Hobson chief executive and majority shareholder Warren Couillault said the company had been looking for ways to grow.
"We have been considering the strategic growth alternatives for Hobson Wealth over the past couple of years, looking for ways we can enhance services for our clients and help scale the business."
He said the takeover would broaden the range and quality of services available to Hobson's clients.
"Their large scale enables a full suite of services, they have an extensive branch network and their market-leading offering in areas like research will provide Hobson Wealth clients with great outcomes."
A sale of Hobson Wealth had been rumoured for some time, with another local financial heavyweight, Craigs Investment Partners, said to have been a potential buyer as well.
Hobson had more than $4 billion in assets under management with 35 financial advisers, while Forsyth Barr had 25 offices around the country with close to 200 advisers.
Forsyth Barr was a leading investment bank, brokerage, and had a small Kiwisaver fund, and overall managed and advised on $30b of assets.
Chief executive Neil Paviour-Smith said the two firms had similar approaches to client service.
"This latest acquisition, on the back of our recent launch of digital advice app Tempo, furthers our progress towards our goal of ensuring all New Zealanders have access to world-class advice to help them grow their wealth."
Recent Australian media reports have also speculated Wellington-based investment concern Jarden Securities had been looking at a merger of its wealth management business with the local operations of JB Were, owned by the National Australia Bank, and private equity firm Pacific Equity Partners.
The New Zealand investment and wealth management sector had been going through a consolidation, with the biggest being the sale of Kiwi Wealth to Fisher Funds, as companies looked for scale and growth opportunities.