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."
New Morgan Stanley research shows retirement planning is a key area where advice is required.
ASA reacts as regulator drops no-deny policy, freeing firms and individuals to publicly dispute allegations after reaching settlements.
Joel Frank allegedly sold more than $39 million worth of investments in the Equilus Funds to more than 90 investors,
The Charity Parity Act would eliminate a costly IRA rollover requirement that blocks direct charitable transfers from workplace retirement plans.
A last-minute court filing ends a case against the federal tax-collecting agency that had drawn unprecedented conflict-of-interest questions from Democratic critics.
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline
