Private equity has been largely responsible for driving lucrative M&A trends in the RIA space, but the industry is gearing up for another wave of capital from institutional investors beyond PE.
Wealth management consultancy MarshBerry says there were 83 M&A transactions announced among RIAs in the second quarter of this year, which is the highest second quarter amount of any year on record according to the firm. Among those announced deals was the BlackRock-owned private credit firm HPS Investment Partners investing in Lido Advisors, a mega-RIA with more than $30 billion in assets under management.
“I don’t think anyone should be surprised to see an asset manager like BlackRock want to be invested in the RIA industry,” Ryan Halls, co-founder of the sell-side M&A advisory Hue Partners, told InvestmentNews. “While traditional PE [private equity] has been active in the space for years, all professional investors have taken note of the attractive fundamentals of our industry. Whether it is PE, asset managers, pension funds, or sovereign wealth funds, I expect more and more professional investors to pursue exposure to fiduciary advice.”
Carson Group, the $42 billion mega-RIA backed by private equity giant Bain Capital, is already contemplating how newcoming buyers beyond PE will impact the RIA M&A market. Carson Group has been among the most active RIAs in M&A so far this year with eight announced transactions through Q2.
“So much of M&A has been focused on the larger aggregators or integrators finding mostly smaller partners that are looking for both succession and growth opportunities,” said Michael Belluomini, Carson’s SVP of M&A. “What happens if the larger broker-dealers take a more active stance? What happens if the asset managers or fund manufacturers, or the custodians decide to get into the business? I think if any of those things happen, you see prices stay steady, if not increase with increased competition.”
State-owned sovereign wealth funds such as Abu Dhabi’s Mubadala Capital invested in CI Financial, taking the Canadian investment management firm private in an $8.7 billion deal. GIC, the Singaporean sovereign wealth fund, has invested across the financial advice space both the $72 billion mega-RIA Mercer and the challenger RIA custodian firm Altruist.
“I think having GIC in the mix and having a true long term capital solution in the ownership group has been quite strategic as part of our last recapitalization. They play a little bit different role than the traditional private equity investment,” Mercer’s CEO Dave Welling told InvestmentNews.
GIC’s investment in Mercer was announced in June 2024 as the sovereign wealth fund joined Mercer’s cap table alongside existing private equity firms Oak Hill Capital, Genstar Capital, and Altas Partners.
“Where they're structurally a little bit different is they are true long term capital,” Welling said of GIC. “They are a decades-long capital investor, and so they play structurally a different role within our strategic ownership group. Whereas private equity, I think you could cast a medium-term capital that you know at some point might need or want some liquidity.”
Ric Edelman, who founded Edelman Financial in 1986 that now operates as one of the industry’s largest RIAs, added that “we're seeing massive interest from not only sovereign wealth funds around the world, but also major financial services companies elsewhere, who have a major presence in South America, Europe or Asia,” who seek to enter the US financial advisor market.
“You will start to see M&A deals among the very largest firms. You will soon see a trillion-dollar RIA as a result of this, and it will represent a significant change in the way firms operate,” said Edelman. “They'll operate more professionally as talented corporate executives are brought into these companies to manage them, you'll see a broader array of products and services made available to investors, which will improve the client experience.”
At nearly $300 billion, the private equity-backed Edelman Financial Engines stands as the largest RIA in the US. But the firm’s founder foresees a trillion-dollar RIA valuation in the not so distant future.
“The industry was invented over the past 40 years, I was part of that first generation,” Edelman said. “It is now giving way to the next generation, and it will be substantially larger and rather different from what was originally built.”
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