RIA consolidators are on a growth tear.
Three major consolidators — Dynasty Financial, AMG Wealth Partners and Mariner Wealth Advisors — grew their affiliated assets under management by a five-year compound annual growth rate of more than 45% from 2011 to 2016, according to Cerulli Associates.
Independent RIAs grew assets during the same time period by only an 11.7% five-year CAGR, and hybrid RIAs by 10.7%, according to Marina Shtyrkov, a research analyst at Cerulli, commenting in the first quarter 2018 issue of The Cerulli Edge — U.S. Advisor Edition.
While Cerulli classifies Dynasty as a consolidator, Dynasty does not. “Unlike others in the RIA market, Dynasty works with completely independent RIAs,” a Dynasty spokesperson told ThinkAdvisor. Dynasty does not “own the firms on our platform and they don’t own any part of Dynasty. Instead, the RIAs pay us an annual fee to be part of our network.”
Cerulli focuses on the rapid asset growth among RIA consolidators that are capitalizing on the “fragmented marketplace” by acquiring or partnering with both new and existing RIAs. Private equity firms, broker-dealers as well as established RIAs are investing in the space, according to Cerulli.
Echelon’s fourth-quarter 2017 RIA and M&A Deal Report found that consolidators took control of RIA deal activity. “In search of growth platforms and scale, well-capitalized, strategic buyers and consolidators accounted for 44% of RIA purchases in 2017, consummating a record of 74 deals,” the report states.
The Boston-based research firm said that it anticipates a “rapid evolution of competitors and business models” in the consolidator space going forward.
Succession solutions, infrastructure support, acquisition capital and aggregated buying power are cited as the most common motivators for advisors’ increased interest in affiliating with consolidators, Cerulli said.