Private-equity firms ramp up M&A in RIA industry, Charles Schwab report shows

They made up 26% of buyers in first half of 2016, up from 11% in the first half of 2015

Sep 13, 2016 @ 3:44 pm

By Christine Idzelis

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Private-equity firms are grabbing a larger portion of registered investment advisory firms up for sale.

They made up 26% of buyers in the first half of this year, rising from 11% in the first six months of 2015 and on pace to have the biggest showing for any year in the past decade, according to a Charles Schwab Corp. report released Tuesday on mergers and acquisitions in the RIA industry.

The total acquired assets in the RIA industry rose to $75 billion in the first half of the year, jumping 50% from the same period of 2015, the report shows. Transaction volume increased 41% to 52 deals.

“The activity is being driven by the fact that sellers have more options than ever in terms of the types of buyers out there,” Jonathan Beatty, senior vice president for sales and relationship management at Schwab Advisor Services, said by phone.

Private equity firms, which tend to look at larger deals, are being considered more frequently as potential buyers as they've created a more established track record over the past five years, he said.

The M&A research done by Schwab Advisor Services is primarily based on RIAs that focus on high-net-worth individuals and endowments, and have more than $50 million of assets.

While private-equity has increased their presence as buyers, RIA firms and strategic acquirers such as HighTower Advisors and Focus Financial Partners continued to dominate deal-making in the first half of this year, representing two-thirds of buyers, according to the report.

Wealth Enhancement Group, which is owned by private-equity firm Lightyear Capital, said in March that it was buying HHG & Co., a registered investment adviser in Connecticut that manages more than $1 billion of assets, to expand in the Northeast.

More recently, RIA firm Tiedemann Wealth Management said last month it was merging with Presidio Capital Advisors, a deal involving a combined $13 billion of assets. And United Capital, which acquires RIAs across the U.S., said this month that it purchased Westport Resources Management's private client group, which manages $373 million of assets tied to high-net-worth individuals.

“The level of M&A activity is the reflection of the success the overall industry is having,” said Mr. Beatty. “It's another proof point on the health and success of its business model.”

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