New York-based Atria Wealth Solutions said in January that it is buying Next Financial Group of Houston, which has about 500 advisors with roughly $13 billion in client assets under administration. Next President Barry Knight will keep his executive role as part of the deal. The purchase is Atria’s fourth broker-dealer acquisition since 2017 and should give Atria a network of more than 1,900 independent advisors with about $65 billion in total assets. Terms of the deal were not disclosed.
Atria also owns broker-dealer Cadaret Grant, as well as CUSO Financial and Sorrento Pacific Financial, which have investment programs for credit unions and banks. As part of the acquisition, Atria also is buying Next Financial Insurance Services Co. and Visionary Asset Management.
With the backing of Lee Equity Partners, Atria announced plans to buy Cadaret Grant — an independent broker-dealer with about 900 advisors and some $23 billion in assets under administration — in April 2018.
Doug Ketterer, the former head of field management at Morgan Stanley, formed Atria in late 2017 as a wealth management solutions holding company in cooperation with COO Eugene Elias, the prior head of client and advisor platforms at Morgan Stanley, and Chief Growth Officer Kevin Beard, who previously led acquisition and recruiting strategies for the Advisor Group of IBDs.
What Happens Now? News of the deal with Next has some industry watchers wondering what Atria will do as a follow-up act. “With Atria now owning a bank channel (Sorrento Pacific), credit union (CUSO Financial) and now two independent broker-dealers (Cadaret Grant and Next), they are looking increasingly similar to Cetera’s model with broker-dealers filling different channels but dominated by independent broker-dealers,” said recruiter Jon Henschen in an interview.
“It is not clear yet where Atria wants to take the broker-dealers, be it a short-term play of two to four years and flipping the firms for profit, or growing larger scale and going public with a timeline of five to nine years,” Henschen added.
But Atria — which has the financial support of Lee Equity Partners — insists it wants to forge its own path.
“We are not following an acquisition strategy,” said Ketterer in an interview. “We are building something unique and want to be different in how we serve financial advisors.” While scale is “the nature of the beast” when it comes to growing a business, hiring and building a platform for digital engagement, Ketterer admits, Atria’s vision goes beyond that.
Advisors traditionally have turned to BDs as “a utility through which they do business, get things done, etc.,” he explains. “Today, the world has changed, and advisors increasingly need a partner to give them resources, support, practice management and up-to-date platforms.”
Along with the technology, Next’s advisors should be able to benefit from Atria’s work in credit unions and banks. “We have seen the hypotheses come true in Technicolor with Cadaret Grant and expect it to do so for Next,” he explained.
‘An Extension, Not an Integration’
The independent broker-dealer was “looking for a while to not [just] sell but find a partnership,” according to Knight. “We were content to go it alone and wanted to transition [only] with a partner who could see that one plus one adds up to three.”
The two firms met about 14 months ago. “I thought we had something here and was impressed with the [Next] team and where it was going,” Ketterer explained. “It seemed like we had more going on that we could do together.”
Both firms insist that building tech platforms that appeal to younger clients is a key motivation behind the tie-up. “We believe we have a winning model for Next’s customers and Cadaret Grant’s, too, when it comes to services and support for the FA to do a great job and build their practices,” according to Ketterer. “That’s the mindset, which gets us excited.” Next advisors and employees should also be pleased about getting a shareholder payout, Knight says, as Atria is buying all of Next Financial’s shares.
“The proxies are in the mail today,” he said. “We wanted to find the opportunity and partnership agreement that we could take with pride to shareholders and advisors. We can tell them, ‘This is an awesome deal.’”
Janet Levaux is editor-in-chief of Investment Advisor. She can be reached at email@example.com.