RIA M&A Deals On Track to Hit Record Highs: Report

Robust breakaway activity in the second quarter of 2018 marks an increase over the 72 breakaways in last year’s second quarter. However, the second quarter saw activity decrease 4% relative to Q1 2018.

Echelon thinks that the spike in breakaway activity will persist over the coming months as advisors actively seek independence — and as recent fears of increased litigation risk have proven to be overstated.

In addition, Echelon reports that the perceived legal risk for departing one’s firm with clients in tow has largely waned. According to Echelon, a retrospective of successful Q1 breakaways producing limited legal backlash has strengthened advisor confidence.

The second quarter’s impressive 123 breakaways was 18% above the historic average of 104 quarterly breakaways over the past twenty-one quarters, according to the report.

Looking forward, Echelon expects the M&A and breakaway activity to continue in the second half of 2018.

According to Carolyn Armitage, a managing director at Echelon Partners, this trend will likely continue thanks to large consolidators, bank buyers and retiring advisors.

“Large consolidators continue to drive RIA M&A activity as they leverage their proven track records and abundant resources,” Armitage said in a statement. “However, it is worth noting that there has been a resurgence amongst bank buyers. Additionally, as senior advisors look to retire and transition their businesses, they are looking for experienced successors that can sustain the growth and culture of their firm.”

Given the market environment, and age of the current business cycle, Echelon expects the M&A and breakaway activity to “continue, if not accelerate, in the second half of 2018,” according to Armitage.

—Related on ThinkAdvisor:

• Tibergien, Seivert Debate 5 Critical M&A Questions for Retiring Advisors
• RIAs Could See Record M&A Level in 2018: Report