp., a technology-focused SPAC with former LPL Financial head Mark Casady as its executive chairman, said Wednesday that it was handing money back to investors because it couldn't get a deal done within proscribed time limits, according to a filing with the Securities and Exchange Commission.
In other words, the SPAC failed to launch. Casady declined to comment.
This was expected, to some degree. Over the summer InvestmentNews reviewed the initial public offering market potential for RIAs, and it was clear that the timing for IPOs, despite the deal-making fervor of 2021, was not quite right a year later.
If one is taking a long view of the RIA industry, the recent slowdown in deal-making and the difficulties in launching a public offering are "bumps in the road," said Mark Tibergien, the former CEO of Pershing Advisor Solutions and a longtime industry executive and RIA proponent.
"Look for a merger among the big RIA consolidators in the next four years" he said. "That would look like the consolidation of the banking industry."
"There are 7,000 banks in the United States, and 16 control over 60% of the retail market," Tibergien noted. "The healthier ones start acquiring and consolidating and become retail brand names in their markets."
That's optimistic for the RIA industry's long-term prospects, but the immediate present is far more difficult. Time may be relative, as Albert Einstein famously proposed, but there's no speeding up the pace of a lousy market to take an RIA public.
While industry statistics pointing to a succession crisis can cause alarm, advisor-owners should be free to consider a middle path between staying solo and catching the surging wave of M&A.
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