Arete Wealth, a national independent broker-dealer, registered investment advisor, and insurance firm headquartered in Chicago, has completed its previously announced acquisition of Center Street Securities, a Nashville-based securities broker-dealer with $1.04 billion in client assets, the companies said earlier this week.
Center Street was founded in 1990 as Elliott Financial Services. Current CEO Jack (JR) Thacker purchased the firm in 2007 and renamed it Center Street Securities. By 2009, the firm had grown to 100 financial advisors.
Now that the transaction has closed, Arete Wealth will have a total of $5.7 billion in assets under management (AUM) and 265 registered representatives nationwide—a 75% increase. The deal will also grow Arete Wealth’s revenue by 40%, the company said.
Although financial details of the transaction were not disclosed, Arete Wealth said in the news release that its acquisition of Center Street was a stock purchase transaction. “We are incredibly excited about the potential this partnership unlocks for us in the years to come because we believe we can move faster together than apart,” Arete Wealth founder and CEO Joshua D. Rogers said in a news release announcing completion of the M&A transaction.
According to Rogers, Center Street’s strong belief in endowment-style investing for high-net-worth clients is consistent with Arete Wealth’s investment philosophy, and complements his firm’s industry-leading position as a provider of bespoke alternative investments.
Rogers discussed his firm’s unique investment offerings and plans for the two combined companies in an email response for comment.
Private Wealth asked Rogers to define the term “bespoke alternative investments,” and how Arete Wealth’s M&A deal with Center Street advanced its position as a leader in providing them.
“Bespoke alternative investments are mostly private securities that have been carefully selected, or in some cases crafted, by Arete Wealth together with family offices and institutional quality sponsors,” he said. “For high net worth retail investors, these are investment opportunities they would not be able to access anywhere other than from Arete Wealth.”
According to Rogers, an example of a bespoke alternative investment might be a structured note, sometimes referred to as a “hybrid security” because it combines the features of multiple financial products rolled into one.
“While these are risky for the average investor, structured notes offer retail investors the features of both debt assets and investment assets,” he said. “Arete Wealth partners with multiple platforms and financial partners on structured notes—in some cases, where the partner will craft new offerings exclusive to Arete Wealth investors.”
Rogers said that real estate investment opportunities in 1031s, REITs (real Estate Investment Trusts), and Qualified Opportunity Zone Funds (QOFs) provided another example of a bespoke alternative investment. To reduce the element of investment risk, he said that Arete Wealth thoroughly vets such opportunities before the firm’s advisors will recommend them.
Rogers said that his firm specialized in working with investment sponsors who have traditionally raised capital only from institutions and ultra-high-net-worth families in what are sometimes referred to as “club deals.”
“We help these sponsors expand their distribution into a broader network of high net worth retail investors,” he said. “The idea is to connect Arete Wealth’s advisors and their clients with the type of quality investment options and sponsors that are usually reserved for, and seen only by, university endowments and family offices.”
He said that Arete Wealth’s acquisition of Center Street helped his firm broaden its reach and achieve more scale, which in turn helped advisors, clients and product sponsors achieve improved results at lower costs.
Private Wealth asked Rogers if Arete Wealth intended to look for a future partner with something different than Center Street had brought to the table, or would the firm look for similar capabilities.
“Arete Wealth is always interested in doing whatever we can to find ways in which we can better serve our investors and advisors,” Rogers said. “However, the M&A strategic plan for 2021 is to focus on the Arete Wealth and Center Street partnership to ensure the most efficient, successful integration possible.”
The two companies, which will strategically combine their entities throughout 2021 under the Arete Wealth, Inc., brand, anticipate distributing approximately a quarter billion dollars in alternative investments, based on previous years’ performance.
