Kingswood continues US expansion with second strategic acquisition

• 85% majority interest to be acquired in Chalice Wealth Advisors and Chalice Capital Partners in San Diego, California, subject to regulatory approval
• Transaction provides Kingswood with a strong leadership team and a seasoned CEO who have the background and experience to carry out an ambitious acquisition strategy
• Kingswood plans to use Chalice as one of its centralised hubs providing a platform for future acquisitions and product offerings in the US

Kingswood Holdings Limited (AIM: KWG), the ambitious integrated international wealth management company, today announces that, subject to US regulatory approval, it has agreed to acquire an 85% majority interest in Chalice Wealth Advisors (“CWA”), a Registered Investment Advisor (“RIA”), and Chalice Capital Partners (“CCP”), an Independent Broker/Dealer (IBD), located in San Diego, California (together “Chalice”) (the “Acquisition”). 

Chalice has experienced robust revenue and advisor growth in the two years it has been in operation. Assets under management have reached $1.15 billion (£0.9 billion) and the combined platform serves 50 independent financial advisors and 104 licensed representatives.  Formed in 2017, the principals of the firm are Keith Gregg and Derek Bruton. Derek oversaw the independent channel business for the largest IBD in the US – LPL Financial – adding over $1 billion (£0.8 billion) in gross revenue to the firm during his leadership. Derek will be the CEO of the acquired businesses going forward.

Kingswood plans to use CWA and CCP as one of its centralised hubs, providing a platform for future acquisitions and product offerings in the US.

Gary Wilder, Kingswood’s Group CEO, said: “We’re delighted to announce our second acquisition in the US, following on from Manhattan Harbor earlier this year. The advantages of this new West Coast hub are that it is immediately earnings accretive with a strong management team that has significant experience in roll-up and consolidation strategies. Derek’s experience and understanding of how to scale a business, work effectively with growing financial advisors, and source and manage superior talent will be instrumental to our success. The Acquisition complements the Group’s strategy of seeking new distribution channels for its expanding products and wealth management solutions.”

Kingswood will further focus its attention on RIA and broker-dealer acquisition targets, a sub-market in which Kingswood’s capital strength and international narrative will create a differentiated, competitive presence.

Keith Gregg, CEO of Chalice, said: “As the CEO of Chalice, our intention and vision was always to bring scale and support for the hundreds of thousands of Independent Financial Advisors and RIAs who operate their own small to mid-size businesses; and we have pursued partnerships with those who share that same passion. Today we are proud to continue the course by assisting the dedicated affiliated professionals of CWA and CCP by providing a deeply resourced firm to help them grow their business in the Kingswood Group. Their commitment to the independent model and existing relationships, along with the continuity of the existing management team and clearing relationships, will pave the way to prosperity for all.”

Derek Bruton, President of the Chalice platform commented: “I am excited to be joining Kingswood and lead the next, exciting chapter of the Chalice growth story. Kingswood brings experienced management, deep resources and expansion capital to enable us to deliver quality, holistic wealth management services to independent financial advisors and their clients. As our industry continues to evolve and advisors seek strong business partners that can adapt to their needs, I couldn’t be happier to work with the Kingswood team on this global growth journey.”

US wealth management sector overview
The US retail wealth market is large and remains fragmented. The total market size is estimated at $22 trillion (£16.9 trillion) with close to 315,000 advisors, with independent broker-dealers controlling circa $3 trillion (£2.3 trillion) AUA and employing 59,000 advisors. This provides Kingswood with a significant opportunity for consolidation with many of these smaller broker dealers in desperate need of a capital injection and support to enable them to survive against ever increasing regulation costs and competition. 

The overall retail wealth management sector is experiencing substantial growth due to an aging population with excess disposable income, overall wealth accumulation, and an increased demand for financial advice. The independent channels (IBDs, and Hybrid IBDs/RIAs) are ripe for further consolidation with several trends creating favourable tailwinds. Smaller IBDs and Hybrid RIAs are generally poorly capitalised, especially in the face of additional technology, regulatory and compliance burdens.  The independent advisor model remains very attractive, especially if affiliated with better capitalised holding company platforms like Kingswood that can support independent advisors while maintaining high levels of autonomy and ownership of the client relationships.

Najib Canaan, the US CEO for Kingswood said: “Wire houses or full-service broker-dealers have been facing pressure from increasing regulatory and transparency requirements and continue to reduce pay-out rates, essentially creating “salaried advisors”. This has led to an increasing number of advisors looking to exit these firms for IBDs enabling them to have more control over their books and the potential for increased compensation. This presents a major opportunity for Kingswood to attract these sophisticated, highly trained advisors. Kingswood is ideally placed to capture these quality RIA’s and IBD’s, such as Chalice, providing the support they need to utilise these market opportunities.”

In 2019 Kingswood has expanded through global consolidation having seen its largest shareholder, KPI (Nominees) Limited, inject new capital to bring its total investment to £15m. Kingswood now presents a robust, and efficient operation and benefits from up to £80m of permanent growth capital in the form of irredeemable convertible preference shares from funds advised by Pollen Street Capital, a global investor with a strong track record in financial services. Kingswood is entering the next phase of development: becoming a global, scalable wealth management infrastructure, not just a bolt-on acquisition driven growth model.