Morgan Stanley is selling a $15 billion registered investment advisory business that it purchased last year as part of its Eaton Vance acquisition.
Eaton Vance WaterOak Advisors, which has a history dating to the 1920s, was sold in two parts, to CI Financial and Pathstone, according to announcements Thursday morning.
The sale suggests Morgan Stanley won't be following some competing Wall Street firms that are migrating toward the RIA space.
Toronto-based mega-acquirer CI Financial is buying the Eaton Vance Investment Counsel division’s $11.4 billion in assets under advisement.
Englewood, New Jersey-based Pathstone, which has $35 billion under management, is acquiring $3 billion from the WaterOak portion of the RIA.
Eaton Vance purchased the Winter Park, Florida-based RIA business in November 2020, four months before Morgan Stanley acquired Eaton Vance Corp. in March 2021, thus making the RIA an indirect subsidiary of Morgan Stanley.
Prior to its acquisition by Morgan Stanley, EVIC served as the dedicated wealth management affiliate of Eaton Vance Corp.
The sale represents another example of Morgan Stanley backing away from the RIA business. In April 2021, Morgan Stanley announced plans to sell ETrade's RIA custody business, ETrade Advisor Services, for $55 million in cash.
“This is a continued signal that Morgan Stanley does not want to be in the RIA space, and that they want to focus on their core verticals,” said Brandon Kawal, principal at consulting firm Advisor Growth Strategies.
In terms of the way the RIA assets were divided among two buyers, Kawal said it represents the kind of “creativity now going on in the RIA space when it comes to acquisitions.”
“Play it forward, with how big some of these platforms are getting, you can make an argument that $15 billion is a big bite,” he added, suggesting that as RIAs get larger, there could be more deals that divide the assets to make them more palatable to potential buyers.
Daniel Seivert, chief executive of Echelon Partners, also highlighted the unique nature of the sale announced Thursday.
“It is rare to have a seller break into two pieces as part of a transaction,” Seivert said. “On one hand, it’s great news and kudos to the sellers if indeed they were able to find best-fitting partners for two of the partner groups. It is usually an objective of the seller to keep it all together, and along those lines sellers look to pull in any other deals possible prior to the close to increase scale and multiple and the number of buyers.”
Morgan Stanley didn't respond to a request for comment for this story.
According to the CI Financial announcement, the EVIC transaction is expected to close in the fourth quarter of this year.
Since entering the U.S. RIA market in January 2020, CI has announced nearly three dozen acquisitions and has grown from zero to approximately $133 billion.
“With nearly a century of success, Eaton Vance Investment Counsel has earned its reputation as one of the country’s leading registered investment advisors and we are proud to welcome them to CI Private Wealth,” CI Chief Executive Kurt MacAlpine said in a prepared statement.
“This is one of our largest U.S. acquisitions by assets to date and aligns us with a growing firm with a rich history, an exceptional team, industry-leading wealth management capabilities and loyal, sophisticated clients,” MacAlpine added.
Pathstone celebrated the growth the deal created for the RIA. The combination will significantly expand Pathstone's footprint in Florida. The firm will now operate in 14 locations in the U.S. with 235 team members, more than 100 of whom are shareholders of the firm, according to a company statement.
"We are very excited to welcome WaterOak to our family," Pathstone president Matthew Fleissig said in a prepared statement.
“They, like Pathstone, are driven by innovation and believe that unique technology and process will keep us a generation ahead of the industry," Fleissig said. "Our client service strategy at Pathstone is founded on our people.”
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