Karisa Diephouse, chief operating officer at Beacon Pointe Advisors, details the rise of the M&A trend in
wealth management and her role as part of the largest female-run RIA in the
country.
Market consolidation within the registered investment
adviser (RIA) space and the rise of mergers and acquisitions within the wealth
management community has been steadily on the rise in the last decade – even
through the pandemic.
Karisa Diephouse, chief operating officer at Beacon Pointe Advisors – an RIA
with $9 billion in assets under management – has had a front row seat to this
industry phenomenon. In her role, she leads the integration efforts for new
teams joining the firm and argues that one of the key aspects to a healthy
M&A strategy lies within the integration process that puts people and
personalities front and center.
Kristen Oliveri, head of private wealth content for Markets
Group, sat down with Diephouse to discuss the overall trajectory of the M&A
landscape as well as the pride she feels to be part of a women-led RIA that is making
strides in spotlighting female leadership within wealth management.
Markets Group: Let’s talk about the fastest-growing
trend in the RIA wealth management space: The unprecedented level of M&A
activity. How are you seeing this trend play out?
Karisa Diephouse: We feel like this has been
predicted for years. The demographics of the founders and these RIA businesses
are requiring M&A activity to truly unlock the value. In addition, the
larger-scale RIAs are able to take advantage of economies of scale and invest
in people and technology. [They can] provide high value for clients at the same
fee, and sometimes possibly even a lower fee [than smaller firms]. In addition,
younger professionals are really looking for upside growth in their careers and
larger firms are able to offer a vision and a career path, and that’s further
driving M&A activity.
This really has taken off in the last few years, which is
interesting given the environment we’ve all been in and not physically being
able to be together. With historical lows on interest rates and capital markets
soaring to new highs, we believe it will continue as more RIAs are being
created each year than absorbed through M&A.
Also, the demographics of the founders are not getting any
younger, so that’s definitely putting them in a position to consider succession
planning and other things that their business might need.
MG: I know Beacon Pointe is very active in this
space. How are you viewing this M&A activity and the integration piece of
acquiring teams and rolling them into the firms?
KD: I’ve always straddled the line in my role as I’ve
grown to be COO. I currently oversee two areas for our firm: integration and
operations in general. I’m in the beginning of what I started doing with Beacon
Pointe, working with President Matt Cooper on finding the prospective firms. I
am involved in the initial meetings, helping them answer questions, helping
them understand what our integration process looks like, and the advantages of
partnering with us once it takes a step further. We have a full integration
team which I lead.
Each new team gets a project lead that is their dedicated
point person throughout the transition process starting at due diligence all
the way through to completion. I am there to oversee that, support my team, [and]
support the new office. One of the most important roles of our project lead is to
continue to build trust and rapport through this journey and process. It’s
definitely a big responsibility.
MG: Dovetailing on that, tell me how you got into the
wealth management space and your path to become COO?
KD: I started my career on the retail side, working
for Fidelity Investments and Charles Schwab, which coincidentally, we have a
strong partnership with still. I learned through having mentors and folks who
helped me grow in my career that I’m very thankful for. I started in operations
client service and moved over to advising clients. So, I think that’s one thing
that’s a little bit unique about my perspective is I have been an advisor. I do
understand what our advisors are working with on a day-to-day basis and meeting
with clients and their needs there, not just the operational aspects of what I
do now. I was there at those two firms collectively about 10 years before I
joined Beacon Pointe. I worked in one of our smaller offices as the director of
operations and there was a team that just joined about a year before I did. There
was no one on my team to help them integrate in, so that was part of what I did
for them.
I understood what the platform offered, researched all the
different departments, and got to know the people and bringing those resources
back to the local office. It naturally led me into the role that I was doing,
the grooming into the current role of a COO, but just helping to onboard all
our new offices. I had done that kind of happenstance in the office I worked in
but then expanded that into helping every new office that joined, putting a
project plan together and then continue to expand that with what we have now in
building out the team. It’s been a journey and I wouldn’t have ever predicted
it, but I’m extremely happy to be here and I love what we do.
MG: What would you say the firm’s overall philosophy
is in terms of viewing M&A?
KD: We’re very
thoughtful with how we want to expand our footprint. We’d love to be in every
primary and secondary market in the country, but we are not going to do that if
it’s going to be at the expense of our people and our culture. That is number
one for us. The criteria is “no jerks allowed.” If anybody knows Beacon Pointe,
they’ve probably heard that before. We’re not just acquiring the firm, we’re
acquiring people. We want to make sure that they are accretive beyond the
economics and that means they generally will have something that they bring to
the table. That might be a specialty planning niche, or they might have a
strong business development or marketing program in play, or they may just be a
very positive energy person that we want to have on our team.
We want to pull them in more than just the earnings or the
economics. We’re really a highly collaborative environment at Beacon Pointe. We
want to make sure that we’re recruiting people that are self-starting, they’re
higher energy, they’re creative, they’re entrepreneurs, they understand the
importance of growth. But at the same time, they have a dose of humility
because nobody has the best mousetrap. We know that we want to make sure that
we’re all collaborating and making sure that we have a better mousetrap over
time. And so that’s a strong piece that I think most of the partners that join
us are looking for – to not lose that independence.
I’m making sure that they have a seat at the table. They
have a voice to share and we’re willing to listen. It really impacts our
culture very positively and that is our secret sauce.
MG: Walk me through what it looks like for a team
acquisition.
KD: We use a three-pronged approach. My team does not
find the candidates, but once we get to that point where we’re moving along and
both parties are interested, that’s when the transition team steps in.
So, the three-pronged approach starts at discovery. It’s
much like a client meeting with an advisor. We’re getting to know the team and
the people. We’re diving deep into their business, understanding how/what role
every person plays and how they work with their clients.
We’re uncovering anything needed from a compliance
perspective and a legal perspective and working with them to build a plan
that’s customized to each office that joins us. We have a project plan that we
follow, but there’s always something unique about it or things that don’t apply
to whatever office is joining. We’re running alongside them during the
discovery to start the planning phase and build out what’s going to work for
their office and lining up as many of the pieces as we can as early as
possible.
Then it’s really the execution phase. We are putting all
these things in place to plan and we’re going to start executing on them after
they’ve joined. Some of that is regarding their people and their roles and
responsibilities, and the transferring of that over to Beacon Pointe. Data
transfer is probably one of the biggest understated pieces. It’s extremely
important, not only to the team, but also to our clients and making sure that
they have access to the historical data that they’ve been used to.
All our teams that join us have the same tech stack and we
help them develop a client communication plan. Some are better at doing that on
their own because they’re in high communication with their clients. Others need
more of our templates and our help for that. But we’re alongside them, helping
to make sure it’s as smooth as possible, not only for them, but for their
clients. We want the least amount of disruption as possible.
It typically takes three to six months. There’s always
outlier situations and things that may take a little bit longer for the entire
transition. Then we can start to focus on how to use these resources and help
partner with them to focus on growth going forward.
MG: You are a
founding member of Beacon Pointe’s Women’s Advisory Institute, which is quite
unique in the industry. Can you share with me the impetus for launching that
initiative and what your main goals are there?
KD: We’ve always had strong female leadership at
Beacon Pointe. Our current CEO, Shannon Eusey,
helped found the company. She has blazed a trail in the RIA space and
our firm has always been about education. Even the way we approach our process
with our clients is very educational driven. The Women’s Advisory Institute was
founded back in 2011 on a very simple premise: we’re looking to just engage.
We noticed that our female clients were not as engaged as
the male clients through our advisory process. We also noticed simple things
like we weren’t gathering information for the second spouse or the second
person on our intake form and it’s like, why aren’t we doing that? We want to
make sure that we’re touching everybody in the relationship, and everyone has a
good understanding of how we can help.
We started with little adaptations to what we were already
doing. It wasn’t that common back then to put a heavy focus on that area, but
we knew that there was going to be, with as many females that work for the firm
and are in leadership. We knew that there was going to be a generous wealth
transfer over to women over time and we saw this as a great opportunity to
start building that foundation and setting that focus early on.
I think our male clients respect the fact that we have
support for their counterpart and COVID has been a unique opportunity for us
here because we have been able to expand our initiative to offer nationwide
webcasts. We try to not always have them be so focused on finance because that
doesn’t draw everybody in as much as there’s always a little twist that applies
to what we do every day. But we’ve had great attendance across the country of
focusing on our mental health and our well-being during such a unique time.
It’s just drawn our team together. It’s helped female
leadership emerge across the company and not just in the headquarters office. Our
host might be someone in our Philadelphia office that has a strong influence in
a particular area and has a great speaker to talk about that.
We’ve just been able to expand it nationwide and our value
proposition in the M&A space has been part of this. This has enhanced it as
well because we are the largest female-run RIA in the country. I think it draws
in female advisors to be interested because they see that there’s opportunity
for them.
MG: What are some potential wealth management trends
you’re seeing and how are you looking toward the future?
KD: I think
emphasizing again how much culture is a key. For firms that are looking to
partner, make sure that you’re deeply evaluating your business, putting your
client first and having a successful growth plan [and a] successful succession
plan. You need to make sure you find the right fit and partner for you. [That
means] taking the time to do proper evaluation and analysis, taking your
clients into consideration, just making sure that you’re doing the right thing
for everybody.
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