RIAs Dominate M&A Deals for Second Year Running

“We are seeing more firms being strategic about their growth, and while many remain focused on M&A as part of that strategy, they are being selective about opportunities and are very mindful of additional factors such as cultural and philosophical fit to ensure a merger or acquisition is beneficial and sustainable over the long term for their firm and their clients.”

Schwab’s data, reported at mid-year and year-end, reflect transactions involving mainly RIAs with more than $50 million under management and focused on the high-net-worth and endowment segments. The data also include advisors-in-transition who joined an existing RIA and received equity consideration.

Schwab said it did not track all financial services industry deals or all industry deal types across all channels, and the data did not reflect the global landscape of industry transactions or transaction types.

Schwab’s 2014 RIA Benchmarking Study showed that about 25% of the fastest-growing firms were considering opportunistic acquisitions to boost their growth. These firms, achieving scale through organic growth and acquisitions, reported three times more growth than the average firm.

Beatty noted that the steady level of M&A activity in recent years emphasized the growth and maturation of the industry. “RIA founders and principals are more focused than ever on creating legacy firms that advance and sustain their firm’s culture and values,” he said.

Contrary to predictions by industry observers, no spike in industry consolidation has occurred, he said. “Instead, firms are considering valuation and completing deals that best address their goals over the long term.”

— Check out Best Practices for Advisory Firm Partnerships by Michael Kitces on ThinkAdvisor.