Merger and acquisition activity in the RIA industry in 2018 increased by 20% over the previous year’s high-water mark, setting a record for the fifth consecutive year, Nationwide Advisory Solutions reported recently, citing research from Devoe & Company.
At the same time, a Nationwide-commissioned survey reveals that nearly 60% of RIAs and fee-based advisors expect industry M&A to increase over the next 12 months, down from close to 70% in last year’s survey — the first time in five years that respondents have been less bullish about the pace of transactions and down from a peak of 70% in 2017, Nationwide said. This suggests some advisors could be concerned that issues with the market and the economy are eroding valuations and decreasing opportunities for transactions.
In fact, 56% of RIAs and fee-based advisors anticipate greater market volatility over the next 12 months, and 56% worry about a U.S. bear market emerging over that period, followed closely by 54% who fear a U.S. economic recession.
“Since launching our Advisor Authority study in 2015, a growing number of RIAs and fee-based advisors were saying that M&A activity would increase — so this year’s sharp reversal in the trend could be an indicator of greater uncertainty about the market and the economy,” according to Craig Hawley, head of Nationwide Advisory Solutions.
“But at the same time that RIAs and fee-based advisors are less bullish about the pace of consolidation and M&A activity, the majority still say that these deals will have a positive impact on their business,” Hawley explained. “Consolidation among firms is driven by a variety of factors — including increasing competition, rising fee compression, the need for greater scale, as well as succession planning for a generation of older advisors.”
Harris Poll conducted an online survey from Feb. 15 to March 4 among 507 RIAs and 514 broker-dealers in the United States, and among 824 investors with household investable assets ranging from $100,000 to $5 million or more.