Deals & People September 19, 2023

Carlyle Makes Growth Investment in CAPTRUST

Equity from Carlyle will be used to advance CAPTRUST’s M&A strategy in both wealth management and retirement, says CAPTRUST president.

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CAPTRUST Financial Advisors announced a minority growth investment from funds managed by the global investment firm Carlyle Group Inc., adding to private equity investment the advisory aggregator has received from lead investor GTCR.

With the addition of Carlyle, CAPTRUST’s valuation exceeds $3.7 billion, while its equity value increases from $2 billion to more than $3 billion, according to the announcement. Carlyle’s growth capital will allow CAPTRUST to continue pursuing growth opportunities through acquisitions, of which it has made five this year. The firms declined to provide the amount of the investment.

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“At a high level, [the investment] means that we have the ability to continue to grow in a way in which we have for some quite some time,” says Ben Goldstein, president of CAPTRUST. “We think there’s great opportunity in the future, as our space consolidates, while growing at the same time.”

Goldstein noted that Carlyle will bring a “large stable of resources” available to its portfolio companies that CAPTRUST will be able to leveragte to get an unbiased view on areas ranging from the implementation of artificial intelligence to talent management.

Carlyle, based in Washington D.C., has $376 billion in assets under management.

M&A, Continued

In 2020, CAPTRUST added its first institutional capital partner, private equity firm GTCR, at a valuation of $1.25 billion. Since then, the Raleigh, North Carolina-based registered investment advisory has added 29 firms to its practice. As part of the new transaction, neither GTCR nor any of CAPTRUST’s executive leadership teams will be selling secondary shares, according to the announcement. Carlyle and GTCR will be minority investors in CAPTRUST, both individually and collectively. 

“The culture at CAPTRUST is driven by unity,” Fielding Miller, co-founder and CEO of CAPTRUST, said in a statement. “Our shareholder program is one of the ways that we show our people just how important they are to the success of our organization.”

Miller will continue to lead the firm, and he remains the largest individual shareholder. Currently, more than half of CAPTRUST employees participate in one or more of the firm’s equity programs. 

Goldstein notes that CAPTRUST began moving from organic growth to strategic acquisitions in 2006, with a focus on retirement plan advisements. In 2020, the firm shifted to opportunities in wealth management. The Carlyle funding will continue to fuel that growth in a way Goldstein says is both strategic in terms of footprint and in finding firms that are a good fit for CAPTRUST’s model of integrating advisories.

Since CAPTRUST is an acquirer that fully integrates firms, Goldstein says the RIA’s first filter when it comes to acquiring is “culture.” Beyond that, CAPTRUST looks at areas such as the acquiree’s size, business line specialties, ages of its advisers and growth rates.

But location also plays a role as well, he says. The RIA “has a strategic desire to be in the 55 major markets with business lines working synergistically together, and we’re probably in 33 today,” Goldstein says, noting that even in those regions, they may not have all business lines.

Retirement and Wealth

Despite the push toward further wealth management acquisitions, Goldstein said the firm remains interested in both lines of business and wants to keep growing through them, along with its outsourced chief investment officer business. But while CAPTRUST will still consider retirement plan advisement additions, the wealth management space is much more robust in terms of growth potential.

“The maturation of the wealth management industry [has occurred] in terms of being identified as an attractive investment, largely for private equity firms, but others as well, due to the fundamentals like recurring cash flow, contracted revenue, high-client retention rates, high margins and other things that are well chronicled,” Goldstein says.

He points to CAPTRUST’s ability to provide financial wellness and education to retirement plan participants through its plan sponsor practice as a key connector, and selling point, for investors.

“Retirement is a challenge in this country, and those participants need some help,” he says. “Plan sponsors will hire us to help their participants, and we love doing that; we have the capability to do it. That engagement leads to natural opportunities to provide wealth management services to those individuals, either with their money outside the plan or, ultimately, when they’re retired.”  

Ardea Partners LP served as exclusive advisor to CAPTRUST. Alston & Bird LLP served as CAPTRUST’s legal counsel. J.P. Morgan served as lead adviser to Carlyle. Simpson Thacher & Bartlett LLP served as Carlyle’s legal counsel. Kirkland & Ellis LLP served as legal adviser to GTCR.

Client Service September 19, 2023

Recruiting a New Generation of Advisers

Junior advisers today may not fit the traditional mold, and firms should adapt to attract and retain talent, according to a panel of advisers.

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Retirement plan advisories, many of which need to cultivate new employees, should look to adapt to a new generation of junior advisers, one diverse in both background and strengths, according to experts at the 2023 PLANADVISER National Conference.

Don’t Scout Only in Obvious Cohorts

Leland Bishop, a senior retirement plan consultant for the Liberty Capitol Group in UBS Private Wealth Management, suggested recruiting new hires who might not come from a purely financial or investing background.

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“When we talked to college graduates, their courses were focused on investment management, and they were focused on sales and trading,” Bishop told an audience of advisers in Scottsdale, Arizona. “Those were the kinds of groups that came through for recruiting.”

However, the job of a retirement plan adviser is more focused on governance, compliance, meeting with clients and educating participants, he said, which does not always align with that group’s interest areas.

“We tend actually to try and look at folks who have more of a management track or somebody who’s interested in psychology,” he said. “We’ve got some good hires out of those areas. The finance folks, you interview them because they’re excited, but we really get more success from other tracks.”

While universities may have financial planning programs, most institutions do not offer specific education on becoming a retirement plan adviser, said Chris Jamail, the chief marketing officer at TCG, a Hub International company. That means considering other attributes in finding new hires.

“Just having folks that show up with the hustle and that are willing to do stuff without you asking, taking on projects,” prove to be significant additions, he said. “You get those more than those who know the technical side. [Employees with hustle are ones] you can very much more easily train.”

Adding to Culture, Rather Than Fitting In

Employers should also be aware that employees entering the industry today are often more diverse than even in the recent past, said Chuck Williams, managing partner and CEO at Finspire and part-time financial planning professor at Northwestern University since 2005.

“My first class was all white males; now they make up less than half [of my students],” Williams said. “There is a far more diverse group of people now, not just male / female, but also ethnic backgrounds and just general backgrounds. They’re also not all in their 20s; sometimes they’re in their 30s, they’re career-changers.”

Williams said he and Finspire colleagues talk about finding “culture adds” to the company instead of “culture fits,” so diversity can be approached as an asset.

Williams said it is important to keep an eye on recruitment trends, so advisories are not just looking for staff with similar backgrounds to themselves.

Williams also recommended resisting the temptation to make a “mini me” of a junior staffer, and to instead encourage employees to carve out their own path. He recounted a time when a young, female employee did a great job on a retirement plan committee review. In response, he offered an example of how he would have done it differently.

“She said, ‘OK, but you told me to do it my way. This was my way.’ I was like, ‘Yeah, you’re absolutely right,’” he told the audience. “I’m really glad we had that kind of relationship where she could feel comfortable saying that to me. [The fact that] I would’ve done it differently doesn’t mean that it was the right way.”

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