Last week, Pershing Advisor Solutions released its most recent Real Deals quarterly update on RIA M&A activity. The report, conducted by FA Insight, found that while there were eight advisory firm transactions in the second quarter with a total of $24 billion in assets under management, one such transaction—the purchase of Ric Edelman’s Edelman Financial Group by private equity firm Lee Partners—accounted for $17 billion of the total. Over all, the number of M&As of retail RIA firms “remained constant,” Real Deals found.

Diving into the trends from the reports, Pershing Advisor Solutions CEO Mark Tibergien said in an interview that there has been a re-emergence of strategic buyers in the RIA marketplace. “What’s interesting about these most recent deals,” Tibergien said, “is that they’re not exit strategies” on behalf of the sellers, but rather buyers are “looking to add scale, capabilities and access to new markets” to their existing firms.

“Sellers view it the same way,” he said, “but for different reasons…they have a scale issue themselves,” and know they need to grow to the point where they can recruit stronger members to their firms. “It’s not apparent” that those sellers are exiting the business, Tibergien says, suggesting that they may very well have “long-term agreements or expectations” with the buyers of their firms.

Tibergien says the most recent M&A figures are a “continuation of what’s begun over the past 10 years,” with RIA firms moving, generally speaking, from being a “bunch of solo practitioners to creating a bunch of super-ensemble firms.” Tibergien expects “more deals to be made,” particularly as advisor owners considering a sale “see how much success people have post-merger.”

It’s a mistake when making a deal, Tibergien counseled, to “invest more in the wedding than the marriage” and to understand post-deal “what the relationship is going to be like after the marriage,” including how to set pricing for services rendered and which clients they will serve. Then there are the demographic drivers. “Age is such a partner in this process,” he said, quipping that advisors are “going to leave [their firms] voluntarily or involuntarily,” and must decide “at what point they want to navigate the outcome.”

One possible outcome for the entire RIA industry is that it will begin to look like the accounting firm landscape, he suggests: large national firms like the Big 4 accounting firms, then smaller regional firms, local practices with multiple partners, and “then the solo practitioners.”

“This emergence of the elite ensemble firms, like an Aspiriant or an Oxford—Focus Financial Partners or United Capital or HighTower could fit into this category” will have a structure, he says, like independent broker-dealers, though their business models are much different.

“The challenge for those firms is to be logical and systematic about their growth,” he said, suggesting that one way they could succeed was to “follow the models of Nordstrom and Starbucks: their location strategy is not random” but rather they place stores based on the demographics of the geographic market, and “look at the supply lines for serving that market” both in terms of clients and employees.

“It’s an investment strategy, so you have to be deliberate,” Tibergien said, warning that “the challenge of bigness is that you risk losing your soul; if you don’t have culture carriers, it creates a real problem.” The smart way to grow is to “systematically add partners” creating “more leaders who are more accountable” and “more rainmakers to facilitate growth, and the ability to grow at a faster rate that attracts more people.” It’s important for owners to remember, he says, that “this is a people business, not a technology business.”