DeVoe & Company’s latest report on RIA mergers and acquisitions in the third quarter suggests advisor M&A market is at a record pace for the full year. Moreover, said Dave DeVoe, that record pace is likely to be followed by “seven to 10 more years” of M&A growth, becoming a “new normal.” Why is that?

“These sales have to happen,” said DeVoe in an interview with ThinkAdvisor during Schwab Impact in San Diego, and the purchases will be outside buyers because for founding partners of successful advisory firms, their firms have become “too expensive for internal buyers.”

As for the latest report, conducted in partnership with Nuveen, DeVoe & Co. counted 109 transactions through the first three quarters of 2016, compared to all of 2015—the year with the highest-ever number of deals—when there were 132 deals. And the fourth quarter is normally the heaviest quarter for RIA M&A deals, DeVoe said, because of the tax considerations attendant to a merger or acquisition. DeVoe pointed out in the interview that his firm, which helps advisors plan and execute M&A transaction, now has tracked eight straight quarters in which there have been more than 30 deals executed.

The deals that DeVoe tracks are for SEC-registered investment advisory firms, along with breakaway brokers who join established RIA firms or create new ones, bringing along at least $100 million in client assets. When asked whether M&A growth would be the same for smaller, state-registered RIA firms, DeVoe said that while his firm does not track those deals, his sense is they are “following a similar pattern” of growth.

As for which kinds of RIA firms are most appealing to buyers, the Nuveen/DeVoe Q3 Deal Book reports that firms with $1 billion to $5 billion in AUM are selling in “record numbers.” Those firms, he said, are more attractive to many buyers, including banks, consolidators (aka rollup firms) and even private equity firms.

Acquiring those larger firms provide buyers with the “power of scale,” allowing buyers to reap the benefits of cost savings in areas ranging from technology to administration. In the first three quarters of this year, there were 24 transactions of those “large sellers,” compared to 17 in all of 2015 and only nine in 2014.

In other words, these deals are happening for the acquirers’ strategic reasons, and are not primarily motivated by founding partners’ succession needs. However, those founding partners—who DeVoe estimates average 62 years of age—will be increasingly motivated to sell their firms for succession planning reasons, since the consensus is that only 30% of firms have bothered to build real succession plans.

Another trend noted by the report: the growth in “sub-acquisitions,” in which an affiliate of a consolidator firm develops its own M&A expertise and makes acquisitions itself, using capital and expertise from the consolidator: “essentially the acquired firm becomes an acquirer,” as the report says. Sometimes these acquired RIA firms become “serial acquirers themselves.”

Meanwhile, the jump in sales of $1 billion to $5 billion in AUM firms helped push the average sized-firm deal so far in 2016 over the $1 billion mark.

In the third quarter, there were 37 transactions, leading DeVoe to call this surge of deals “the new normal of heightened M&A activity” in the RIA space. In 2013, the average AUM of established RIA firm sellers was $649 million, and grew to $926 million in 2015. This year the average AUM is $1.13 billion.

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