Key Takeaways
- • Hightower Advisors acquired an 80% stake in NEPC, an investment consultant and OCIO provider with $1.7 trillion in assets and $250 billion in assets under advisement (AUA), according to RIABiz; the firm did not disclose deal terms.
- • The $156 billion Chicago RIA roll-up gains an institutional consulting arm serving 642 advisors, with NEPC's 367 staff bringing the combined headcount to 1,604.
- • CEO Bob Oros positions the deal as a "one-plus-one-equals-five" combination, with cross-referrals between institutional clients at NEPC and individual clients at Hightower.
- • NEPC's ADV reports fees as low as 5 to 10 basis points, up to 50 basis points, excluding third-party manager fees, versus 100 basis points or more typical for classic RIAs.
- • Michael Manning, NEPC managing partner, will join the Hightower board; the deal is seen by analysts as a response to competitors' institutional consulting acquisitions.
Summary
Hightower Advisors, the Chicago-based RIA roll-up with approximately $156 billion in assets under management, has acquired an 80% stake in NEPC, an investment consultant and Outsourced Chief Investment Officer (OCIO) provider. According to RIABiz, NEPC manages $1.7 trillion in assets and $250 billion of assets under advisement (AUA). Hightower did not disclose financial terms of the transaction. CEO Bob Oros said the firm had spent roughly four years building a centralized investment capability for its 642 advisors and that the scale required a partner of significant size to deliver it credibly across the firm.
Oros characterized the combination as a "one-plus-one-equals-five" deal, pointing to cross-referrals: institutional opportunities could flow to NEPC, while individual clients needing services could be referred to Hightower. NEPC will reportedly operate under its own ADV and remain largely separate in operations, and it is located two blocks from Hightower's owner, Thomas H. Lee Partners, in Boston. Hightower also expects to use the partnership to expand its alternative investment offerings, with Oros citing growing retail demand for private markets access. Advisors could adopt NEPC's asset allocation models or outsource investment management to NEPC's OCIO platform, freeing time for client work.
Fee economics differ markedly. According to NEPC's ADV, discretionary fees range from 10 to 50 basis points of total asset value, excluding third-party manager fees, compared with 100 basis points or more typical for classic RIAs. Oros acknowledged that by asset count Hightower is the larger acquirer, saying "it does look like the minnow's swallowing the whale," but argued that revenue and earnings favor Hightower; neither firm disclosed revenue or profit figures because both are private. Hightower's AUM was about $61.6 billion in September 2020, rising roughly 153% to about $156 billion over four years.
NEPC managing partner Michael Manning will join the Hightower board. Industry observers cited the deal's strategic logic. Cerulli Associates' Bing Waldert said rival RIA aggregators have acquired retirement plan consultants, and that the deal gives Hightower a foothold in the defined contribution market. Louis Diamond of Diamond Consultants said alternatives access is now "table stakes" for recruiting advisors and that the combination helps Hightower keep pace with Morgan Stanley, Merrill Lynch, and UBS, which all operate institutional consulting arms.
Oros characterized the combination as a "one-plus-one-equals-five" deal, pointing to cross-referrals: institutional opportunities could flow to NEPC, while individual clients needing services could be referred to Hightower. NEPC will reportedly operate under its own ADV and remain largely separate in operations, and it is located two blocks from Hightower's owner, Thomas H. Lee Partners, in Boston. Hightower also expects to use the partnership to expand its alternative investment offerings, with Oros citing growing retail demand for private markets access. Advisors could adopt NEPC's asset allocation models or outsource investment management to NEPC's OCIO platform, freeing time for client work.
Fee economics differ markedly. According to NEPC's ADV, discretionary fees range from 10 to 50 basis points of total asset value, excluding third-party manager fees, compared with 100 basis points or more typical for classic RIAs. Oros acknowledged that by asset count Hightower is the larger acquirer, saying "it does look like the minnow's swallowing the whale," but argued that revenue and earnings favor Hightower; neither firm disclosed revenue or profit figures because both are private. Hightower's AUM was about $61.6 billion in September 2020, rising roughly 153% to about $156 billion over four years.
NEPC managing partner Michael Manning will join the Hightower board. Industry observers cited the deal's strategic logic. Cerulli Associates' Bing Waldert said rival RIA aggregators have acquired retirement plan consultants, and that the deal gives Hightower a foothold in the defined contribution market. Louis Diamond of Diamond Consultants said alternatives access is now "table stakes" for recruiting advisors and that the combination helps Hightower keep pace with Morgan Stanley, Merrill Lynch, and UBS, which all operate institutional consulting arms.
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