In the face of headwinds such as high interest rates and pricey valuations, mergers and acquisitions of registered investment advisors still remains strong and is on a projected pace to be the second best year for RIA transactions on record, according to a new report by Echelon Partners, the 2Q24 RIA M&A Deal Report.
Echelon estimated that 332 RIA transactions will be completed this year in the new report; if that holds true, this year would be the second best year for mergers and acquisitions in the last half-dozen years and second only to 2022, when 341 deals were completed.
The three months ending in June saw 75 RIA transaction, compared to 65 in the same time last year. The second quarter saw significant deals, as well.
Advent International and the Abu Dhabi Investment Authority in June invested between $2.5 billion to $3 billion for a minority stake in Fisher Investments. Another notable transaction was the proposed merger in May of Focus Financial Partners firms Buckingham Wealth and The Colony Group, creating a $115 billion platform.
While the 75 transaction over the three months ending in June "is a lower total than those of the last three quarters, it is somewhat expected as [the second quarter] is historically the least active period," according to the report. "There are key signs for optimism: [this year's second quarter] was the second most active second quarter in the past five years and the annualized [first half of this year] deal total puts the industry on pace to exceed 332 total transactions for the full year, an increase of 3.4% relative to 2023."
Meanwhile, in the second quarter, "strategic acquirers," meaning RIAs, and "financial acquirers," primarily private equity firms, announced 84% and 16% of the quarter’s total deals, respectively, or a near mirror of the first quarter of the year.
"We're seeing more deals but generally smaller deals," said Larry Roth, managing partner at RLR Strategic Partners. "The Fisher Investments' deal and the few other mega deals look like an aberration."
"The market for the smaller RIAs is strong for a variety of reasons," Roth added. "RIAs are continuing to grow due to the rising stock market and their margins continue to improve because of generally little downward pressure on fees."
"The big theme is that the industry is still in fourth inning of the consolidation ball game," said Pete Nesvold, partner at Republic Capital Group. "And the number of new RIAs is actually still increasing."
"One interesting issue is the renewed focus on organic growth of assets at RIAs," Nesvold said. "In the past, the market hasn't really differentiated a firm's org increase in assets, its acquisition of assets and market growth. If an RIA firm right now can't show organic growth, they are seeing more price sensitivity in how they are valued."
A $141M judgment and a federal asset freeze collide over one shrinking pool
The firm's CFO and EVP of Wealth Management Solutions are the latest executives to exit the broker-dealer.
Clients are saying they would consider switching advisors if another professional offered estate planning services, according to a new Trust & Will survey.
CEO Laurel Taylor says the fintech's composable AI stack helps workers optimize dollars across Trump Accounts, 529s, 401(k)s, and other employee benefits.
The bank has swiped three private banking veterans from BNY as the city climbs the ranks of America's fastest-growing wealth hubs.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
