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‘Disruptive’ Digital Innovation Driving M&A

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Will the increased technology and digital innovation across the financial services industry create more opportunity for mergers and acquisitions?

Matt Brinker, head of national partner development at United Capital, thinks so.

“I think the disruption in the innovation in our space is only going to facilitate more and more consolidation,” Brinker told ThinkAdvisor in an interview. “The consumer is demanding a way of consuming financial service like they consume everything else in their day-to-day lives – music, media, TV, movies, effectively an on-demand experience.”

When United Capital looks at acquisitions, it’s looking for firms that also recognize the importance of having what Brinker calls “a digitized client experience.”

“At every partnership we’re looking at there’s … a shared vision of how the future of the wealth management industry is going to play out over the next 10, 15, 20 years and the absolute importance of having a fully integrated, digitized client experience that helps streamline the local operations and have some semblance of capacity so our partners and staff can focus 75%-80% of their time with existing clients and growing,” Brinker said.

According to Brinker, the average age of United Capital’s partners is 48.

“They’re certainly keen on working for another 15-20+ years,” he told ThinkAdvisor. “They want to be powered by the digital infrastructure that we’ve been able to invest in aggressively over the last 10 years.”

The digital infrastructure that United Capital has put in place is Salesforce, which Brinker calls “the central nervous system of United Capital.”

Salesforce integrates with all of United Capital’s vendors and partners to deliver a financial planning experience electronically and physically.

“I think it’s becoming more-so-than-ever for advisors to pick their heads up and completely be honest about the demand of the next generation of clients and how technology is going to be impacting their business,” Brinker said. “I think our partners are that subset of advisors who recognize that the competitive winds are shifting.”

ThinkAdvisor talked with two firms that were recently acquired by United Capital, and both firms expressed similar sentiments to Brinker’s comments.

A week ago, United Capital Financial Advisers LLC announced the addition of more than $370 million in assets under management to its platform through two separate acquisitions.

First, United Capital acquired the assets of Bedrock Capital Management, located in Los Altos, California. The company was renamed United Capital of the Silicon Valley, and the firm’s primary principal, Joel Shaps, has joined United Capital as a managing director along with principals Eric Lewis and Tony Blagrove.

Simultaneously, United Capital acquired Harvest Group Financial Services, which was founded in 1994 by Rosemary Caligiuri in Pennsylvania. While neither Shaps nor Caligiuri are specifically worried about a “robo-advisor” threat, they both acknowledged the role United Capital’s technology will have in helping advance their firms.

“As an individual advisor before [the acquisition] but knowing that I wanted more and better tools for my clients, technology, a robust portfolio, world-class investment committees, and more robust portfolio options led me to United Capital,” Caligiuri told ThinkAdvisor.

She listed United Capital’s Money Mind Analyzer and Honest Conversations as a few of the tools that will now help her bolster her offerings to her clients.

“I could not create the tools and the process that United Capital has created by spending their money doing behavioral finance studies, etc. on my own,” she said. “To join forces with an organization that is so focused on the behavioral finance, the holistic planning, the guidance, the advice, the commitment to bringing insight and awareness and therefore confidence to the consumer – I feel so much more empowered for myself, and my job is to empower my client.”

Shaps said the new partnership gives his firm a new integrated system that will help him and his staff spend more time with their clients.

“We all had versions of things, but ours were either legacy systems or things that we had patched together,” Shaps told ThinkAdvisor. “We had one CRM and one portfolio management software and some other system that we used and they all sort of integrated but not really. With United Capital, we have a proven infrastructure with systems that are all integrated that will give us the tools to spend a lot more time with our clients.”

Instead of having to deal with “compliance and systems and trying to pick the software for this or whatever,” Shaps said all of that is built into the structure of United Capital.

Like Shaps and Caligiuri have done, Brinker thinks many firms are going to need to join forces to take advantage of some semblance of a digitized client experience in order to be relevant.

“It doesn’t mean all roads end at a United Capital,” he said. “I think you’re going to see a lot more mergers of people. I think you’ll see a lot more regional RIAs that are north of several billion that have built infrastructure, they’ve built scale, they’ve built a reputable growth and marketing program and career development and training for next gen advisors. Those firms are built to be successful at M&A and there’s enough access to capital to facilitate those transactions.”

Brinker expects consolidations like these are already happening more than many realize.

“If a deal happens in the woods and there’s no one there to report it, does a deal happen? Yes of course,” Brinker told ThinkAdvisor. “And I think many of these deals are going unreported. It’s only when a banker is involved and they’re smart in wanting to inform the media. But most times it’s not newsworthy, and I think many times advisors want to stay out of the news.”

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