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.
The Dynasty Financial partner firm's latest deal in Connecticut adds roughly $600 million in client assets.
The giant broker dealer and RIA overseeing roughly $554 billion in AUA has appointed a Merrill and BofA alum to support advisor growth.
Firm's CEO is confident SEC can approve without legislation.
The group led by a 37-year industry veteran brings $470 million in assets to the Philadelphia-based broker dealer.
The Atlanta, Georgia-based national wealth firm revealed its new PE partner as prior backers Wealth Partners Capital Group and HGGC's Aspire Holdings exited their investments.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
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.
