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For Wealth Managers, M&As Surge to New Record in 2019

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Mergers and acquisitions in the wealth management industry set another record in 2019 for both the number of deals and assets acquired, according to Fidelity Investments and Echelon Partners.

Fidelity reports 139 transactions for the 2019, representing $781.1 billion in assets, and increases of 43% and 38%, respectively from the year before. The 139 figure includes 127 RIA and 12 IBD acquisitions.

Echelon Partners reports 203 deals in 2019 representing $285 billion, excluding mega transactions above $20 billion.

Fidelity’s total AUM figure includes several deals in excess of $20 billion AUM, which Echelon also reports apparently outside its total AUM figure: Advisor Group’s acquisition of Ladenberg Thalmann ($181.1 billion AUM), Warburg Pincus’s acquisition of Kestra Financial ($77 billion AUM, according to Fidelity; $92 billion assets under administration, according to Echelon Partners) and Hub International’s acquisition of Global Retirement Partners ($40.1 billion AUM).

Fidelity and Echelon also mentioned Goldman Sachs’ acquisition of United Capital, with an estimated $25 billion in AUM and Echelon Partners also highlighted Schwab’s acquisition of TD Ameritrade for an estimated $26 billion, which Fidelity does not include along with breakaway deals from one wire house to another, which Echelon does.

The Schwab acquisition will provide an estimated additional $1.3 trillion in custodial assets, which more than one-third the total assets in the RIA custody market though only 11% of client assets in retail financial services, according to Echelon.

“After a year of steady acceleration in M&A activity, 2019 came to a close with record numbers in both total deals and AUM transacted,” said Scott Slater, M&A Specialist and VP of Practice Management & Consultant at Fidelity Clearing & Custody Solutions, in a statement. “Looking ahead to 2020, we expect the same driving forces – external capital, growing operating costs, the search for talent and the need to scale – to pave the way for another year of strong activity.”

2019 also saw a record number 33 deals involving RIAs with over $1 billion in assets, according to Fidelity. Such firms are “ideal platforms” for acquirers because they “possess the ideal mix of size and development,” including the pep staff, processes and technologies, infrastructure and most have over $3 million in EBITDA, which most professional investors require, according to Echelon Partners’ report.

Focus Financial led the list of firms with the highest number of deals in 2019 — a total of 18 — followed by Mercer Advisors (12), Wealth Enhancement (7) and EP Wealth, HighTower and Dynasty, all with six deals.

Some of these acquirers and others also changed hands, from one private equity firm to another. OakHill Capital acquired Mercer Advisors from Genstar, TA Associates’ purchased Wealth Enhancement Group from Lightyear Capital and Reverence Capital acquired Advisor Group from Lightyear Capital. Last week Envestnet announced it secured a minority stake in Dynasty.