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L.A. Firm Heads North With $5 Billion Target

By Murray Coleman January 26, 2016

Fast-growing EP Wealth Advisors, a southern California independent RIA that’s moving up on industry analysts’ radar as a mid-tier M&A player on the west coast, has reached agreement to buy its second rival in a year.

Derek Holman, co-managing director at the Torrance, Calif.-based firm, says EP Wealth will merge Ballou Plum Wealth Advisors into its fold. Terms of the deal for the suburban San Francisco firm, which manages about $300 million, aren’t being disclosed. Holman does say, though, that this latest acquisition moves EP Wealth’s footprint into the Bay Area for the first time.

“We see northern California as an extremely attractive wealth-management market with unique demographics to help support our growth in working with affluent young professionals,” says Holman. A key plus, he adds, is that the deal “also expands our expertise in helping to serve women executives and business owners.”

The acquisition is expected to push the parent’s assets under management to $2.3 billion, some 35% more than just two years ago. Revenue growth has averaged more than 20% per year since the 11-year-old firm turned more tactically to M&A after 2008's financial crisis, says co-managing director Brian Parker.

With seven acquisitions now under its belt, he and his colleagues say they’re on pace to top $5 billion AUM within a few years. “M&A has become a key part of our growth strategy,” says Parker. “We see it as an important complement to our efforts to fuel organic growth through additions of new advisors and staff.”

Patrick Goshtigian

By upping its ante in M&A, EP Wealth has become in short-order one of the industry’s more notable “serial acquirers,” says David DeVoe, an independent San Francisco-based investment-banking consultant who tracks RIA merger data. He suggests that the growing firm now should be considered in the same class as much larger M&A players such as Los Angeles-based Aspiriant and Leawood, Kan.-based Mariner Wealth Advisors.

“Clearly, EP Wealth has established a strong track record of growing through acquisitions,” says DeVoe. “They are a great example of a firm that has integrated inorganic growth through acquisition as a core plank of their overall growth strategy and business model.”

Growing through acquisitions to accomplish specific goals is more important than “growing just for the sake of growth,” says Patrick Goshtigian, EP Wealth’s president. For example, a year ago the firm bought a relatively small competitor, Moore Financial Group, in the Denver area. At the time, the firm managed about $60 million.

Besides expanding its reach to Colorado, Goshtigian notes that the merger also brought an attractive yet affluent book of new clients, many of which had crossties with business interests in southern California.

“We’re being highly selective about who we’re considering as partners,” he says. “Our first priority is to recruit advisors who emphasize comprehensive financial planning over more narrowly focused businesses that only do money management.”

Before the recent spate of deals, Goshtigian says EP Wealth had a support payroll of around 20 workers in two different offices in southern California. In the past year, that number has shot up by 50%.

“Not only do these acquisitions give us more staff to support our existing advisors,” he adds, “but we’re now better stocked with a larger pool of talent."

The 18-year-old Ballou Plum includes three women FAs. After starting as a generalist indie RIA, founders Lynn Ballou and Marilyn Plum now say that about 70% of their clients are women who’ve gone through divorce, inherited new wealth or experienced significant career altering events.

For its part, EP Wealth says that's a niche many of its advisors have been interested in gaining more exposure to for the last several years. Along those lines, part of the merger agreement provides for the former Ballou Plum’s staff to be integrated into the larger firm’s support infrastructure, according to Ballou.

“A big part of the integration process that has just started is to set up a system for advisors in other offices to easily be able to tap into our knowledge of planning issues related to helping women in transition,” she says.

The benefits Ballou lists to joining a larger firm include more help in recruiting new advisors and diversifying an aging client base. Along those lines, Ballou plans to shift most of the northern California practice’s daily operational chores to EP Wealth’s headquarters.

“Millennials are a huge demographic in the Bay Area,” she says. “This deal will give us the bandwidth to pursue more next-generation clients and put more time into training younger advisors with little or no dedicated wealth-management experience.”