If your RIA is mid-sized with strong fundamentals, PE firms may have you in their sights

Private equity firms are shifting their sights in the wealth management space, zeroing in on mid-sized RIA firms as new growth targets, according to new research.

While the idea of PE investment or joining a PE-backed firm may make some advisors uncomfortable – something Modern Wealth president Jason Gordo recently told InvestmentNews is often due to misconceptions – it’s likely that successful mid-sized RIAs may attract the attention of PE firms.  

That’s a key finding from AdvizorPro’s new survey which discovered that, while industry-wide AUM swelled 14% to $6 trillion this year, the average funds overseen by individual firms actually declined, and while PE firms largely funneled capital into massive RIA aggregators and headline-grabbing platforms over the past decade, they’re now increasingly turning to smaller, regional firms with scalable potential.

AdvizorPro founder and CEO, Michael Magnan, told InvestmentNews that private equity is moving downstream because the mega-aggregator play is crowded and expensive.

“There’s an extremely long tail in RIA AUM, and that’s where the opportunity lies,” he says. “Mid-sized RIAs still have loyal client bases, professional leadership, and room to grow without the inflated multiples at the top.”

Over-sized influence

Although PE-backed RIAs still represent fewer than 4% of all firms, their market influence is disproportionate, accounting for roughly a quarter of industry assets. The number of sub-$1 billion firms with private equity partners is rising quickly, hitting 81 this year compared to 62 in 2024.

Magnan notes that private equity investment is lifting the valuation of these mid-sized firms, closing the gap with the larger cohort.

“Our research shows there is a growing opportunity for them to remain standalone platforms or be absorbed by a larger PE-backed RIA as we see regularly,” he says. “In the next 2–3 years, well-run firms with clean financials and growth paths should expect growing multiples.”

There is a risk, with many lower-AUM RIAs lacking proven leadership, established brands, or scalable operations. But Magnan says that that’s also an opportunity which is less about financial engineering and more about building stronger businesses.

“Investing here is largely a bet on the continued growth of the RIA industry itself—a rising tide lifts all ships,” he says. “Diligence can be trickier, but decisions move faster. As more PE chases smaller RIAs, risks multiply: crowded deal flow, heavier integration lift, and client-retention challenges. If too many buyers pile in, returns will compress.”

PE booster?

The AdvizorPro research reveals a 16% increase in the number of PE-backed RIAs, now totaling 295, with average AUM down slightly from $2.45 billion to $2.31 billion.

It also finds faster growth rates among PE-backed firms, with a three-year CAGR of 30.7% compared to 13.9% for their peers. But Magnan says that, while PE is “clearly an accelerant” it’s not possible to break out how much of the growth is organic versus inorganic.

“The dollars enable M&A, professionalize deal execution, and free up resources for marketing and advisor recruiting. By contrast, many non-PE-backed RIAs are ‘lifestyle’ practices that aren’t focused on growth, which drags down the peer group’s averages,” he says.

As for what the future trajectory of private equity investment in RIAs might be, Magnan believes there will be two tracks.

“Some mid-sized RIAs will be rolled into mega-platforms, while others evolve into sustainable regional consolidators as boutique PE interest grows,” he says. “The data shows growing interest from PE shops that are not household names. The next wave may not be just bigger aggregators, but a new class of $10–$25B regional platforms.”