Biden tax hike could boost RIA M&A: Rudy Adolf

Biden tax hike could boost RIA M&A: Rudy Adolf
President Joe Biden is considering a proposal to almost doubling the capital gains tax rate for wealthy individuals to 39.6%. The looming increase could add urgency to the market.
MAY 06, 2021

The looming reality of the Biden administration raising capital gains taxes could only pour gasoline on the already sizzling market of registered investment advisers looking for mergers and acquisitions, according to Rudy Adolf, founder and CEO of Focus Financial Partners Inc.

President Joe Biden is considering a proposal to almost double the capital gains tax rate for wealthy individuals, to 39.6%, to help pay for a raft of social spending that addresses long-standing inequality, according to people familiar with the proposal.

Many in the financial advice industry have said that, in the near term, a looming capital gains tax hike could add urgency to the market and spur some financial advisers to sell their practices to avoid higher taxes.

“This is obviously a very complex question because it has so many facets,” Adolf said Thursday morning during a conference call with analysts to discuss the firm’s first quarter earnings.

“In the short term, clearly, we do believe it will have an accelerating impact on our M&A activity, not dramatically but still meaningfully,” Adolf said. “In so many discussions we are having, quite frankly, this is an important subject.

“Medium term it will turn more into a headwind for the wealth management business,” he said. With a tax hike on capital gains, the government takes a bigger bite of clients' wealth, he said.

“For sure it will have some impact on what we are managing,” Adolf said. “However, this probably is offset by the [clients'] need for high-quality advice.”  

There appears to be no stopping the current RIA M&A craze.

The 76 RIA deals announced during the first three months of 2021 broke a record set in the final three months of last year, when 69 deals were announced. And that fourth-quarter record had eclipsed the record 55 deals in the third quarter, according to Echelon Partners.

Focus Financial reported total revenues over the first quarter of 2021 of $394.2 million, or 16.9% growth year over year. The majority of the growth was driven by higher wealth management fees, which included the effect of mergers completed by partner firms, the company said.

Latest News

Advisor moves: NY-based Coastline wealth adds three teams with over $430M in assets
Advisor moves: NY-based Coastline wealth adds three teams with over $430M in assets

Raymond James also lured another ex-Edward Jones advisor in South Carolina, while LPL welcomed a mother-and-son team from Edward Jones and Thrivent.

Fintech bytes: Vestwell comes through for underserved savers with multilingual support
Fintech bytes: Vestwell comes through for underserved savers with multilingual support

MyVest and Vestmark have also unveiled strategic partnerships aimed at helping advisors and RIAs bring personalization to more clients.

UBS profit beats estimates as Ermotti sees brighter outlook
UBS profit beats estimates as Ermotti sees brighter outlook

Wealth management unit sees inflows of $23 billion.

Evercore to buy advisory firm Robey Warshaw for $196 million
Evercore to buy advisory firm Robey Warshaw for $196 million

Deal will give US investment bank a foothold in lucrative European market.

Gates and Buffett’s Giving Pledge is 15 years old, but many signatories are richer than ever
Gates and Buffett’s Giving Pledge is 15 years old, but many signatories are richer than ever

New report examines the impact that the initiative has had on philanthropy.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.