National firms driving RIA deals

In 2012, number of deals dropped but size increased

Jan 28, 2013 @ 2:05 pm

By Andrew Osterland

RIA, mergers & acquisitions
+ Zoom

National firms participated in more than half of mergers and acquisitions in the registered investment advisory industry last year, according to data compiled by Schwab Advisor Services, which also found that while the number of deals in 2012 declined from 2011, deal sizes increased dramatically.

Of the 45 deals involving RIAs in 2012, aggregating firms — or RIA partnerships, as they prefer to be called — accounted for 25 of them.

The three most prominent national firms are HighTower Advisors LLC, Focus Financial Partners LLC and United Capital Financial Advisers LLC, which acquired Paragon Investment Management this month.

“National acquiring firms are proving to be a good overall alternative for the growth of the industry,” Jon Beatty, senior vice president of sales and relationship management at Schwab Advisor Services, said in a statement. “They are attractive to both advisers that are looking to join the move to independence, or RIAs that are seeking to expand their footprint or execute a succession strategy.”

Twelve more deals were executed in 2011, but the average firm size, based on assets under management, increased dramatically last year to $1.3 billion, from $798 million in 2011. The total assets under management held by firms involved in deals last year was $58.8 billion, up from $43.9 billion in 2011.

Shirl Penney, chief executive of Dynasty Financial Partners LLC, which added 12 adviser teams to its RIA service platform last year, said national firms have the resources and people to execute transactions.

“The larger firms have people dedicated to getting deals done, while RIAs are focused on serving their clients,” Mr. Penney said. Dynasty, which provides a wide range of services to RIA firms, does not invest in those firms but does help finance deals between them.

Mr. Penney said he thinks Schwab missed a substantial number of mergers between smaller firms that might not have been reported in the media. He also expects that factors such as the aging adviser population, the need for succession planning and the increasing complexity of running an advisory practice, will drive more deals, with larger firms continuing to have an advantage over their smaller counterparts.

“Scale and size matter in our industry,” Mr. Penney said. “There's a growing supply of financial advisers looking for a succession plan and there are still plenty of advisers going independent who don't want to run their own business. These are good trends for our industry.”

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Get creative: How to boost your message to prospects

Communicating with prospects can be difficult. What are some creative ways that you can enhance your messaging? Bob Huntley of Wise Counsel Wealth Management offers some ideas.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

How does your advisory firm stack up?

Comparing a firm's pay to the competition can point out vast flaws.

10 signs your client is cheating on you

Sure signs that clients may be on the way out the door.

Morgan Stanley sees slower fee-based asset flows on fiduciary rule delay

Flows to advisory accounts, while still higher than the start of 2016, dropped off more than 20% from Q2 and were the lowest in a year.

How adviser salaries stack up to other jobs

Median compensation hovers just under $100,000 on the low end and reaches nearly $300,000 for bosses.

Finra ranking brokers in effort to crack down on industry's bad apples

All 634.403 reps have been ranked based on factors such as prior regulatory disclosures, disciplinary actions and employment history.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print