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In Practice April 17, 2023
Pensionmark CEO Says Firm Moving to 50/50 Retirement, Wealth Split by Summer
About one year after being acquired by World Insurance, Pensionmark discusses robust pipeline of wealth adviser transactions ahead.
Reported by Alex Ortolani
Pensionmark Financial Group CEO Troy Hammond is on track to move the firm from its current split of 80% retirement plan advisers and 20% wealth managers to an even 50/50 makeup by July, the company’s founder told PLANADVISER in an interview Thursday.
“We are moving in a direction of a more balanced organization,” Hammond said from the firm’s headquarters in Santa Barbara, California, with Neel Ray, his newly hired head of mergers and acquisitions, seated across the table. “We’re also adding a lot of services, a lot of features. … We’re looking to buy a lot of organizations and firms that bring unique subject matter and specialization to us.”
Becoming an M&A player is relatively new for Pensionmark. For its more-than-30-year history, the firm had prided itself on growing organically by bringing on affiliate advisers. Now, about one year after being acquired by World Insurance, Pensionmark is diving headfirst into the robust market for wealth management advisories. The growth potential, both geographically and by specialization, is even greater than Hammond had mapped out after the World Insurance deal was inked.
“We are 10 times [ahead of] where we thought we would be,” he says. “The strength of our platform, the strength of World, the flexibility and the way we can transact with advisers are resonating very well with sellers.”
Troy Hammond.
That growth trajectory made Hammond realize he needed a new leader for the M&A team, which had previously been reporting to him. On April 4, Pensionmark announced it had hired Ray from his role as head of M&A at Envestnet; Ray has prior experience at TD Ameritrade, TIAA and Bank of America’s Merrill.
Ray notes that, despite market volatility and higher interest rates, the deal space has continued to be active, even if sometimes transactions happen “creatively.”
“There’s no shortage of opportunity,” Ray says. “The question really is finding that sweet spot in terms of pricing and hoping to get that arbitrage growth when you combine [firms] together so it leads to a higher multiple. That’ll be the challenge and the opportunity in front of us.”
Hammond says the firm is focused on creating a streamlined process in assessing and making a move for advisories. The firm also sees itself as a good fit for “younger advisers that are faster-growing and who want to stay in their business,” he says. “That’s a really great fit for us, and culturally, there’s an alignment there.”
Yes, It’s About Synergy
So far, Pensionmark has brought on just three advisers since May 2022, but the pace is about to get a lot faster, Hammond says. The firm currently has about 30 firms in the pipeline for review, representing more than 200 financial advisers. Going forward, the firm expects to book about 15 to 20 deals per year.
Like many retirement and insurance benefit aggregators, Hammond sees wealth management as a key offering for clients to provide the full scope of services. While Pensionmark had become dominated by institutional retirement services, it had not intentionally been making that transition, Hammond says. In fact, the firm spun off a wealth management division in 2008, which until then had been about 50% of the business.
About three years ago, Hammond says, Pensionmark made a strategic decision to bring on more wealth managers in locations where it could build on the firm’s existing retirement offerings.
“There’s a tremendous amount of synergy between a retirement and wealth adviser being in the same location, being able to refer business back and forth, and being able to provide holistic services to the client,” he says. “We knew that was an area and a direction that we wanted to go, and we’d been shifting more and more that way. … Now, with acquisitions, we can really put the pedal to the metal, and those numbers can change a lot faster.”
Adviser-Focused
Pensionmark is also investing in its adviser services and platforms, Hammond says. In the past year, the firm has brought on nearly 40 staff members through hiring or acquisition to build out technology support.
“We love what we have today … but as we look through the window five years and say, ‘Where are we going to be in five years? What will advisers look like in five years? And what kind of capabilities do we want to have?’ We have to start building that today,” Hammond says.
Meanwhile, the firm will be looking for good fits to expand wealth and retirement services in the 300 locations where Pensionmark and World currently have presence. With new hires like Ray and other leaders on the team, that task feels more manageable to the company’s founder.
“These are experienced professionals that come with 20, 30 years of experience that can help us build our business,” Hammond says. “It’s been fun [bringing them on], and we’re just going to keep doing it.”
