fidelity 2016 wealth management m&a transaction report...wealth management ria acquirers banks...

Fidelity 2016

Wealth Management M&A

Transaction Report

Insights into Large RIA Acquirer Models

and Strategies

2

What’s inside

About Fidelity’s M&A

Leaders Forum

2016 M&A Trends:

Role of RIA Acquirers

How Large RIA Firms are

making acquisitions

Appendix

3

What’s inside


Leaders Forum

2016 M&A Trends:



making acquisitions

Appendix

4

About Fidelity’s M&A Leaders Forum

Recognizing the growing importance of M&A strategies to the

future of the wealth management industry and individual advisory

firms, Fidelity created the M&A Leaders Forum in 2015.1

Comprised of influential leaders actively executing M&A strategies, the

Forum community seeks to:

• Increase M&A transaction transparency by identifying individual

deals.

• Raise advisor understanding and preparedness to engage in M&A

through increased education on key M&A trends and issues.

1. The Fidelity M&A Leaders Forum is a community of Wealth Management M&A Industry Leaders including leading strategic and financial acquirers, large RIA firms which have created a range of

business models focused on growth and sustainability, and Broker Dealers. Members of the Fidelity M&A Leaders Forum can be found in the following pages of this report.

5

Highlights from Fidelity's November 2016 M&A Leaders Forum meeting

In November 2016, Forum members gathered in Boston for their annual

meeting. Noteworthy takeaways from the Forum’s discussion include:

Acquirers are increasingly prepared, well capitalized, and

sophisticated, yet are experiencing increased competition

for a relatively small pool of attractive target firms.

Unlike in the past when AUM “rollup” was the primary M&A

objective, acquirers today are using M&A as means to

pursue strategies such as talent acquisition, scale,

improved advisor productivity, and growth.

The advisor community is largely unprepared for M&A and lacks

awareness on the right time to sell. Too many desire to maintain

independence and lifestyle elements while failing to see the

forces driving increased industry consolidation.

Acquirers demonstrate greater interest today in

understanding and addressing seller motivation as well

as understanding the specific challenges each advisory firm

seeks to solve through M&A.

Dynasty Financial Partners

Ed Swenson

Atlanta Capital Group

Joseph P. Young, Jr.

6


AMG Wealth Partners

John Copeland

AMG Wealth Partners

Rich Gill

Beacon Pointe Advisors

Matt Cooper

Cambridge Investment

Research, Inc.

Jeff Vivacqua

Cambridge Investment

Research, Inc.

Amy Webber

CAPTRUST Financial Advisors

Rush Benton

Exencial Wealth Advisors

John Burns

Fiduciary Network

Mark Hurley

FP Transitions

Brad Bueermann

Atlantic Trust

Eric Propper

Berkshire Capital

Bruce Cameron

Colchester Partners

Frank Kettle

EP Wealth Advisors

Patrick Goshtigian

All photographs used with permission. The third parties referenced herein are independent companies and are not affiliated with Fidelity Investments. Listing them does not suggest a recommendation or

endorsement by Fidelity Investments.

Silver Lane Advisors

Liz Nesvold

Kestra Financial

Mark Schoenbeck

7


Ladenburg Thalmann

Richard Lampen

Ladenburg Thalmann

Adam Malamed

Ladenburg Thalmann

Mark Zeitchick

Mariner Holdings

Marty Bicknell

United Capital

Matt Brinker

Park Sutton Advisors

Steve Levitt

Savant Capital Management

Brent R. Brodeski

Wealth Enhancement Group

Jeff Dekko

Wescott Financial Advisory

Group

Grant Rawdin

Hilliard Lyons

Karl Heckenberg



HighTower Advisors

Matthias Kuhlmey

8

What’s inside


Leaders Forum

2016 M&A Trends:



making acquisitions

Appendix

9

2016 M&A Trends: Role of RIA Acquirers

In 2016, we continued to see

healthy M&A activity, with

104 transactions representing

nearly $67.1 billion in AUM.

37

31

9

27

67

46

4

21

2016

2015

Strategic Acquirers

Wealth Management RIA Acquirers

Banks

Others

Wealth Management RIA

Wealth Management Breakaways

2016

2015

62

47

57 76

Buyers Sellers

See the Appendix for a definition of the types of transactions that are reflected in this report and a detailed list of the transactions. Fidelity compiled the data from publicly available information. Data for this

research covers the time periof 1/1/15 – 12/31/15 and 1/1/16-12/31/16od. All statistics quoted are from this research for the report unless otherwise indicated.

10

What’s inside


making acquisitions

Appendix

2016 M&A Trends:



Leaders Forum

11

Large RIA Acquirers: A growing and critical industry player

Last summer, we developed The Fidelity 1H 2016 Wealth Management M&A Transaction Report,

which provided insights into how Strategic Acquirers executed a significant portion of transactions and are

helping to shape M&A in the Wealth Management Industry.

In this report, we introduce a second segment that’s also becoming a critical force in our industry as it

continues to mature: the large, standalone $1B+ wealth management RIA with strong management

and a track record of executing a well-defined acquisition strategy (“Large RIA Acquirer”).

Interviews were conducted with some members of Fidelity’s M&A Leaders Forum to gain insights into how

Large RIA Acquirers are becoming larger businesses through a thoughtful M&A strategy, as well as what

these firms have learned over the past several years by executing deals.

Interviews with members of the Fidelity M&A Leaders Forum for the insights shared in this report were conducted during the period of November 1, 2016 – November 15, 2016 by Excella, Inc., an independent

third-party consulting firm. The appendix of this report includes the names of those Forum members contributing to the report findings. The views and opinions expressed herein by the interviewed Forum

members are not necessarily the opinions or recommendations of Fidelity Investments.

12

Large RIA Acquirers: Focused on building strong, enduring businesses

These Large RIA Acquirers recognize the complexities of building a strong , successful, and

enduring business. They also recognize that in order to compete effectively in the M&A space, they

must communicate a strong value proposition to potential target firms who are interested in shaping

their future as part of a healthy, scalable, and focused organization.

z Business

development process

13

Large RIA Acquirers: The Attraction for Advisors

For advisors with successful, growing businesses,

Large RIA Acquirers may be a business strategy

that could help them grow faster and bigger than

they otherwise could if they remain independent.

Compliance, operations,

and technology

Investment solutions

and comprehensive

financial planning

Often these advisors possess proven-quality talent, yet

are seeking additional support in key business

functions and access to greater resources.

Another reason advisors find Large RIA Acquirers

attractive may be the potential to have greater

influence on the future direction of the combined entity

than might be possible with many multi-acquisition

strategic acquirers

Large RIA Acquirers: Selective in Their Targeting

Large RIA Acquirers are discerning.

The firms interviewed report that they’re less interested in advisors

who run a business with any one of the following attributes:

History of

limited AUM

growth

Aging

client base

Lack of

talent

An immediate

succession of

the advisor

Spotty or tainted

compliance

record

14

15

Six characteristics demonstrated by Large RIA Acquirers

In contrast to the Strategic Acquirers we profiled in

The Fidelity 1H 2016 Wealth Management M&A Transaction Report , Large RIA Acquirers have generally

completed fewer transactions, often by design. The firms interviewed for this report have, for the most part, completed

between two and five deals.

Their often opportunistic initial deal experience and subsequent challenging implementation lessons leads them to

develop a more deliberate and thoughtful acquisition strategy. We have identified six distinct characteristics of their

approaches to acquisition that other acquirers and advisors can learn from.

In general, Large RIA Acquirers:

Seek to boost

growth and

increase scale 1

Readily access

capital through

multiple sources 2

Take a strategic and

deliberate approach

to pursuing targets 3

Place a high importance

on creating a well-

defined shared vision 4

Structure the deal to

reinforce shared

vision 5

Make integration

a priority and

competitive differentiator 6

16

1. Seek to boost growth and increase scale

While M&A itself is often considered to be the strategy, several of the firms interviewed identified higher level

strategies of growth, talent acquisition, and operating productivity which lead to M&A as the means of execution of

the strategy. As a result, they are more deliberate, intentional, and patient in executing their M&A strategy.

Led by visionary leaders and strong

management teams, these firms believe that

pursuing an inorganic growth strategy that

complements existing activities can help sustain

historical growth rates over the long term. Rising breakeven costs for people,

technology investments, and compliance are

driving acquirers to pursue acquisitions as a

means to create scale, gain efficiencies,

and increase productivity.

17

2. Readily access capital through multiple sources

Examples of capital-raising

activities relied upon by

Large RIA Acquirers:

A corporate

recapitalization

Funds from private

equity firms

A sale to a larger, but

often passive, investor

owner (e.g., bank)

One potential benefit of

greater available capital:

Increased flexibility for all

parties when structuring

deal terms.

A significant change giving

rise to this Large RIA

Acquirer segment is the

availability of substantial and

sophisticated capital.

Today, few Large RIAs are

executing transactions by

relying solely on existing

cash flow.

Instead, these acquirers are

drawing on available

capital from sophisticated

private equity firms and

parent investors who find

the wealth management

space an attractive

investment opportunity.

18

3. Take a strategic and deliberate approach to pursuing targets

Dedicating seasoned

professionals to the

M&A process

After initially executing opportunistic transactions, Large RIA

Acquirers began to take a more thoughtful and strategic approach

to subsequent acquisitions. These approaches include:

Defining their

acquisition goals

Clarifying a set of criteria

to define an ideal target

Because of this deliberate and

strategic approach, targets

seeking to maximize the value

of their firm may want to

closely match their

characteristics to the needs

and objectives of the acquirer.

19


Expanding geographically

with the intent of efficiently

building a presence and brand

in a new and distant market

Building density in markets

where the acquirer has an

existing presence in order to

increase scale and gain

efficiencies and elevate their

brand profile

Acquiring next-gen

talent, who can potentially

help supercharge organic

growth by providing an

array of technical and

client-facing skills and

leadership potential

When it comes to

defining acquisition

goals, Large RIA

Acquirers typically

focus on three

priorities.

20


Acquirers have learned to make an effort

to determine whether G2 talent

represents the type of professional that

can help them longer-term. They’re also

looking to see if incentives are in place to

keep this talent post-acquisition. A lack of

a deep bench in the satellite office may

put existing client relationships at risk.

Next-gen talent in the distant

location can make or break the

success of an acquisition.

Distant locations tend to

need local leadership.

Succession deals can be more challenging

than anticipated with distant targets.

Large RIA Acquirers report that they

carefully assess who will provide local

leadership (e.g., someone from their team

who plans to relocate to the satellite office

or someone who is already in place at the

target). When pursuing a target

that offers geographic

expansion, some Large

RIA Acquirers have gained

unexpected lessons

through their experience

21


In order to avoid creating a long wish list of criteria that may not

be realistic to fill, Large RIA Acquirers typically prioritize the top

characteristics that they consider essential in a target advisor.

Staying true to these priorities can help them save time, realize

efficiency, and keep emotions out of the buying process.

Typical criteria to

define an ideal target

Location Firm size Fit

Once a strategy is set,

Large RIA Acquirers are

investing a meaningful

amount of time to identify a

set of criteria to define and

evaluate an ideal target.

22


Large RIA Acquirers typically look for these attributes in their assessment:

Client experience . Large RIA Acquirers are attentive to the client experience. They want to

understand the details about a target's communication processes, including touch points, contact

frequency as well as offline and digital channels used.

Similar investment philosophy and capabilities such as holistic financial planning.

Common philosophy on how employees are treated. This can include philosophies regarding

compensation as well as criteria for advancement within the organization. As part of this assessment,

they’re also looking to ensure future employees possess the right skill sets (e.g., technical, emotional

intelligence, leadership) to complement or fill any gaps in their organization.

The right chemistry. Large RIA Acquirers look for compatible personalities among all partners and

associates that are part of the deal. Investing the time to have conversations with all stakeholders

can help validate whether the chemistry is right and develop a clear understanding of future roles.

For Large RIA Acquirers,

assessing fit is a

combination of art and

science and ultimately

helps them better

understand the target

firm’s core values. Firms

devote substantial

attention to the new

relationship and assessing

potential alignment.

23


While some Large RIA Acquirers have full-time staff dedicated to

pursuing a target and closing a deal, all have at least one internal leader

who is typically allocating the majority of his or her time to acquisitions.

Large RIA Acquirers

tend to dedicate

substantial

resources to

acquisition efforts.

Discussions about a combined entity typically include these topics:

How they will pursue long-term sustainable and, in several

cases, much faster combined growth

Organizational structure of the combined team including future

roles and responsibilities for key players

Potential difficult decisions and areas of conflict

Areas for potential cost savings

The type and amount of risk each party may assume

24

4. Place a high importance on creating a well-defined shared vision

Large RIA Acquirers believe that candid

discussions with the target advisor

about a future vision for the combined

entity can help build trust and clarity.

These types of constructive, forthright

conversations, which are largely focused

on expectations, tend to occur early on in

the pursuit. This timing is instrumental in

helping Large RIA Acquirers understand

how the target will contribute to creating

a stronger combined entity.

Large RIA Acquirers tell us that

succession/exit situations are

less attractive to them than a

target advisor or firm that has the

potential to grow faster and

bigger than they otherwise would

have if they remained independent.

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4. Place a high importance on creating a well-defined shared vision

According to the firms interviewed, don’t underestimate the amount of consideration and effort

all parties to a transaction need to undertake when agreeing upon a well-defined vision.

In defining their shared vision, acquirers and targets consider the following activities:

1. Documenting their core values and know what is critical versus desired

in a post-acquisition vision.

2. Articulating what they hope to achieve from a sale.

3. Communicating their strengths and how they can add value to a

combined entity (e.g., talent, attractive client base, or additional

capabilities)

4. Fully embracing the acquiring firm’s overall approach.

While large RIA Acquirers indicate that they’re open to new ways of

running the business, they generally expect their targets to fully embrace

their practices. Few will consider making exceptions for one target or

group of clients in terms of how they are served, since such exceptions

likely defeat their goal of achieving scale.

Acquirers Target Advisor

1. Documenting and clearly articulating a well-developed value

proposition for why a target should join them, which could include:

• The acquirer’s track record for doing acquisitions

• How new business is generated

• Resources and capabilities they offer

• The types of centralized resources, including technology, that

the target advisor or firm will have access to

• Governance and decision-making processes

2. Understanding all of the commitments the target advisor or firm

has made to existing clients and employees and whether they can be

fulfilled or addressed prior to closing a deal.

3. Maintaining an open mind to adopting any best practices offered by

the target firm that can make the combined entity stronger.

This information is general in nature and should not be construed as advice of any kind. This does not reflect an advisor’s analysis for any particular situation or transaction. An advisor should conduct its own

analysis, review, and due diligence based on the factors of its own specific situation. The views and opinions expressed herein are not necessarily the opinions or recommendations of Fidelity Investments.

26

5. Structure the deal to reinforce shared vision

The combined vision increasingly drives deal structure

and terms, which are instrumental when finalizing price.

As a result, deal structures have become increasingly

sophisticated as they may address an array of issues:

Shared

risk

Specific control and

voting provisions

Timing and method

of payments

Philosophical

alignment

27

5. Structure the deal to reinforce shared vision

While all parties may agree on firm valuation, deal terms can

ultimately impact the final price agreed upon by all stakeholders.

For example:

If the target is sharing

more of the risk, an

acquirer may pay more

than the firm’s value.

If the clients are likely to remain with the

combined entity, the acquirer may consider

compensating talent if they're participating in

the growth of existing clients and assuming

the risk of it not growing.

If a target advisor only

wants cash or a short-term

note, the price can be

lower than the valuation.

If a target advisor is looking for a

succession option and does not offer a

strong bench of G2 talent, then the price

can be negatively impacted.

28

6. Make integration a priority and competitive differentiator

They learned over time that their success

requires attention to the demands of

integration: complexities, unanticipated

challenges, organizational alignment, and

resource and leadership demands.

These demands should be addressed

over an extended time period to achieve

the full potential of the combined entity.

Large RIA Acquirers recognize that M&A is

both a financial and business transaction.

An acquisition is much more than a financial transaction. Acquirers need to fully

integrate their target into their organization in order to achieve maximum value.

Closing the deal does not define success. Integration requires patience, much more

hard work, and commitment than most anticipate. Reviewing results of the integration

one year after the closing date can help gauge overall effectiveness and uncover valuable

insights and best practices to apply to the next deal.

Expectations between both parties must be established well before the close. For

example, parties should decide the sequence of events for the integration, as well as any

changes in roles, governance and decision making processes.

Both sides of the deal face challenges. Regular status meetings with leaders from both

sides, clear role definitions, establishing a way to identify points of difference, as well as a

resolution and governance process can all help streamline the integration process.

Unique individual processes or skills offered by the acquired firm can provide ways

to help integrate the combined entity. Large RIA Acquirers should maintain an open

mind to ideas offered by the target.

29

6. Make integration a priority and competitive differentiator

Based on their experiences, the Large RIA Acquirers offer the following

observations for achieving an agreed-upon vision for the combined entity:

This information is general in nature and should not be construed as advice of any kind. This does not reflect an advisor’s analysis for any particular situation or transaction. An advisor should conduct its own

analysis, review, and due diligence based on the factors of its own specific situation. The views and opinions expressed herein are not necessarily the opinions or recommendations of Fidelity Investments.

30

Conclusion

Large RIA Acquirers represent an opportunity for well-prepared advisors to work closely with firms who

demonstrate a unique mix of business management acumen and wealth management advisory experience.

Such relationships can provide a way for advisors to leverage a well-managed platform in order to achieve a potentially

higher level of growth than if they remained independent, while also contributing unique elements

of their existing business into a willing partner’s organization.

What specific management and growth

challenges are you facing that a Large RIA

Acquirer could help you to solve?

When considering how to engage with Large RIA Acquirers, advisors may want to

thoughtfully answer the following questions:

What types of attributes, skills, and

expertise do you bring to the table that

would help a Large Acquirer continue to

build a strong , successful and

enduring business?

How can you contribute to

developing a shared vision of the

future with a Large RIA Acquirer to

help long-term success?

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Contact Your Fidelity Representative for More Information

As with any effective M&A strategy, advisors should determine their own

priorities as they consider their growth, scale, and leadership succession

options. As you explore your path forward, we encourage you to

contact your Fidelity Representative for more information.

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2016 M&A Trends:



Leaders Forum

Appendix


making acquisitions

33

Contents

M&A Transactions for 2016

Contributors to Insights on Large RIA Acquirers

Comparison of Acquisition Models

Additional Fidelity Resources

Select 2016 Broker Dealer and Other Transactions

34


This Wealth Management M&A Transaction Report

seeks to capture Merger and Acquisition deals involving:

Fidelity compiled the data for this report from public information and reviewed it with a community of Wealth

Management M&A Industry Leaders. This community included leading Strategic and Financial Acquirers, Large

RIA firms who have created a range of business models focused on growth and sustainability, and Broker

Dealers. Data for this report covers the period from January 1, 2016 - December 31, 2016.

Designation of acquirer models consistent with descriptions in this report are representative examples from

discussions with the M&A Leaders Forum members and are not inclusive of all transactions during this period.

Wealth Management firms registered with the SEC as a

Registered Investment Advisor including transactions

identified with over $100 million in assets under

management, but less than $20 billion

Breakaway advisors and/or advisory teams who are

leaving a financial institution to join a Wealth

Management RIA and who are expected to bring over at

least $100 million in AUM to the new business, as this

transition would likely include remuneration.

35


Former firm Former firm

seller type New firm

Approx.

transaction

date

Approx. AUM

($M) Location Acquirer model1

1 Wells Fargo Advisors Dually Registered Focus Financial/GYL Financial Synergies 8/1/2016 4,500 West Hartford, CT Strategic Aggregator

2 Douglas C. Lane & Associates Wealth Management RIA Focus Financial Partners/Douglas C. Lane & Associates 1/19/2016 4,300 New York, NY Strategic Aggregator

3 Smith Hayes Advisers Wealth Management RIA D.A. Davidson & Co 3/7/2016 4,000 Lincoln, NE Other

4 Presidio Capital Advisors RIA Tiedemann Wealth Management 8/8/2016 4,000 San Francisco, CA Large RIA Acquirer

5 Convergent Wealth Advisors RIA Pathstone Federal Street 8/25/2016 3,000 Potomac, MD Large RIA Acquirer

6 Gerstein Fisher RIA People's United Bank 7/21/2016 3,000 New York, NY Bank

7 Atherton Lane Advisers Wealth Management RIA BNY Mellon Wealth Management 4/4/2016 2,700 Menlo Park, CA Bank

8 Kovitz Investment Group Wealth Management RIA Focus Financial Partners/Kovitz Investment Group 1/11/2016 2,700 Chicago, IL Strategic Aggregator

9 Cleary Gull Advisors Wealth Management RIA Johnson Bank 5/28/2016 2,100 Milwaukee, WI Bank

10 Kanaly Trust Wealth Management RIA Mercer Advisors 3/28/2016 2,000 Houston, TX Large RIA Acquirer

11 Cordatus Wealth Management RIA Prospera Financial Services 8/9/2016 1,200 Newtown, PA Large RIA Acquirer

12 Braver Wealth Management RIA Adviser Investments 11/21/2016 1,100 Needham, MA Large RIA Acquirer

13 National Asset Management Wealth Management RIA Fortress Biotech 4/28/2016 1,005 New York, NY Other

14 HHG & Company Wealth Management RIA Wealth Enhancement Group 3/2/2016 1,000 Darien, CT Large RIA Acquirer

15 Transamerica Financial Advisors Dually Registered Kestra Financial/Wiser Financial Group 7/29/2016 1,000 Kalamazoo, MI Branded Acquirer

16 Sargent Bickham Lagudis Wealth Management RIA Colorado Financial Management 1/20/2016 957 Boulder, CO Large RIA Acquirer

17 Stanford Investment Group Dually Registered Aspiriant 12/12/2016 850 Mountain View, CA Large RIA Acquirer

18 Sterne Agee Investment Advisor Services Wealth Management RIA INTL FCStone 6/27/2016 845 Birmingham, AL Other

19 Waddell & Associates Wealth Management RIA Focus Financial Partners/Waddell & Associates 3/21/2016 750 Memphis, TN Strategic Aggregator

20 Spero-Smith Investment Advisers RIA HPM Partners 7/31/2016 750 Cleveland, OH Large RIA Acquirer

21 Lebenthal RIA Dynasty Financial Partners/YorkBridge Wealth Partners 7/1/2016 750 New York, NY Integrated Platform Provider

22 Emerson Investment Management Wealth Management RIA Boston Financial Management 5/2/2016 701 Boston, MA Large RIA Acquirer

23 SunTrust Advisory Services RIA Smith & Howard Wealth Management 8/31/2016 700 Atlanta, GA RIA Acquirer

24 SII Investments/Watermark Wealth Strategies Dually Registered Kestra Financial 8/4/2016 700 Scotsdale, AZ Branded Acquirer

25 U.S. Trust Bank of America Private Wealth Management Wealth Management Breakaway

GuideStar Private Wealth Management/Wells Fargo Advisors

Financial Network (FiNet) 3/10/2016 663 Westlake Village, CA Other

Fidelity compiled the data for this report from public information and reviewed it with a community of Wealth Management M&A Industry Leaders. This community included leading Strategic and Financial Acquirers,

Large RIA firms who have created a range of business models focused on growth and sustainability, and Broker Dealers. Data for this report covers the period from January 1, 2016 - December 31, 2016.

1. Additional information on acquirer models can be found in the Appendix of this report.

36




Approx.

transaction

date

Approx. AUM


26 West Capital Management RIA WSFS Financial Corporation 10/17/2016 651 Philadelphia, PA Bank

27 Carnick & Kubik Wealth Management RIA Focus Financial Partners/Carnick & Kubik Group 4/5/2016 600 Denver, CO Strategic Aggregator

28 LPL Financial Dually Registered Focus Financial/XML Financial Group 10/1/2016 600 Rockville, MD Strategic Aggregator

29 Morgan Stanley Wealth Management Wirehouse

Encore Wealth Management/Wells Fargo Advisors Financial

Network (FiNet) 8/19/2016 587 Fresno, CA Other

30 WealthSource Partners RIA

WealthSource Partners/Raymond James Investment Advisors

Division 8/8/2016 568 San Luis Obispo, CA Other

31 Bank of America Merrill Lynch Wirehouse Dynasty Financial Partners/Maximai Investment Partners 9/16/2016 550 Coral Gables, FL Integrated Platform Provider

32 Summit Capital Management Wealth Management RIA Focus Financial Partners/Merriman Wealth Management 4/1/2016 520 Seattle, WA Strategic Aggregator

33 Acacia Wealth Advisors RIA HighTower Advisors/Acacia Wealth Advisors 7/14/2016 500 Beverly Hills, CA Branded Acquirer

34 Morgan Stanley Wealth Management Wirehouse HighTower Advisors/HighTower Omaha 8/18/2016 500 Omaha, NE Branded Acquirer

35 Disciplined Wealth Strategies Wealth Management RIA Efficient Advisors 2/22/2016 441 Austin, TX Large RIA Acquirer

36 UBS Financial Services Wealth Management Breakaway

Millennium Private Wealth/Wells Fargo Advisors Financial

Network (FiNet) 3/24/2016 426 Charleston, SC Other

37 Bank of America Merrill Lynch Wealth Management Breakaway Dynasty Financial Partners/Premia Global Advisors 2/15/2016 400 Coral Gables, FL Integrated Platform Provider

38 NFP Advisor Services Wealth Management Breakaway HighTower Advisors/HighTower St. Louis 6/8/2016 400 St. Louis , MO Branded Acquirer

39 Bank of America Merrill Lynch Wirehouse

Duncan-Newman Associates/Wells Fargo Advisors Financial

Network (FiNet) 7/26/2016 400 Agoura Hills, CA Other

40 HFI Wealth Management Wealth Management RIA United Capital 5/4/2016 375 Shepherdston, WV Branded Acquirer

41 Westport Resources Management (Private Client Group) RIA United Capital 8/26/2016 373 Westport, CT Branded Acquirer

42 US Wealth Management RIA IHT Wealth Management 12/21/2016 371 Braintree, MA RIA Acquirer

43 Glowacki Group Wealth Management RIA Aspiriant 2/17/2016 360 Los Angeles, CA Large RIA Acquirer

44 Bank of America Merrill Lynch Wirehouse First Republic Investment Management 8/26/2016 360 San Francisco, CA Bank

45 WNA Wealth Advisor RIA Private Vista 10/20/2016 355 Hinsdale, IL Large RIA Acquirer

46 Concannon Wealth Management RIA Dynasty Financial Partners/Concannon Wealth Management 8/16/2016 354 Bethlehem, PA Integrated Platform Provider

47 LPL Financial Wealth Management Breakaway

Harbor Lights Financial Group/Wells Fargo Advisors Financial

Network (FiNet) 5/4/2016 350 Manasquan, NJ Other

48 J.P. Morgan Securities Bank

Snowden Capital Advisors/Harbor Wealth Management

Group 9/16/2016 350 Baltimore, MD Large RIA Acquirer

49 Weaver Wealth Management Wealth Management RIA BOK Financial 3/1/2016 340 Dallas, TX Bank

50 Ironmark Advisors RIA Beacon Pointe Wealth Advisors 9/30/2016 340 Plano, TX Branded Acquirer




37




Approx.

transaction

date

Approx. AUM


51 Private Fund Advisors RIA Cornerstone Advisory 12/6/2016 331 Arnold, MD RIA Acquirer

52 SunTrust Investment Services Wealth Management Breakaway HighTower Advisors/The Otto Group 5/20/2016 320 Sarasota, FL Branded Acquirer

53 Bank of America Merrill Lynch Wealth Management Breakaway HighTower Advisors/DSG Wealth Management 5/6/2016 315 Minneapolis, MN Branded Acquirer

54 Bedrock Capital Management Wealth Management RIA United Capital 1/26/2016 310 Los Altos, CA Branded Acquirer

55 Rav Financial Services Wealth Management RIA Sequoia Financial Group 6/27/2016 301 Beachwood, OH Large RIA Acquirer

56 Old Dominion Capital Management Wealth Management RIA Union Bank & Trust/Union Bankshares Corporation 4/5/2016 300 Charlottesville, VA Bank

57 Bank of America Merrill Lynch Wealth Management Breakaway HighTower Advisors/LRG Wealth Advisors 6/16/2016 300 New York, NY Branded Acquirer

58 Ballou Plum Wealth Advisors Wealth Management RIA EP Wealth Advisors 1/20/2016 300 San Francisco, CA Large RIA Acquirer

59 J.M. Egan Wealth Advisors Wealth Management RIA HighTower Advisors/The Egan Group at HighTower 6/28/2016 300 Madison, NJ Branded Acquirer

60 J.P. Morgan Securities Bank

Capstan Financial Consulting/Wells Fargo Advisors Financial

Network (FiNet) 8/10/2016 280 Sarasota, FL Other

61 Sound Financial Solutions Wealth Management RIA Wealth Enhancement Group 5/2/2016 260 Houston, TX Large RIA Acquirer

62 UBS Financial Services Wirehouse HighTower Advisors/Falcon Wealth Advisors 12/2/2016 260 Mission Woods, KS Branded Acquirer

63 J.J.B. Hilliard, W.L. Lyons Wealth Management Breakaway

Saling Wealth Advisors/Raymond James Investment Advisors

Division 5/18/2016 250 Louisville, KY Other

64 Merrill Lynch Wirehouse HighTower Advisors/The Thrush Group 10/17/2016 250 Westport, CT Branded Acquirer

65 LPL Financial Dually Registered Kestra Advisory 4/26/2016 250 Mount Laurel, NJ Branded Acquirer

66 IronGate Investment Management RIA HighTower Advisors/IronGate Partners 10/28/2016 250 Wilmington, NC Branded Acquirer

67 Summit Brokerage Services IBD Berthel Fisher & Company Planning 12/15/2016 250 Cedar Rapids, IA Other

68 Morgan Stanley Wealth Management Wirehouse

Seventy2 Capital Wealth Mgmt/Wells Fargo Advisors

Financial Network (FiNet) 12/1/2016 243 Bethesda, MD Other

69 Deutsche Bank Bank Wells Fargo Advisors Financial Network (FiNet) 7/18/2016 230 Washington, DC Other

70 Matterhorn Capital Management RIA Avalon Advisors 12/26/2016 220 San Antonio, TX Large RIA Acquirer

71 Pinnacle Financial Advisors Wealth Management RIA RTD Financial Advisors 3/31/2016 210 Marlton, NJ Large RIA Acquirer

72 Peak Investment Management RIA Stockman Asset Management 9/24/2016 207 Missoula, MT Large RIA Acquirer

73 Raymond James Financial Services Advisors Wealth Management Breakaway

Kauffman Wealth Management/Wells Fargo Advisors

Financial Network (FiNet) 1/15/2016 202 Pasadena, CA Other

74 Morgan Stanley Wealth Management Wealth Management Breakaway HighTower Advisors/The Rand Group 3/21/2016 200 Newport Beach, CA Branded Acquirer

75 Morgan Stanley Wealth Management Wealth Management Breakaway

Pitti Group Wealth Management/Wells Fargo Advisors

Financial Network (FiNet) 5/4/2016 200 Rochester, NY Other




38




Approx.

transaction

date

Approx. AUM


76 CLA Financial Advisors RIA Wealth Enhancement Group 12/15/2016 200 Northbrook, IL Large RIA Acquirer

77 Blackhaw Wealth Management RIA Brown Advisory 9/1/2016 193 Austin, TX Large RIA Acquirer

78 Morgan Stanley Wealth Management Wealth Management Breakaway

Trailhead Wealth Management/Wells Fargo Advisors

Financial Network (FiNet) 2/12/2016 186 Louisville, CO Other

79 Lincoln Financial/Integrated Financial Partners Dually Registered Integrated Wealth Concepts 11/29/2016 184 Waltham, MA Other

80 Goldman Sachs & Co. Wealth Management Breakaway Dynasty Financial Partners/Corient Capital Partners 6/29/2016 180 Newport Beach, CA Integrated Platform Provider

81 Bank of America Merrill Lynch Wirehouse Snowden Lane Partners/Guth-Fordyce Group 7/15/2016 180 New Haven, CT Large RIA Acquirer

82 Solutions for Wealth Management Wealth Management RIA Focus Financial/Buckingham Asset Management 3/31/2016 174 Bourbonnais, IL Strategic Aggregator

83 UBS Financial Services Wirehouse

Heritage Financial Partners/Wells Fargo Advisors Financial

Network (FiNet) 8/12/2016 173 Pittsburgh, PA Other

84 Netting & Pace Wealth Management RIA Exencial Wealth Advisors 4/12/2016 171 San Antonio, TX Large RIA Acquirer

85 Powers Capital Wealth Management RIA Focus Financial Partners/Benefit Funding Services Group 1/1/2016 163 Irvine, CA Strategic Aggregator

86 Triton Wealth Management Wealth Management RIA Focus Financial/Bridgewater Wealth & Financial Management 1/11/2016 154 Easton, MD Strategic Aggregator

87 Denver Money Manager Wealth Management RIA Focus Financial/Buckingham Asset Management 2/3/2016 153 Denver, CO Strategic Aggregator

88 Stark Capital Management Wealth Management RIA Atlanta Capital Group 1/7/2016 150 Houston, TX Large RIA Acquirer

89 Ameriprise Financial Wealth Management Breakaway

NewDay Solutions/Raymond James Investment Advisors

Division 1/9/2016 150 Hampton, NH Other

90 UBS Financial Services Wirehouse

Great Lakes Wealth/Raymond James Investment Advisors

Division 7/5/2016 150 Northville, MI Other

91 Walden Capital Advisors RIA Beacon Pointe Wealth Advisors 12/31/2016 150 Bala Cynwyd, PA Branded Acquirer

92 Columbia Ridge Capital Management RIA NBT Bancorp 12/15/2016 142 Johnson City, NY Bank

93 Wheatland Advisors RIA Orrstown Financial Services 12/13/2016 139 Lancaster, PA Bank

94 Raymond James Financial Services Advisors Wealth Management Breakaway

Collins Investment Group/Wells Fargo Advisors Financial

Network (FiNet) 5/16/2016 132 Falls Church, VA Other

95 Filigree Advisors Wealth Management RIA Boston Private Wealth 1/26/2016 126 Beverly Hills, CA Large RIA Acquirer

96 UBS Financial Services Wealth Management Breakaway HighTower Advisors/HighTower Boca Raton 5/12/2016 125 Boca Raton, FL Branded Acquirer

97 Bank of America Merrill Lynch Wirehouse Wells Fargo Advisors Financial Network (FiNet) 11/10/2016 125 Staten Island, NY Other

98 UBS Financial Services Wirehouse Wells Fargo Advisors Financial Network (FiNet) 7/1/2016 107 Hinsdale, IL Other

99 Edward Jones Dually Registered

Alloy Capital Management/Wells Fargo Advisors Financial

Network (FiNet) 10/21/2016 103 Silverdale, WA Other

100

Michael Dallas Retirement Solutions/Prospera Financial

Services Dually Registered Bloomfield Hills Financial/First Allied Advisory 10/31/2016 103 Fort Worth, TX Other

101 J.P. Morgan Securities LLC Dually Registered Wells Fargo Advisors Financial Network (FiNet) 11/4/2016 101 Bloomfield Hills, MI Other

102 Bank of America Merrill Lynch Wealth Management Breakaway Snowden Lane Partners 5/13/2016 100 New York, NY Large RIA Acquirer

103 Beverly Financial Group/Ausdal Financial Partners Wealth Management Breakaway Sentinus 1/7/2016 100 Oak Brook, IL RIA Acquirer

104 Diveley Lind & Associates RIA Alpha Omega Wealth Management 11/1/2016 100 Fort Defiance, VA RIA Acquirer




39


Transactions by State

62% of transactions occurred in just 8 states.

CA

TX

FL

NY

17

10

9

5

Other: 40

Total: 104

IL

6

CT:5 PA

MD:6

6

Transactions by Seller Size

The ten largest transactions by assets accounted for

nearly 65% of the total transaction AUM.

Seller size

No. o

f tr

an

sa

ctio

ns

$100M <

$250M

$250M <

$500M $500M <

$1B

$1B <

$4B

$4B <

$10B $10B <

$20B

Wealth Management

RIAs

Wealth Management

Breakaways

0

10

50

20

30

40

31

19 17

20

2015

2016

13

18 16

17

2015 2016

13

14 11

8

2016

2015

5

15 9

2

2015

2016

8 4

2015

2016

2

2015

See the Appendix for a definition of the types of transactions that are reflected in this report and a detailed list of the transactions. Fidelity compiled the data from publicly available

information. Data for this research covers the time period of 1/1/15 – 12/31/15 and 1/1/16-12/31/16. All statistics quoted are from this research for the report unless otherwise indicated.

40


Wealth Management

RIAs

Wealth Management

Breakaways

No. o

f tr

an

sa

ctio

ns

1st Half

2015

1st Half

2016 2nd Half

2015

2nd Half

2016

18

33

0

20

140

60

100

120

80

40

44

43

20

32

27

25

62

76

2015

Total

2016

Total

47

57 Pe

rcen

t o

f tr

an

sa

ctio

ns

1st Half

2015

1st Half

2016 2nd Half

2015

2nd Half

2016

35%

65%

0

20%

100%

40%

60%

80%

70%

50%

30%

10%

50%

50%

38%

62%

52%

48%

90%

45%

55%

45%

55%

2015

Total

2016

Total

Transactions by Seller Type

See the Appendix for a definition of the types of transactions that are reflected in this report and a detailed list of the transactions. Fidelity compiled the data from publicly available

information. Data for this research covers the time period of 1/1/15 – 12/31/15 and 1/1/16-12/31/16. All statistics quoted are from this research for the report unless otherwise indicated.

41

Initial Glance: January 2017 M&A Transactions

Fidelity compiled the data for this report from public information and reviewed it with a community of Wealth Management M&A Industry Leaders. This community included leading Strategic and Financial

Acquirers, Large RIA firms who have created a range of business models focused on growth and sustainability, and Broker Dealers. See the Appendix for a definition of the types of transactions that are reflected

in this report . Data for this report covers the period from January 1, 2017 - January 23, 2017.

1 Wells Fargo Advisors HighTower Advisors/Fortress Wealth Planning

2 Signator Investors Kestra Financial/Dudum Financial

3 Bank of America Merrill Lynch First Republic Investment Management

4 Crestwood Advisors Focus Financial Partners/Crestwood Advisors

5 Robertson Stephens Dynasty Financial Partners/Claybrook Capital

6 The Retirement Corporation of America Fifth Third Bank

7 Jones Barclay Boston Focus Financial Partners/Colony Group

8 Novos Planning Associates Mercer Advisors

9 Couch Hallum Financial Group Per Stirling Capital Management

10 HBK Wealth Management CAPTRUST Financial Advisors

11 PacWest Financial Management Focus Financial Partners/Benefit Financial Services Group

Former Firm New Firm

42

Contributors to Insights on Large RIA Acquirers

Atlanta Capital Group

Joseph P. Young, Jr.

Atlantic Trust

Eric Propper

Berkshire Capital

Bruce Cameron

Colchester Partners

Frank Kettle

EP Wealth Advisors

Patrick Goshtigian

Park Sutton Advisors

Steve Levitt

Savant Capital Management

Brent R. Brodeski

Wealth Enhancement Group

Jeff Dekko

Wescott Financial Advisory

Group

Grant Rawdin



Interviews were conducted with the following members of Fidelity’s M&A Leaders Forum to gain insights

into how Large RIA Acquirers are becoming larger businesses through a thoughtful M&A strategy, as well

as what these firms have learned over the past several years by executing deals.

Interviews were conducted during the period of November 1, 2016 –November 15, 2016 by Excella, Inc., an independent third-party consulting firm. The views and opinions expressed by the interviewed

Forum members are not necessarily the views or opinions of Fidelity Investments.

43

Select 2016 Broker Dealer and Other Transactions

Although the select 2016 Broker Dealer and Other transactions noted below do not meet the criteria for being included in

Fidelity’s 2016 M&A Transaction Report, they reflect ongoing wealth management industry consolidation.

1 AIG Advisor Group Lightyear Capital, PSP Investments 160.0

2 Deutsche Bank U.S. Private Client Services Raymond James Financial 50.0

3 Kestra Financial Stone Point Capital 37.0

4 Sterne Agee Group INTL FCStone 11.0

5 Legend Group Lincoln Investment 6.0

6 Foothill Securities Securities America 5.1

7 Keeley Asset Management Teton Advisors 2.5

8 W.E. Donoghue & Co. (WEDCO) Minella Capital Management 1.6

9 First Affirmative Financial Network FOLIOfn 1.0

10 Navigator Planning Group Nicolet National Bank 1.0

Former Firm New Firm Approx. AUM ($B)

Fidelity compiled data for the noted transactions from public information and reviewed it with a community of Wealth Management M&A Industry Leaders. This community included leading Strategic and Financial

Acquirers, Large RIA firms who have created a range of business models focused on growth and sustainability, and Broker Dealers. Broker Dealer and Other Transactions noted cover the period from January 1,

2016 – December 31, 2016.

44

Comparison of Acquisition Models - Strategic Acquirers and Wealth Management Acquirers

Integrated Platform

Provider Passive Investor Financial Acquirer

Strategic

Aggregator Branded Acquirer

Wealth

Management RIA

Acquirer

Differentiator

Strong product, operating

and practice management

platform.

Capital to execute move to

independence.

Strong transition support

model.

Passive capital provision

from long term investor.

Advisor retains maximum

operating and voting

control.

Enable entrepreneurs to

execute business plan by

providing needed capital.

Advisors accountable to but

operate independently from

investors.

Engage and retain

entrepreneurs seeking to

build business to next level

(whether transition or

strategic support).

Well capitalized to facilitate

transitions.

Sophisticated deal

structures.

Strong well branded presence

and platform.

Enable advisors to concentrate

on client/market facing

activities.

Remove often unwanted

operating complexities and

decisions (operations,

technology, staff management)

from motivated entrepreneurs.

Strong, respected local

brand and well executed

operating model.

Primary deal

structure &

components

(% cash

/equity/debt;

% up front; earn

out structure; etc.)

No ownership change.

RIA pays ongoing platform

fee on multi-year contract.

Minority equity stake.

Long term investment to

generate cash flow to

passive investors.

Majority equity stake.

Long term investment.

Ownership transition to

shared cash flows and

equity provided by Strategic

Acquirer. Either

management transition to

the next generation of firm

leadership or long term

investment.

Majority to 100% stake.

20-30% upfront in cash or

equity in acquirer. Mix of cash

and acquirer equity.

Expectation that RIA leader

remain 3-5 years minimum.

100% acquired.

Typically a mix of cash

and equity over 2-5 year

earn out. Often profit

sharing incentives to

motivate continued

growth.

Post-deal

entrepreneur

model

Wholly independent,

100% advisor owned.

Empower through platform,

community and capital for

transition to independence,

G2 buy in or sub

acquisitions.

Advisor retains full

management decision-

making and voting control.

Parent provides strategic

guidance as requested by

advisor. No advisor

ownership/investor changes

without consent of parent.

Largely passive, providing

support when requested.

“Carrot and stick” incentives

to drive growth, profitability.

Shared cash flows.

Empower acquired

entrepreneur to continue

remaining independent and

grow with benefit of capital

and community.

Engage through better

platform and unified strategy

and brand to drive growth,

productivity and profitability.

Relieve RIA of unwanted

functions to focus on growth

and client satisfaction.

Become part of a unified whole

with aligned strong culture.

Integrate into new single

entity.

This chart provides additional insight into the varying models and approaches of Strategic Acquirers and compares them to Wealth Management RIA Acquirers which generally are executing few transactions than

Strategic Acquirers and in a more defined geographic scope. The intention of this supplemental chart is to help advisors better understand the approaches of different models as they consider their own strategies

and options. This information is for illustrative purposes only and is not meant to be exhaustive of all possible business options or models an advisor may consider for its particular situation.

45

Comparison of Acquisition Models - Strategic Acquirers and Wealth Management Acquirers

Integrated Platform

Provider Passive Investor Financial Acquirer

Strategic

Aggregator Branded Acquirer

Wealth

Management RIA

Acquirer

Legal structure

/ Autonomy

Advisors remain fully

independent, own ADV.

Percentage of revenue fee

structure to provider.

Minority long term

investment.

Advisor retains operating

control and voting rights.

Independent ADV.

Varying levels of investor

percentage ownership;

advisor maintains some

level of equity.

Independent ADV.

Typically, majority but not

100% ownership; firms

retain independent ADVs.

Significant majority to 100%

owned by acquirer.

Acquired firm becomes part of

parent RIA’s ADV.

Acquired firm becomes

part of acquirer’s ADV.

Product &

operating

platform

provided to

advisors

Robust operating,

technology and

investment platform.

Access to capital.

Support for M&A execution.

No platform provided;

informal access to strategic

guidance, particularly in

capital structure and sub-

acquisitions.

Limited operating support.

Some collaboration on

strategy and growth plans

as desired by RIA.

Limited cross firm

interaction with other

acquirer-owned firms.

Capital to facilitate

succession plan execution,

sub acquisition strategies.

Strategic support with M&A

opportunities, capital

structure, operating and

investment expertise.

Active Wealth Manager

network.

Standard operating and

technology platform across

acquired RIAs.

Marketing and Communication

support.

Single brand.

Investment platform

encouraged but not always

required.


network.

Fully integrate into

existing platform.

Incorporate unique

expertise sought by

acquiring firm into

existing model.

Practice

management

platform

Extensive practice

management offerings and

expertise.

Active community network.

Informal guidance as

sought by firm.

Limited to none.

Collaborative coaching as

requested.

Typically limited to no

Wealth Manager network.

Best practices coaching

initiatives and support.


network.

Staffed practice management

groups provide coaching and

best practices.

Some organization design and

development structure support.


network.

Typically no platform.

Seek to integrate into

existing model.

This chart provides additional insight into the varying models and approaches of Strategic Acquirers and compares them to Wealth Management RIA Acquirers which generally are executing few transactions than

Strategic Acquirers and in a more defined geographic scope. The intention of this supplemental chart is to help advisors better understand the approaches of different models as they consider their own strategies

and options. This information is for illustrative purposes only and is not meant to be exhaustive of all possible business options or models an advisor may consider for its particular situation.

46

Additional Fidelity Resources

Fidelity 1H 2016 Wealth Management M&A Transaction Report

Insight into Strategic Acquirer Models and Strategies

Taking Steps to Help Maximize the Value of Your Firm

A resource to understanding the factors that can influence the value of your RIA

Value Traps: Overlooked Opportunities to Help Maximize Your Firm’s Value

Findings from the 2015 RIA Benchmarking Study.

Realizing the Value in Your Firm: Succession Planning Toolkit

Comprehensive tools and solutions to help you determine your succession strategy.

Fidelity Succession Evaluator®

An online tool designed to help advisors choose a transition path suited to their needs.

Realizing the Power of Two: The Art and Science of a Successful Merger

A Profiles of a Deal white paper sharing case study examples and best practices of investment advisors who completed a merger.

Buyout Benefits: When an Offer is Too Good to Pass Up

A Profiles of a Deal white paper sharing case study examples and best practices of two wealth management firms

undergoing an acquisition.

On the money: structuring employee ownership to potentially get the right payoff

A Profiles of a Deal white paper sharing case study examples and best practices of firms who have

implemented an equity ownership plan.

Your Guide to Expansion

A toolkit to help you prepare for growing your business through a merger, acquisition, or by adding an individual or team of advisors.

Access to Merger and Acquisition Specialists

Fidelity Investments offers you access to discounted rates from certain third-party industry service providers specializing in M&A

and succession planning.

Please contact your

Fidelity representative for

additional resources or visit

fidelityinstitutional.fidelity.com

47

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The content provided herein is general in nature and is for informational purposes only. This information is not individualized and is not intended to serve as the primary

or sole basis for your decisions as there may be other factors you should consider. Fidelity Clearing & Custody Solutions does not provide financial or investment

advice. You should conduct your own due diligence and analysis based on your specific needs

The third-party providers listed herein are neither affiliated with nor an agent of Fidelity, and are not authorized to make representations on behalf of Fidelity. Their input

herein does not suggest a recommendation or endorsement by Fidelity. This information was provided by the third-party providers and is subject to change. The content

provided and maintained by any third-party Web site is not owned or controlled by Fidelity. Fidelity takes no responsibility whatsoever nor in any way endorses any such

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