Trying to keep up with Hub International’s M&A activity in 2019 was an exercise in futility, so we threw up our hands and went to the source—David Reich, AIF, PPC, National President of Hub Retirement and Private Wealth, who’s taken the lead on Hub’s current buying spree.
Many of the advisory firms announced so far are well known, and well known to Reich specifically. We facetiously asked if his strategy was simply to buy his friends’ firms, but there’s a ring of truth.
“That would be a lot more convenient, wouldn’t it?” Reich quipped before referencing his previous position with LPL Financial. “Our intent there was to put together quality groups and capabilities and bringing in the right people and working with them, as it is here. If you know them and know they are a great fit, it’s easier to do that than with someone brand new.”
Noting that acquisitions of that type aren’t new for Hub, he referenced The Insurance Exchange and Summit Financial Corporation.
“You move more quickly down the path to trust if you’ve known the person for 10 years, and you helped them and they helped you at times when they don’t need anything and you don’t need anything; you’re just doing it to help each other. That creates a whole heck of a lot more credibility and makes it easier to move forward. That said, however, if the fit is right, we can start a relationship from scratch and be very successful.”
The “right fit” to which he referred resulted in deals announced over the past week with Washington Financial Group, StoneStreet Pearl River, Perennial Pension and Wealth, Wharton Hill Advisors, EPIC Retirement Services Consulting and Inter-Mountain Retirement Partners (MRP).
Hub Retirement and Private Wealth offers institutional and retirement services to for-profit and not-for-profit organizations and customized private wealth management services to individuals and families. The division manages over $38 billion in assets and services.
Reich sat with 401(k) Specialist for a discussion of the method behind the mergers, the type of firm he’s looking for and why these firms now.
When you talk about a ‘good fit’ with the firms you acquire, what specifically do you mean?
First and foremost, they’ve got to be really strong and really confident in the retirement plan space. It all starts right there. No. 2, we want people who are focused on driving outcomes, not just checking the box. There are a lot of folks in our industry who just check the box, put a plan in place and move on.
We want people who want to help more individuals prepare for a better retirement through better outcomes; both sponsors and participants. That’s critical for us.
We want people who want to grow, and who aren’t looking to step away. They’re looking to grow their business and take it to the next level of convergence with everything that’s going to occur in that space.
We’re not looking for a firm that wants to continue with the status quo. The firms that want to do that can be great, and sometimes that works. But we’re looking for those that are passionately involved and want to improve in the space and help us change how we support the country.
Are we in the thick of M&A activity in the advisor space now, and will it continue?
You know, it’s funny, I hear people say this all the time and it’s in my best interest to say that we’re in the thick of it, but I don’t know—I think it’s picking up. It’s certainly true that this year and last year there was much more M&A than we’ve seen before, and that’s at Hub and other organizations.
I think we’re still very early in the very early innings, though. I think there’s a lot more to be done. I don’t think we’ve hit the high point of acquisitions in our space.
Does that include Hub?
Absolutely, and I think there’ll be more transactions overall next year, and more the year after that. So, I think that number will continue to grow. The characteristics of the firms that are out there just lend themselves to the consolidation stage. They’re scattered across the country, they are not really at scale, but they’ve got great practitioners and they want to grow and take their business to the next level, and that’s ideal for us. We have 450 offices overall and hundreds of thousands of commercial clients—who need retirement plan help. Our cross-sell has been exceedingly strong so far, but we’re really just getting started, and we have a lot of coverage gaps to fill in.
So, we are a great destination for almost anybody. It’s then about picking and choosing the right firms for us and who are aligned with what we’re trying to do and build.
What’s driving industry M&A activity?
People thought all the consolidation was going to occur in the 2000s, but that got reversed out for a number of different reasons. One of them was the technology wasn’t there to support the activity. The second piece is, at that point, there were a lot of advisors who felt like they were offering different pieces of what was important to their clients, and they were very specific about the way they delivered it. Some of that’s now commoditized. Now it’s about the next big piece in how advisors provide value and differentiation to the clients. Joining forces with an employee benefit shop or a commercial P/C shop is one of the great ways of doing that.
So, are we at the peak? I don’t know. I don’t think so. I think we’re in early innings.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
