There is a lot of marketing material being pushed out these days touting registered investment advisors’ expertise with upper-high-net-worth clients. But for alternative investment manager Investcorp, its first foray into the wealth space focuses on another growing segment: the mass affluent who need financial advice.
“There’s still plenty of opportunity to build something and scale something in the RIA sector, and we were particularly interested in what I would describe as the mass affluent model, where you can profitably serve clients,” said Vitali Bourchtein, managing director of Investcorp’s North American private equity team.
Last week, Investcorp announced it had taken a majority stake in Berger Financial Group, a Minnesota-based registered investment advisor with more than $3 billion in assets under management. The move was the first for Bahrain-based Investcorp into wealth management, adding to a portfolio of other professional services plays across accounting, consulting and talent and entertainment management.
Bourchtein said his team in North America had been studying the RIA sector for several years and decided to make a play for a firm focused on clients with rising affluence and inheritance, whom he said may be “underserved” by the larger platforms.
“There’s a lot of wealth in this country, a lot of upcoming retirements, a lot of generational transitions, and so there’s a really big opportunity to serve this client base,” Bourchtein said. “Berger has done that very successfully over a long period of time, and that’s what got us really excited about the specific opportunity.”
Berger, he said, has found success serving this client base organically and has made more than 10 acquisitions, which have given Investcorp a complete picture of what it was looking for in a firm.
“They’ve been acquisitive historically, and we expect to continue doing what they’re doing and adding advisors to their platform organically and inorganically,” he said.
When it takes majority stakes, Investcorp is generally an “active board member,” but does not take operational roles or seek to lead the management teams.
“We let the team continue doing what they’re doing and help at a strategic level, help with strategy, help with our network and relationships, help in whatever way we can be helpful,” Bourchtein said.
Investcorp’s private equity division has been well stocked to go investment hunting in the North American market. But it’s also a global manager of alternative investments for both institutional investors and the upper-high-net-worth sector.
Bourchtein said Berger is not a distribution channel play, partly because it is not focused on the right client base for alternatives.
“I know you’ve seen a lot of the bigger platforms recently buy RIAs and definitely have a distribution angle to it, but that’s not our play—at least not with this investment,” he said.
The distribution aspect, he said, was “interesting,” and didn’t rule out such a move in the future.
For now, though, he said that Investcorp will focus on Berger’s growth.
“We love this sector,” Bourchtein said. “I would say in the short term, this is the bet and the platform that we’re backing. But it’s a really good sector. We’re very bullish about it, so we’ll continue to explore.”
