2023 RIA M&A off to sluggish start

While 2022 was another banner year for deal-making in the ever hot market to acquire registered investment advisors, this year has gotten off to a less than stellar beginning as buyers and sellers weigh rising interest rates and high valuations for firms when doing the math on potential deals.

Indeed, the second half of January saw RIA mergers and acquisitions slow down sharply from the first half of the month, according to a report this week from Fidelity.

"January 2023 seems to be signaling a shift in the RIA deal-making market," Laura Delaney, Fidelity’s vice president of practice management and consulting, said in a statement. "January announcements included December spill-over, and activity was subdued after January 12, yielding only three RIA transactions."

Smaller firms continued to be involved in deals, Fidelity noted. Deal size in January was down 36% compared to January 2022, according to Fidelity, but deals involving RIA firms with less than $1 billion in assets continued, comprising 65% of the month’s activity.

Indeed, 20 out of the 23 transactions were announced within the first 12 days of last month, in part reflecting December deals being announced in January, and the $21.9 billion in total assets involved was a 36% year-over-year decrease, according to Fidelity.

While 2022 wound up with a record 229 RIA transactions, a 7% increase over 2021, the slowdown seen in the second half of last month started to show up during the final three months of last year.

According to Fidelity, the fourth quarter saw a 46% decline in RIA assets involved in deals compared to the third quarter, and a 55% decline in assets compared to the same period a year earlier.

On the broker-dealer side of the financial advice industry, January saw one deal, with Securian Financial Group announcing the sale of its $24.8 billion retail business to Cetera Financial Group.