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Thursday, March 16, 2023

Altruist Acquires RIA Custodial Platform Shareholders Service Group

Simply weeks after asserting the launch of its personal self-clearing platform, Altruist says it has acquired Shareholders Service Group, a brokerage and custodial companies platform, in a transfer that provides greater than 1,600 advisors to its current RIA companies. The acquisition provides Altruist near 10% market share of complete RIA companies, SSG’s service group and a relationship with Pershing, SSG’s clearing and custody supplier.  

Altruist CEO Jason Wenk declined to reveal particulars of the transaction, besides that it was a largely money deal, with some fairness. Broadhaven Capital Companions, an impartial service provider financial institution, suggested SSG on the deal.

It is troublesome to provide you with an impartial valuation for such privately held companies, stated one advisor tech government, who declined to be named. However he stated a agency like SSG, which isn’t self-clearing, would doubtless be price an excellent deal lower than one which self-clears. 

“It simply provides us much more scale rapidly,” Wenk stated. “You consider the dimensions of the RIA panorama, and we’ll have near 10% market share, which is fairly outstanding for a corporation that’s 4 years previous.”

“By having that bigger base of advisors, it permits us to develop our belongings rather a lot sooner as properly,” he stated.

San Diego-based SSG was co-founded in 2002 by Peter Mangan and Bob Reed, who’ve created or managed 4 RIA custodial service platforms because the Nineteen Eighties. Not like Altruist, the agency by no means went self-clearing; it has operated as an “introducing dealer/supplier,” utilizing Pershing for clearing and custody.

Wenk stated Mangan made the choice to promote as he was trying towards the following part of progress for SSG. Mangan will keep on with the Altruist group, at the very least for the following couple years.

“I feel SSG’s been round for 22 years, so he’s in all probability it and going, ‘What’s the following 22 years seem like?’ And there needed to be a succession plan for the following 22 years,” Wenk stated. “And the issues they would want to develop are issues like nice expertise, a number of the infrastructure, like having our custody and clearing infrastructure in-house. That’s a extremely, huge significant factor.”

One of many issues Wenk was interested in was SSG’s expertise. The agency’s San Diego workplace will stay open, and 100% of SSG workers will keep on board. All of their workers will develop into shareholders in Altruist.

There’s little overlap in the kind of expertise the 2 firms have, he added. Altruist has about 330 workers, 75% of which work in product and engineering; SSG has about 30 workers, none of that are in product and engineering. The agency is extra targeted on servicing the advisors.

“It’s very a lot what they’re identified for—they simply are actually, actually good at for caring for the advisors they serve, and so they serve advisors which might be very, similar to Altruist,” Wenk stated. They’ve all the time believed that you just shouldn’t should have $1 billion or $500 million to get entry. They’ve been accessible. They’ve grown with companies.”

“It’s positively a companies play,” stated one senior government at a wealthtech firm, who declined to be named. “They’ve their very own tech stack and far of what SSG makes use of is from Pershing. What Altruist actually wanted is a companies group to serve advisors.”

Because it launched in 2019, Altruist has additionally been working as an “introducing dealer/supplier,” utilizing Apex Clearing for custody and clearing. However two weeks in the past, the corporate introduced its personal self-clearing platform, Altruist Clearing, the ultimate step in changing into a full-service custodian—the one one, argues Wenk, constructed completely from the bottom up for the RIA market.

However with the acquisition, Wenk is raring to keep up the connection with Pershing, in order that it could actually serve sure account and product varieties. For instance, proper now Altruist doesn’t help choices or margin accounts, whereas Pershing does.

“There are particular issues we are able to’t do as a result of it takes some time to construct out all of that clearing and custody infrastructure,” he stated. “We’ll have true parity day one with any custody platform on the market as a result of we now have all the advantages that Pershing brings with all of the expertise and innovation that Altruist brings.”

Tim Welsh, president, CEO and founding father of Nexus Technique, stated the acquisition may very well be a transfer to nook the small advisor market, which different custodians have steered away from.

“From a strategic perspective, it’s questionable as a result of the economics in custody don’t work very properly for small shoppers,” he stated.

“To me, it’s so counterintuitive to what the business’s evolving towards,” Welsh stated. “Possibly [Jason Wenk is] zigging the place everyone else is zagging, and perhaps that’s not all the time a foul factor to do. But it surely additionally in all probability has to do with the truth that he has his personal clearing enterprise now, so he wants quantity to make that work.”

“It’s not simply having the expertise,” Welsh added. “There’s lots of monetary issues that go together with being your personal clearing agency, so perhaps that’s the one method it may actually work for him is, out of the gate, get a ton of quantity on it. This can do it.”

Wenk stated he didn’t just like the time period, “small advisor,” and prefers to name them “scale-up advisors,” that means growth-focused, upwardly cellular companies. Advisors on the SSG platform vary from startup to $500 million in belongings.

“‘Small advisor’ considerably assumes that they’ll be small without end, whereas if I’m working with a growth-focused advisor, these advisors will not be going to be small. They’re going to continue to grow and rising.”

Davis Janowski contributed to this report. 

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