Cetera Financial Group's mid-September acquisition of Avantax, formerly Blucora, may not have been the biggest wealth-management deal of the past year or so, but according to MyVest CEO Anton Honikman, it's one of the more telling with respect to the long-term trajectory of the RIA industry.
As the CEO of MyVest, a TIAA subsidiary focused on building and supporting enterprise wealth management technology in a tax-aware and personalized manner, Honikman spends much of his time thinking about M&A trends and what they say about the technical side of the wealth management industry.
As he recently told ThinkAdvisor, the Avantax acquisition demonstrates two key themes that are rapidly reshaping the space: consolidation and tax-aware planning.
"Those who follow the industry probably weren't surprised by the news," Honikman said. "On one level, this is continuing the story of [industry] consolidation … It's the big continuing to get bigger — and Cetera is already one of the big ones."
The second key theme, Honikman says, is the "elevation of all things tax" throughout the financial planning and investment process.
"I think [Cetera Holdings CEO] Mike Durbin knows exactly what he is doing," Honikman continues. "Large firms are looking for sensible, additive acquisition targets, and Avantax is one of them. Beyond mere consolidation, however, I think this deal also signals the importance of tax and elevating the concept of tax planning and tax matters in wealth management."
The Tax Play
As Honikman notes, Durbin himself has outlined this vision, including in the original announcement of the Avantax acquisition, and leaders across the RIA and broker-dealer industries are seeking greater expertise and technical capabilities in this area.
"As we explored expanding Cetera's capabilities into wealth management and tax expertise as a core component of our growth strategy, it quickly became clear that Avantax was an ideal target and a powerful fit for our business," Durbin said. "Avantax will significantly build out Cetera's capabilities in tax and wealth management."
As both Durbin and Honikman have observed in the past, disrupting the market with expanding capabilities means more flexibility for advisors and developing adjacent capabilities and channels to expand a firm's addressable market. This is seen as a key trend moving forward, they explained, given the potential for fee compression and the industry's overreliance on market returns to fuel revenue growth.
Ultimately, Honikman says, the Cetera-Avantax deal signals the fact that client service expectations are growing quickly, and that includes a new demand for tax-aware investing. What comes next is Cetera's task of fully integrating and taking advantage of the Avantax approach, a task that is shared by other firms that have engaged in similar acquisitions.
Among this group is Hightower, which recently made a strategic investment in GMS Surgent, a suburban Philadelphia-based tax and advisory firm that provides high-net-worth and business clients with tax advice and advisory services.
Under the deal, GMS Surgent will become a "wholly owned tax subsidiary" of Hightower, according to a press release published by the firms.
