Lack of scale, an aggressive buyer --  what prompted the most recent big acquisition in the wealth management industry as a major securities firm snaps up a $2 billion RIA?

Indiana, Pa.-based financial holding company First Commonwealth Financial has agreed to sell its RIA firm, First Commonwealth Financial Advisors, to Cantor Fitzgerald Wealth Partners, an affiliate of the major New York-based securities firm Cantor Fitzgerald & Co, the firms announced Thursday.

According to Stan Gregor, president and CEO of Cantor Fitzgerald Wealth Partners, First Commonwealth’s focus on high-net-worth and ultra-high-net-worth customers fits nicely with Cantor Fitzgerald’s business model as it moves further into the private wealth management space.

“They’ve built a real nice practice,” he says, adding that the firm’s retirement services practice ties in with Cantor Fitzgerald’s institutional focus. 

Richard R. Applegate, the firm’s longtime leader, will continue to lead the business. Virtually the entire team—14 people—will join Cantor Fitzgerald.


Why sell? First Commonwealth’s sale of its RIA firm may have to do with a lack of scale, says Wayne Cutler, a partner at management consulting firm Novantas. “When you have a small institution like that, they don’t have the scale to be in all businesses,” he says of the $6.2 billion bank holding company.

According to Cutler, First Commonwealth likely had a strategic review of its businesses and realized that it didn’t have the resources and capital to grow the RIA business relative to its core banking business. 

That’s because institutions need to have $20 billion to $30 billion in assets to justify investing in all the infrastructure, people and technology “to do the end-to-end wealth business,” Cutler says. It’s at that point, he adds, that banks can start to cross-sell their retail customers wealth products. “You need a certain minimum scale to justify that,” he says.


Cutler believes other banks will also likely sell their RIA firms if they don’t have enough scale. “Given all the investment required in new wealth platforms and the more challenging regulatory environment, I think that would be a prudent consideration for most sub-scale banks,” he says.

And as for potential buyers, Cantor Fitzgerald still counts itself among them. The firm is in an aggressive acquisition mode and is looking at all types of investments, whether “it’s banking holding companies, individual RIAs or high-end top producers at various firms,” Gregor says.

“We have a number of deals that are in various stages that will happen in the next few weeks or months,” Gregor says.

Read more:
Exclusive: Nicholas Schorsch's Shopping List
Acquiring Banks Interested in Same Thing As Advisors: Deposits
Recruiters to Advisors: Cut Your Best Deal Now




Register or login for access to this item and much more

All Bank Investment Consultant content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access