As the equity and bond markets continue their tough stretch, many advisors are turning to alternative asset classes to offer their clients the diversification necessary to protect their wealth. These investments can include private equity, private credit and real estate, which RIAs have traditionally under-allocated to, compared with institutional investors. To catch up with client demand for alternatives, firms that lack alts research and due diligence capabilities internally are now hitting the M&A marketplace and seeking buyers that can help expand their alternative investment offering.
Among the first of these deals in 2023 is AlphaCore Wealth Advisory’s acquisition of Magnolia Lane Financial Advisors, a wealth advisory firm based in Greenwich, Connecticut with an office in Hilton Head, South Carolina. As a result of this opportunity, AlphaCore will open its first East Coast offices and Magnolia Lane founder and experienced wealth advisor and portfolio manager Eric Gerster will join AlphaCore as the firm’s Chief Investment Strategist.
In a recent Citywire article announcing the deal, AlphaCore CEO and Founder Dick Pfister, CAIA, commented on the RIA landscape and what led AlphaCore to consider the acquisition. “I look out and see advisors who want alts research on their own team. The typical 60/40 portfolio is down anywhere between 10% and 15% over 2022, so there are a lot of investors and advisors looking to find another solution,” says Pfister. “It’s an opportune time for a firm like us that doesn’t have a lot of debt to come in and say, okay, let’s do some strategic acquisitions, provide the advisor and their clients with the service that they need and really shake up the M&A landscape.”
This marks AlphaCore’s fourth acquisition in the past four years. Pfister tells the publication that he was introduced to Magnolia Lane’s Eric Gerster by a fund manager who noticed that both firms share a strong resemblance in their investment outlooks.
“Gerster believes that in the coming five-to-10-year window of time where volatility is elevated and interest rates continue to be raised, alternatives are going to need to be that third leg of the stool in a diversified portfolio,” explains Pfister. “We’ve been saying that since our launch over seven years ago.”