Merit Financial Advisors entered the Wisconsin market in August 2022 by acquiring Sheboygan Falls-based Mersberger Financial Group. The Georgia-based firm has since made four additional acquisitions in the state, adding millions of dollars in assets under management to its Wisconsin presence.
Merit acquired Sheboygan-based Jochimsen Wealth Management in September 2022, De Pere-based WealthPlan in May 2023, West Bend-based Reis Financial Services in June 2023, and Manitowoc-based Access Investment Advisors in March of this year.
Merit says it “expects to continue adding several new office locations per year in Wisconsin for the foreseeable future.”
Josh and Zach Mersberger are leading the Georgia-based company’s efforts as regional directors. It wasn’t long ago that they were on the other side of the equation, helping to run their family firm but also seeing a growing trend of industry consolidation.
In each of the past three years, there have been more than 300 merger and acquisition deals in the wealth management industry in the United States, involving firms with more than $100 million in assets under management, according to research from Echelon Partners, a California-based investment banker. There were 968 total deals in those three years. For the duration of the 2010s, the average was 134 a year and the total number of deals that decade didn’t crack 200 until 2019.
Echelon is estimating 332 deals for 2024.
Zach and Josh had joined their family’s firm in 2010 and 2008, respectively. At the time, the company had around $50 million in assets under management and was in the midst of transitioning from a commission-based business to a fee-based business. The brothers worked to build out the firm’s financial planning and investment platforms.
With a focus on offering comprehensive financial planning and diversified investments, the firm grew to $200 million in assets under management by 2015. The family started executing its own succession plan as Josh and Zach each bought 25% of the firm. There was a plan in place for the brothers to acquire the remaining portion of the business in the coming years.
The firm continued to grow, mostly organically, and reached $1.2 billion in assets under management by 2021. At the same time, industry consolidation continued. Zach said they could see a gap emerging between the big and small firms. Mersberger was left somewhere in the middle. No longer small like it was back in 2010, but also certainly not big.
“We could kind of see the trend that if we did not figure out how to scale ourselves and get much bigger, we were not going to be able to provide some of these services,” he said. “And probably someday, whether it was three years, five years, 10 years down the road, we would wake up one day to find that we can’t do a lot of the things these bigger firms now can, and we did not want that to happen.”
The firm initially looked at both whether it could grow enough on its own or if it should partner with a larger company; that’s where Merit Financial Advisors entered the picture.
One of the biggest challenges in deciding to go with a partner was the prospect of rebranding and giving up some independence. That meant the partner firm needed to be a good cultural fit with Mersberger. Merit was a good fit, Zach said, because they wanted the brothers to remain entrepreneurial, grow and help establish a presence in the upper Midwest. Zach and Josh would maintain leadership of day-to-day operations on the local level. It also helped that a significant portion of the deal was also structured as an exchange of equity, “which is a pretty awesome way to do the deal because Merit, their equity is growing very quickly,” Zach said.
The looming challenges of competing against firms with more and more scale may have been a driving force for Mersberger’s deal, but there’s another factor driving industry consolidation: the aging of financial advisors.
The average age of financial advisors in the U.S. was 56 as of 2023, according to a J.D. Power survey. One in five respondents to that survey said they planned to retire within the next five years. In 2019, J.D. Power found the average age was about 55 with around 20% of advisors over the age of 65.
The average age across all financial activities is 44 and 42 across the entire labor force, according to data from the U.S. Bureau of Labor Statistics.
Zach said within the world of independent advisors, many do not have a succession plan in place for their own business. With the backing of a national player and two leaders in their 30s, the Mersbergers knew they’d be able to offer a succession plan when they make acquisitions. Zach said it has been a part of most of the deals the firm has done since joining Merit.
“Usually, the advisor is not ready to retire immediately,” he said. “They may be wanting to be retiring in three years, five years, seven years or 10 years, but they’re looking to get that succession plan locked in so that they know their clients are taken care of, they know their team is taken care of and they know they can actually step away when it’s time and when they’re ready.”
