In opening salvo to new sector, benefits firm buys $45B hybrid RIA

Two related — but historically separate — sectors of the financial services are converging on retirement plans.

As wealth management firms seek to expand their retirement plan business, an employee benefits advisory firm purchased a big hybrid RIA. OneDigital Health and Benefits sees 190-advisor Resources Investment Advisors as a new chapter for the acquiring firm.

Wealth management is a “component part” of Atlanta-based OneDigital’s decision to combine employer retirement plan services with health insurance and other medical benefits, co-founder Mike Sullivan said in an interview after the firms announced the deal Feb. 4.

“Our employers are basically saying, ‘Rather than being siloed divisions, we need a holistic approach to this,’” Sullivan said. “We're just getting around to it, but our employers have been asking about this for years. And so we're finally fixing this problem.”

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The parties didn’t disclose the terms of the deal, which has closed. Overland Park, Kansas-based Resources Investment’s clients assets have grown by more than 50% for three straight years to $45 billion, President Vince Morris says. The hybrid RIA serves as an OSJ with Ladenburg Thalmann’s Triad Advisors.

“We understand how to support a wealth advisor and we also can speak the language in the retirement-plan consulting space,” Morris says. “We believe in a vision and a strategy that corporate clients want a broader and more holistic approach.”

Morris is the RIA’s “sole manager” under ownership by the enterprise’s founding practice team, according to its SEC Form ADV. The firm also granted stakes to several advisors and key employees when it converted to an LLC in 2018, the ADV states.

While Morris notes that advisors at 32 independent brands already “live and breathe” in markets like 401(k) and 403(b) services, other wealth management firms are trying to tap more readily into employer retirement plans through new resources and major acquisitions of their own.

OneDigital Health and Benefits

Cetera Financial Group, for example, rolled out new 401(k) and other employer-plan tools last year in an effort to help push up the 40% of advisors in the network servicing the channel. Principal Financial Group bought Wells Fargo’s Institutional Retirement & Trust unit last summer for $1.2 billion, and the $3 billion deal creating Edelman Financial Engines in 2018 revolved around a major RIA merging with a big retirement plan-focused firm.

The record M&A activity in wealth management mirrors that of the other sector. Consolidation among benefits, HR and related tech firms reached a new high in 2019 with 649 agency acquisitions, according to investment bank and consultancy Optis Partners.

Since November, OneDigital has announced six acquisitions in the benefits space besides Resources Investment and a total of 23 deals in 2019. Private equity firm New Mountain Capital purchased a majority of OneDigital from Fidelity National Financial for $560 million in 2017.

The firm’s business now spans more than 2,000 benefits and HR strategists advising 50,000 employers. Resources Investment manages 2,700 employee plans with a half-million participants, according to Morris.

OneDigital views the deal as the first national benefits firm to take a holistic approach to small- and medium-sized businesses, Sullivan says. The acquisition of Resources Investment comprises 13 deals for practices, which were either affiliated with the hybrid RIA and OSJ or in the pipeline to do so.

For example, nearly 50 advisors with $10 billion in AUA at the Retirement Benefits Group aligned themselves with Resources Investment and Triad last year. The OSJ enterprise is retaining Triad as its broker-dealer.

“The acquisition by OneDigital will allow those advisors to continue to serve their communities more effectively and efficiently,” Triad CEO Jeff Rosenthal said in a statement. The expanding market and the firms’ expertise will enable them to stay on a “meteoric growth trajectory,” he added.

OneDigital plans to take “a very methodical approach” in unifying the incoming Resources Investment teams under its brand, Sullivan says.

But he adds that it’s by no means finished making deals touching the wealth management space through retirement plans.

“We view this as a starting point. There is a significant number of additional teams that are looking to join us,” Sullivan says, noting that OneDigital looks for a long-term view and a cultural fit. “We would like people to know we're open for business and we intend to be a major player.”