A string of recent deals and hires point to rising competition in the high-end world of managing multigenerational wealth.
Cresset Asset Management’s acquisition in June of $2.3bn multi-family office PagnatoKarp, creating a $9.5bn firm, was soon followed up by Pathstone’s acquisition of Cornerstone Advisors, a $4bn shop with 600 family clients, creating a $20bn RIA and multi-family office.
Meanwhile, $22bn Tiedemann Advisors, whose client base includes ultra-high net worth families, hired Cresset’s Jill Shipley to become its head of family governance and education. Cresset has since named Barbara Young, former chief executive of Cypress Wealth Advisors, to be co-head of the firm’s family office services group.
At the same time, many RIAs that purport to operate as family offices or multi-family offices simply come up short in the scope of services they provide, argues John Elmes, Pathstone’s executive managing director of family office engagement.
Elmes said he expects that the ‘true’ multi-family office players will separate from the rest of the pack in the coming years as consolidation continues and firms bring more services in-house.
Prior to Pathstone and his stint as president of Convergent Wealth Advisors, where he managed the firm through its sale in 2016 to Pathstone, Elmes was a founding partner of GenSpring Family Offices, where he served in multiple leadership roles.
‘We were the first firm to put “family office” in our name and after we did it, I’m pretty sure everybody in the world called themselves a family office,’ he said. ‘But clients are starting to see the firms that really do deliver family office services, versus the ones that are fine registered investment advisors, but not a true family office.’
He said Pathstone is ‘uniquely’ positioned in that its ‘entire suite’ of services is delivered internally, with teams dedicated to accounting, financial statements, middle-office support and risk management, among others. The firm has also built a proprietary performance reporting system.
‘We built the tools but also hired the people to actually deliver all the services inside Pathstone — we do not outsource,’ Elmes said. ‘A lot of the RIAs outsource all these services and try to coordinate it, but it’s really hard to deliver a good consistent sort of value proposition if you don’t control it.’
Elmes said that the key is size and scale, which he suspects is what’s driving a lot of the M&A activity in the market right now. ‘Without size and scale, it’s hard to keep innovating, and to keep up with all the compliance issues, and to create an equity and capital structure that keeps the talent in place.’
Elmes said Pathstone, backed by private equity firm Lovell Minnick Partners, is ‘fortunate to be well-capitalized.’ He said the recent addition of Cornerstone Advisors was an instance of the firm finding a ‘culturally matched’ partner it was able to bring under its wing.
‘We’ll continue to look for these opportunities because size is going to matter in this business,’ Elmes said.”
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Please note that Pathstone's acquisition of Cornerstone Advisors is pending and estimated to close on September 30, 2020.