Deals at five-year low, with just 18 so far this year, Schwab says

Mergers and acquisitions of RIA firms are running at the lowest levels since the first half of 2008, according to the latest survey of deals by Schwab Advisor Services. Just 18 transactions were completed in the first half, representing $15.4 billion in assets under management, according to data compiled by Schwab. During the first half of 2012, 25 deals totaling $36 billion in assets were completed, compared with 27 deals totaling $20 billion a year earlier.

Adding clients

Schwab tracks mergers and acquisitions of registered investment adviser firms with assets of more than $50 million. Financial advisers appear to be too busy adding clients and assets to pursue transactions this year, said Jonathan Beatty, senior vice president of sales and relationship management at Schwab Advisor Services. “We hear from a lot [of advisers] that they're very focused on growing their firms organically,” he said. RIA firms increased assets 13.3% last year, according to Schwab's separate benchmarking survey, released last month.

Market tail wind

The median firm had $572 million in assets. “The top third will have doubled assets in five years” by the end of 2014, Mr. Beatty said. That growth is being driven by firms executing strategic-growth plans, and “a bit of a tail wind from the markets,” he said. M&A activity could pick up as advisers implement succession plans. But “we haven't seen the catalyst from” succession planning yet — “not to the degree we thought we would,” Mr. Beatty said. Most advisers plan to do an internal succession rather than sell or merge. Of firms with $100 million to $1 billion in assets, 86% of advisers are looking at an internal handoff, Mr. Beatty said. But for those pursuing an acquisition or merger, access to capital shouldn't be a problem. Strategic acquirers such as aggregator firms and private-equity players are providing money, “and we also hear more [advisers] are finding lending facilities,” Mr. Beatty said. Schwab's benchmarking study found that of firms with $100 million to $1 billion in assets, 25% said that they are actively looking to acquire another firm.