The Great Wealth (Management) Transfer

Last November, I wrote about the Great Wealth Transition. The reference is to the pending transition of wealth from one generation to the next. According to those economists, Baby Boomers, the youngest of whom are 61 years old and the oldest are 79 years old, will be transferring massive amounts of wealth they created to their heirs over the next two decades. Estimated amounts range from $100 to $124 trillion.

The estimated amounts refer to the transfer of capital market assets – stocks, bonds, cash, etc. But what about the transitions of businesses to the next generation? Those are occurring too, but there are a few more “interested parties” involved. Namely private equity (PE) firms have become increasingly more involved in business transitions.

How is private equity impacting business transitions in the wealth management industry?

Private equity impacts wealth management by funding aggregator firms to consolidate independent advisors amid rising merger and acquisition activity. While this can offer upgraded technology, severe disruptions occur when short-term corporate profits are prioritized over long-term client relationships, highlighting the value of structured, relationship-first succession plans.

PE firms are investment management companies that raise money from investors to acquire or invest in private companies. They commonly do this with the goal of improving the value of the acquired and then eventually selling it for a profit. Over the last ten years, PE firms have become flush with cash and have been on a buying spree to create returns for themselves and their investors. Initially more focused on the acquisition of manufacturing and industrial companies, their cash positions have required them to shift their focus to other types of companies. Healthcare services (medical practices, hospitals, etc.), professional services (accounting and wealth management firms) and even consumer residential services (roofing, HVAC, security, etc.) have become popular target investments.

PE firms have also found ways to indirectly get involved with business transitions. Aggregator firms are typically larger companies that scale their growth through the acquisition of smaller companies within a single industry. These firms are often funded by PE firms. And a big focus for them over the last five years has also been the consolidation of independent wealth management advisors. Merger and acquisition activity in the wealth management space continues to hit all-time highs according to the latest Echelon RIA M&A Deal Report. Even in our markets, we are noticing a lot of this type of activity.

As the average age of the independent wealth management or registered investment advisor (RIA) owner continues to increase, those that did not create a succession plan are increasingly turning to PE firms and aggregators as their answer to transitioning their business. When selling to these types of larger non-local profit seeking consolidators, I wonder whose best interest is in mind? If done right, clients involved in the transition can benefit from access to more services, sophisticated tools, better technology, elevated thought leadership, and hopefully continuity of care. Disruption though occurs when profits are put in front of relationships.

Greenleaf Trust is structured to remain privately held into perpetuity. We have the ability to serve from generation to generation and intend to do so. We also may make acquisitions in the future as part of our long-term strategy to Serve Clients More. When and if that happens, we will always put client relationships first.

What are the risks and benefits of an advisory firm selling to a corporate consolidator?

Clients can benefit from scaled acquisitions through increased access to sophisticated planning tools, enhanced technology and broader investment options. However, significant disruption occurs if the non-local consolidator prioritizes corporate profit targets ahead of personal, trust-based client relationships and individual long-term care frameworks.

How does Greenleaf Trust protect client relationships from private equity acquisition disruptions?

Greenleaf Trust is structurally organized to remain privately held into perpetuity, completely shielding our operations from short-term private equity buyout pressures. This independence ensures we can deliver seamless, multi-generational continuity of care, always putting personal client relationships ahead of corporate profit targets.