RIA mergers and acquisitions set another record in 2017

More smaller transactions brought the average size deal down to $881 million from just over $1 billion in 2016

Jan 22, 2018 @ 5:00 am

By Jeff Benjamin

Merger and acquisition activity in the registered investment adviser space accounted for 153 deals in 2017, representing a fourth consecutive record year, according to the latest research from DeVoe & Co.

The year's M&A activity, which started with 46 deals in the first quarter and gradually slowed to 33 in the final quarter, was impacted by two major factors, according to David DeVoe, the research firm's managing director.

Mr. DeVoe said M&Aactivity was heavily influenced by delays in the Department of Labor's fiduciary rule, and the late-year decision by Morgan Stanley and UBS to abandon the broker protocol agreement for recruiting.

The "wave of activity stopped abruptly" during the second half of the year when the Trump Administration delayed the implementation of the DOL rule and left its future in question, Mr. DeVoe said.

Regarding the move away from broker protocol, Mr. DeVoe said, "We have only begun to see the impact" of a policy change that could make it more difficult for advisers to leave brokerage firms.

The bulk of the RIA transactions were made by consolidator firms (50%). RIA acquirers, meanwhile, saw their share fall from 46% in 2015 to 38% in 2016 to 31% last year.

But, while RIA buyers have made up a shrinking percentage of all deals over the past three years, and consolidators have remained steady, banks have stepped up to 8%, from 3% of transactions during each of the prior two years.

One area that shows the evolution of a maturing RIA space is an increase in so-called sub-acquisition deals, represented by acquisitions by consolidator-firm affiliates.

Last year there were 17 such deals, down slightly from 19 in 2016. But during the first two weeks of January, Mr. DeVoe counted at least five sub-acquisition deals, which shows promise for more 2018 activity.

A surge in smaller-sized deals pulled down the average deal size to $881 million in assets under management, down from an average of just over $1 billion in 2016.

0
Comments

What do you think?

View comments

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

Latest news & opinion

Target-date fund design may be wrong for retirees

Researchers suggest the funds don't adequately hedge against sequence-of-returns risk in retirement.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print