AlphaCore Wealth Advisory could acquire as many as five firms in the coming years that align with its emphasis on alternative investment diversification, said founder and CEO Dick Pfister.
Based in San Diego, the firm is looking for wealth managers in growing cities, particularly in Texas, Florida and Arizona, Pfister said.
AlphaCore prefers firms with USD 200m-USD 750m in assets under management (AUM), but alignment in cultural and investment philosophy are more important than size, he said.
Pfister doesn’t think closely-held AlphaCore will need additional capital to fund growth, but said he would consider an equity partner that agrees with the company’s strategic plan.
Target managers should be fee-only firms rather than fee and commission hybrids, he said. The firms should have a collaborative work culture that’s open to solutions that are best for clients, he said.
AlphaCore has about USD 2.3bn in AUM including a significant percentage invested in alternative strategies such as private equity, private debt and merger arbitrage. Potential targets should understand or appreciate the investment specialty or seek exposure to it, Pfister said.
The firm’s diversification is an important differentiator compared to managers that use the traditional 60-40 portfolio allocation to stocks and bonds, respectively, he said.
“We have a very unique value proposition that most other active acquirers don’t have,” the CEO said.
The January acquisition of Greenwich, Connecticut-based Magnolia Lane Financial Advisors brought in a founder experienced in alternative strategies. Terms of the deal were not disclosed.
The company is also interested in advisers with expertise in other areas of wealth advisory such as estate planning, insurance planning and charitable giving, Pfister said.
AlphaCore announced on 21 March the acquisition of Denver-based Johnston & Associates that brought in two professionals with “deep expertise” in tax and estate planning, risk management, insurance planning, and small business advisory. Johnston was AlphaCore’s fifth acquisition in the last five years.
AlphaCore would also be interested in adding research talent through M&A, he said.
EBITDA multiples for wealth managers that AlphaCore targets tend to be in the high single to low double-digits, Pfister said.
Pfister founded the company in 2015 with a goal to make alternative strategies more accessible to mainstream investors. AlphaCore’s service began with a heavy emphasis on investment management, but the company has been staffing and acquiring to enhance its holistic planning service, he said.
The company has the capacity to close another two deals this year, with the next one expected in three to four months for a firm outside of California, he said.
Pfister is the majority shareholder alongside a few family offices who help fund acquisitions, the CEO said.
The advisory firm has experienced about 30% or more in compound annual revenue growth since inception, he said, declining to provide a figure. AlphaCore has 30 employees.
Finch Thornton & Baird provides legal services. AlphaCore gets banking from Schwab [NYSE:SCHW] and Fidelity. It hires outside quality of earnings firms to evaluate larger targets, Pfister said.
