M&A, Valuations, and the Future of RIAs — A Conversation with Ian Wenik (EP.222)

0:28We all need to make smart decisions with our money. and just one of the sharpest reporters I've ever known covering the wealth management industry. And he has a really interesting background. We talk a little bit about how he started out as a sports writer before shifting into business journalism. And now he's at the center of breaking some of the biggest stories in the RIA space. So our conversation, we explore how journalism and wealth management really works from sourcing the stories and breaking news to balancing the investigative features with daily coverage. And he also shares his perspective on the M &A booms in RIAs, which I think is pretty interesting, particularly where valuations are headed and whether consolidation risks changing that entrepreneurial DNA of the advisory business.

1:11I think you're really going to enjoy the conversation, just a total behind the scenes look at an industry that's growing quickly and attracting more and more attention than ever before. Now, if you don't have an advisor or you have an advisor, but you're kind of interested in learning what PlanCorp is all about, there is a link at the top of the episode description to book a call with me. I'm going to be carving out a lot of availability at the beginning of October, really just to my email list. And so when you click on that button, you are going to go directly to booking a call. But also, if you want to sign up for my newsletter, you get first access to my calendar.

1:45But enough about that. Let's now start my conversation with Ian Winnick.

1:53Welcome to The Long-Term Investor. Today, I'm joined by Ian Winnick, editor at CityWire RIA, and honestly, just one of the sharpest reporters covering the wealth management industry. Ian, thank you so much for joining me here today. Thank you for having me on, Peter. I really appreciate it, although I feel like I'm going to inevitably fail to live up to that lofty introduction you just gave me. Well, you know, there's an even bigger introduction that I record beforehand, so I'll make sure to make it embarrassingly grandiose and such. But we can talk a little bit about right now that you just started your journalism career covering distressed debt and bankruptcies, leveraged loans.

2:32I'm curious, I want to give people an inside look into the life of a journalist, but maybe you can just set the stage of how you made the leap into wealth management and became the editor of CityWire RIA. Yeah. So let's back up a little bit earlier, which is that I used to actually write about sports through college and through grad school. I wrote for publications like Newsday, NBC Sports of Philadelphia. And yeah, growing up, I wanted to be the lead NFL writer or MLB writer for Sports Illustrated or ESPN. And it kind of set me on this path. I feel like a lot of people get into the RA business almost by accident.

3:07What set me down this path was my second semester when I was getting my master's at Columbia. I took the sports class, networked with the professors, and I took the business class to learn how to report on business in a fun, stress-free academic setting. And what happened was that I found the sports class really depressing. And the business class just filled me with so much joy. And I basically decided to go all in on business reporting when I was interviewing with ESPN post-grad school simultaneously covering bankruptcy at one of my first business internships. And ESPN brought me up to New Haven.

3:41I was there for two days. It was like an investment banking super day. 12 interviews over two days, we opened a hotel outside of Bristol. And I thought I had the job. And they ghosted me. And I said, I'll say to myself, I said, you know, F this, I'm done. I'm going to go all in a business reporting. And so I covered distressed debt for about a year at a website called Capital Structure, now part of Life and Insights, which in turn is part of Fitch. And then yeah, about a year in, one of my business school classmates from that Columbia class was at CityWire. I saw they had an opening. I said, hey, what's it like over here?

4:16She said, come on in. The water's great. And I put my name in the ring. They hired me and I've been here ever since. I didn't even know what an RA really was at the time. And it's kind of crazy how far things have come in those seven plus years since. You know, when I got out of college, I went right to an RA myself and I didn't know what an RA was. I feel sort of lucky that I stumbled into it. But before getting into the meat of the conversation, I have to know, like, who were your teams growing up? Like if you could have been the beat writer for an NFL or MLB team, who would it have been? So the thing is that you really can't be a fan of a team that you cover.

4:50And I never wanted to write about a team that I'm a fan of because, you know, you don't want to see all the dirty laundry that goes on inside. I'm a religiously fervent Giants fan, NFL, Padres baseball, long story, Islanders hockey, Penn Quakers for college sports. And yeah, I have Giants tickets. I go to all the home games. I go to one or two games on the road every year. That's a big part of my life. Oh, very cool. Well, now I know when I come to New York to try to hit you up to join you at a Giants game sometime this fall. We'll get back into the point at hand here. So you didn't know that much about RIAs.

5:25I mean, did you have any preconceptions about wealth management in general before covering it? And maybe how have those changed? It's a good question. This is a story I've never actually told anyone before. But I think that I kind of came in to this space relatively neutral or almost trusting of big brands. Like, I remember when I first saw Wolf of Wall Street, and I heard Jordan Belfort, Leo talking about, oh, Merrill Lynch is doing everything too. I'm like, oh, that's weird. Merrill Lynch is a pretty good company. And so then he kind of hopped into the industry and was, oh, wow, yeah, I'm dead wrong about this.

6:03And so I think I went from like trusting or viewing everybody, oh, kind of kumbaya. And now I've had a much more kind of cynical, jaded view, which is good as a journalist. You're supposed to be skeptical of what you see. Skeptical, but not cynical, I assume. Like that's a good quality. Yeah, skeptical, but not cynical. Yeah. Okay. Maybe you can start to peel back the curtain for us. What does the workday look like as editor of CityWire RIA? And go wherever you want with this. So the way that I would describe it is that everything kind of revolves around two news calls. So we have a morning news call and we have an afternoon news call.

6:42And so that morning news call really finalizes the agenda for the day and the afternoon news call sets the agenda for the following day. And everything in between revolves around writing and preparation and thinking ahead. And so I do a lot of writing in the morning, mid-afternoon, late afternoon, and I have a lot of space as well in between for source meeting, source calls. So it's kind of ad hoc, like it's not a set super hard schedule. You have to be flexible. There might be releases that probably you have to adjust to. But my goal is to have at least one or two in every single newsletter, deeply source exclusive stories that can be headlines.

7:21That can come from myself. That can come from my really talented colleagues, Andrew Forch, Sam Bojarski, Alec Rich. And the goal is that we're all generating stories independently on a day-to-day basis. So we're not reliant on SEC filings. We're not reliant on press releases or following competitors. We want to set the news agenda on a day-to-day basis. And how do you balance this, both breaking news, even if there isn't news really to be broken because you have to keep putting things out. Sometimes you quote break news, but you have to have this balance between breaking news and investigative features and ongoing coverage of a story.

7:55I mean, how do you balance those both as the editor who I assume is doing some management of the pieces among the different staff writers, but then a writer yourself going through the process? I have a lot of these conversations with your friend, my boss, our CityWire US newshead, Alex Steger, which is that he always says he's a big soccer fan. He wants me to be quote unquote 10, like the soccer player, the messy, the striker who can go out and get goals for the team. And so the goal that we have is that we find a balance where I have the ability to go out and try and get a lot of those stories that CityWire is known for, while at the same time, I feel like as my role as an editor, it's my job to cultivate the talent around me.

8:39And so sometimes that's deep line editing. Other times that's sharing bylines and big stories. Andrew and I, we broke together the scoop in 2023 that Goldman Sachs was selling his personal finance division. That was a team effort. And other times it's leading by example. I hope that sometimes when I get stories, it inspires other people to go out and get the same. So it's a little bit of balance and it's a little bit more of an art than a science I found from time to time. Find that balance between what the right amount of hands-on editing versus writing. But I feel like we're in kind of a healthy dynamic now.

9:11In your sources, I realize they must be advisors to some extent. I mean, there's digital tools now where you can scroll on LinkedIn or Twitter or whatever. I mean, what do you find like is the mix of sources that you're going to find ideas and new information? It's a mixture of both and I'll get a little investment-y. So we have our passive sources of information, which Alex and I affectionately refer to as smart beta. And so what that includes is, so we have a tracker that automatically will update us and send us an email notification every time a list of RAs that we track updates their Form ADV Part 1 or Part 2.

9:50And that software that we use that also has a track changes feature. So we can use that to generate a lot of document based leads based on advisors joining or leaving, executives joining or leaving, ownership structure changes, new offices, new investors. And sometimes we'll see part twos around changes to pricing structure. So that's been really helpful. Then we also subscribe to a court docket notification system, which alerts us every time that major court cases involving RAs, we have company-related tags. We'll get notifications every time new cases are filed, and we set case-level notification as well.

10:25So that gives us a lot of what we call the smart beta stories. The alpha comes from the source relationship. So those are when I get to cite my, I'm doing air quotes here for anybody listening, my super scary secret source with knowledge of the situation. People that tell me things that I'm not supposed to know. And those are the stories that I treasure above all others. I also really treasure the stories that we have that come from data reporting, a really interesting feature. You know, we've done a lot of really cool stuff on our 50 Growers Across America project, where we've done our initial pass, then also follow-up stories on here are the firms under one billion, here are the largest firms.

11:02So yeah, it's a little bit of both, but we really value the relationship-driven stories first. Hearing you talk, and I didn't know that about you that you wanted to be a sports writer initially, you know, in starting your career, but I can feel like as you're covering the different players in the space, so to speak, it's not all that different than following, people on baseball reference to some extent when you're trying to follow along with the firm and follow their progress. But I guess the data feed, as well as obviously AI, has completely changed the landscape. You joined in 2018. I'm kind of curious how you've seen journalism as well as the RIA space and wealth management space evolve in the time that you've been with CityWire.

11:43I feel like we and myself personally, we've gotten really, really lucky that we've grown as investment in the R industry has grown. We started CLC writing about this space in 2018, a couple months after I first joined, right after the Hellman and Friedman and Amman Financial Engines deal, which was at that time, that$3 billion equity valuation, that was a landmark moment for this industry. Now we have creative planning getting a valuation north of$16 billion. And so our investment in the space and my personal investment in journalism and in this craft, it kind of went vertical with institutional investment interest in this space.

12:25I think we also got lucky that we were able to cover things like PPP really, really aggressively, the Goldman creative planning deal, the LPL Commonwealth acquisition. So I think that we've found stories that it's kind of like a dog chasing a car. We've lashed on to the back bumper or kind of like the T-1000 Terminator 2 when he's chasing him in the parking garage, he's got the hooks in. So that's kind of what we're like is that we find a story or a theme and we just try to sink into it and hold on. I think that that deep investment has helped us grow our readership base as well. I'm going to pull a little on that M &A thread.

13:00there's really no way to cover our space and not be entrenched in the mergers and acquisition activity that's really picked up a lot in the past few years. What major shifts are you watching right now in that space? So me, I think the big question is, what is the end game? And now I'll make a sports analogy, which is that I feel like the valuations in the REA space, it reminds me a lot of the growth evaluations of sports teams. And those valuations look great as you find the quote-unquote greater fool and so on and so forth. But the issue is, yeah, you can have a paper valuation for whatever you want.

13:41You have a message for whatever paper valuation you want. But at some point, that paper valuation has to be monetized in an ultimate event, whether that's a sale to a strategic or an IPO. And so for me, I think the question is, how are these valuations going to stand up when some of these firms that have gone through three or four rounds of private equity investing and have a consortium of private equity backers, what's going to be their end game and who's going to be the first mover on an IPO? So I really think about a couple of years ago when CI Financial tried to spin out what is Anos Coriant in an IPO play.

14:19And the issue that CI had was that Corian, because they didn't have any track record as a serial acquirer, they made a bunch of transactions where they were paying very high multiples to buy well-established firms. Not going to name any specific names because I don't know what specific multiples were on specific bids. But what it did was, if you're buying firms at 16, 17, 18x, the multiple arbitrage that is supported so much of this institutional investment in the state's and private equity, you have to be able to sell the parent company at a greater multiple. And I think the issue that we have collectively as an industry, the royal we, not me personally, is that the public markets view RIAs, generally speaking, as somewhat analogous to asset managers because they take a 1 % management fee, some is a little higher, some is a little bit lower.

15:10But I don't think that the public markets realize that RIAs have much stickier assets than traditional asset managers do, which are dealing with a sort of secular decline right now if you're an active manager. I mean, think about how often you're right about companies having outflows. And so what happened was, CI, if they went out Coriant, that thing might have gone public at a 13, 14x multiple. And all that you're accomplishing there is lighting money on fire through the multiple compression. And so what the industry needs to see is, is there going to be a first mover that can go public and get an earnings multiple similar to the 23x or so that LPL trades out of the public markets right now?

15:46If someone like a creative planning can get that done, then I think we'll see others try to follow. If they can't, then it's going to be a very, very, very complex next few years. You know, it's interesting to hear you talk about it from a financial perspective at PlanCorp, which for those listening and viewing is a firm where I have an ownership. I've been an employee there for over a decade. We have just started down the path of M &A activity, often looking for talent more so. So, I mean, there are a lot of really big firms where you ask, what's the end game? And is it the greater fool theory at play where, you know, you just slap a valuation on something?

16:22And at what point is it financial engineering? And at what point are you not really helping the end client? One thing I think that people don't realize who are clients of financial advisors, whether they're big or small, is just how competitive the talent market is. And so, you know, we might buy a firm that has six people because we just really want the founder or even 30 people because we really want the founders and maybe a couple of key employees. But if companies start going public, I do wonder, I don't want to put words in your mouth, but I feel like I sort of hear, do these mega RAs just start looking a lot like brokerage firms, but just with less conflicts, different fee model, not cross-selling necessarily.

17:04Just kind of hearing me talk out loud, what are your thoughts on all of that? So I really think that the, I'm trying to think of how this curve looks. It almost looks maybe logarithmic. We're approaching like a set number. And I think that there is kind of an upper bound on how big some of these firms can grow. Because I think that the spirit of this industry historically has been around independence, being an entrepreneur. And a lot of people start their own RAs because they have an inherently entrepreneurial streak. And I think there's an upper bound to how big an organization they want to be a part of before they break away.

17:40And I think the best test case for my kind of half-baked labyrinth hypothesis is the creative planning, golden personal financial management transaction. We had a lot of these advisors at Golden PFM. They'd already been sold once from United Capital to Goldman. From United Capital. And actually, just for the listener's benefit, because they probably don't know the history. I mean, you don't have to go deep, but can you just kind of start with, hey, United Capital sold to Goldman. My understanding, a lot of it's a tech platform. Plus, Goldman's buying an asset that generates cash flows, but it seems like it didn't work out.

18:16And maybe that's me setting the stage enough. Is there any other stage setting you would do? That's very true. I think that Goldman bought, what does the net account, which had about 23 billion in assets, tons of advisors, because they viewed it as a sort of cross-selling platform. You could sell mortgages, home loans. and there was part of a play to move into the mess app one space. Now, it never really kind of got off the ground. It still held on to the bulk of those assets and advisors because they were W2 employees, but there was kind of a break on growth. I think it's worth noting that when Goldman chose to sell that unit and creative planning came in, a lot of advisors left and they started their own independent practices again, where they used Dynasty Financial Partners as a middle and back office service platform or they affiliated with an IBD or they just did it totally alone.

19:00they didn't want to be, one, sold twice, and two, part of a mega organization. And so I feel like if these REAs start to look more and more like wire houses, the advisory democracy is going to be a lot like wire houses. We're going to have the inherently entrepreneurial kind of rainmakers, a lot of them will leave, and the ones who are either aging, or they're too young to generate their own books of business, or they're a little bit afraid of not being associated with a big name brand, they're going to stay put. And so I think that that entrepreneurial streak, I think I view that as an inherent break on the upper bound growth of some of these mega businesses.

19:38Yeah, that's a great perspective. And without having spent any time thinking about that opinion, I think I agree. I really worry about client experience. And then I would have said employee experience, which is effectively what you're saying. People will break away if they don't like it from a financial standpoint, or they don't like the way that clients are being served or the way things are being handled internally. The big thing that you said, maybe a question or two ago was that this was such a entrepreneurial client centric industry. And I think that the more you see it M &A, you know, if you're listening or watching and you're a client of a firm going through this, I think it's important to understand the why behind it.

20:18Growth for growth sake, or A lot of times you need growth to attract talent, retain talent, but it's really been fascinating. I mean, it's just picking up. I don't see any slowing down interest rates. Even when they rose, we continue to see pretty healthy pace. I've probably pulled on that thread long enough unless you have any other final comments on M &A in general. Well, I think the last point that I want to make is that keep in mind that this is a deeply, deeply personal business. And I think that ultimately, the relationship with the end client and the end advisor, that's a deeply personal relationship, and that is what takes precedent over everything else.

20:57That's why some of these people follow advisors out the door, because they care about their relationship with the advisor more so than their relationship with the institution. Appreciate the perspective. Kind of transitioning back to the life of a journalist, your target audience is really mostly the financial advisor community. do you feel like there are a certain type of content that they are engaging with more than others, either when you started or if there's a long-term trend or right at this moment? I think what's interesting is that since we are a trade publication, a lot of what we do inherently reaches the advisory community.

21:34So it's tough for stuff to kind of get out to the end client. What I have found is that, you know, I get deep insight into what drives registrations. What I found is that when we go deep into a company or deep into a situation. Tons of people from those affected companies register with us because they view us as a source of information and updates on what's going on in their organizations. We saw this when we wrote about the Orion return to office controversy. We've seen this with LPL Commonwealth. We saw this with the Goldman process. So I think that when we write about stuff that affects the lives of advisors on the ground in big organizations, that stuff has a massive, massive, massive impact.

22:11And also people love deals. And people love stories about crazy crimes. They really do. That's what makes Netflix specials. Maybe one day you'll break out the story on something that becomes a Netflix special for all the documentary junkies out there. I guess in the financial world, you have to, you mentioned earlier having access and getting information that maybe people weren't supposed to tell you. I can't fathom what it's like to build those relationships. I obviously have a number of relationships within the media and people I trust. I do give information if I feel like, you know, there's a good story that people need to hear about.

22:45And, you know, there's nothing ethically wrong with sharing the information. But I guess, are there actual best practices that you have to follow? Is there some sort of standard the way that a CPA or, you know, an attorney might have with information sharing and such that journalists follow? Or is it just more of a unspoken set of rules and laws? I think where it kind of comes from is a lot of this stuff. I mean, look, we as an organization, we're nothing and I'm nothing without the trust of my sources. And so what I always do with sources that I want to have a confidential informational relationship with is I set out very clearly, unless agreed upon mutually, otherwise, your name will not be used.

23:25And if I say I'm going to use someone's name in a story, they know well in advance, they know that I'm going to record and they know what the ground rules are. So as long as you set really clear rules of engagement, people are willing to engage. And what I found is that I think that people sometimes, I think outsiders sometimes worry that people write kind of curry favor with sources or write favorably about people that give them information. But I found that the way in which this relationship really works is that obviously it's getting information is great, but it helps the person on the other end when inevitably I write about something that's contrary to their business interests or something about their company they don't like, they know that they have a direct line to me and that they have a way to shape the story, shape our coverage by getting their voice in there.

24:10And they understand that it's not personal. I'm doing my job. And so a lot of times, you know, I've texted CEOs saying, hey, I know I don't want to hear about this, but I know you guys have started this process. I know you can't say anything, but we're going with it. So they can brace themselves. And, you know, without, again, naming any names, there was one time where I let a CEO know, hey, I know your process is starting. I wasn't terribly worried about it getting out or the publication getting it. The CEO asked me, can you at least give us a couple of hours so I can alert employees internally so I don't have to find out through us?

24:43And in that situation, I did agree to it saying, all right, I'm willing to do that. But if somebody else texts you about this or emails you about this, let me know so we can run it right away. And so it's a balancing test. There's no hard and fast 100 % rule, but I found ways to kind of develop a clear line of dialogue. That's fascinating. You're looking ahead, Ian. I'm curious, where do you just in general see journalism in the RIA and wealth management space headed over the next few years? Where I kind of sit right now is I feel like the RIA industry is growing, but in a lot of ways, the coverage of the industry has shrunk, I think, as certain legacy publications have had cutbacks or pivoted to other areas of coverage.