RIA industry tests waters on 'merger of equals' transactions

M&A deals in the RIA industry typically involve larger firms buying smaller practices, but dealmakers are viewing two recent combinations as a potential window into more mergers of equals to come. 

Chicago-based $70 billion mega-RIA Cresset announced its “strategic combination" on Aug. 18 with $124 billion institutional consulting firm Monticello Associates. Monticello’s entire team will join Cresset as the combined company approaches $200 billion in assets. Another significant merger came earlier this week with Cleveland-based registered investment advisor MAI Capital Management doubling its size through buying Evoke Advisors, a Los Angeles-based firm focused on ultra-high-net-worth services. 

“We've seen two so far, and it feels like something that the industry has been talking about for years,” Jessica Polito, founder of M&A advisory Turkey Hill Management, told InvestmentNews. “I feel like there have been rumors swirling about the largest firms in the industry merging together, which feels harder to accomplish.”

The deal for Evoke stands as one of this year’s largest RIA-to-RIA transactions, bringing MAI to about $60 billion in AUM. Firms having distinct specialities to where a service functionality is being added is key to efficient mergers of equals, which Polito sees having played out in the recent transactions led by Cresset and MAI.

“The two mergers that have been announced so far are interesting because they don't have a lot in common,” said Polito. “You [Cresset] merge with an institutional consulting firm, you don't maybe have to integrate as many systems and there is more room at the C-suite level for people to keep their jobs because they're doing different things. Kind of the same thing with MAI and Evoke, they're adding two different business lines together instead of merging two existing ones into one.”

Creative Planning CEO Peter Mallouk said at a recent Echelon Partners’ conference that “you will see two big firms get together in the future,” according to WealthManagement.com. Mallouk was referring to a potential mega merger between two of the industry’s largest RIAs, but added that he personally has no interest in his $370 billion Creative Planning being a part of that. 

Modern Wealth Management’s president Jason Gordo told InvestmentNews he believes “you'll see many more mergers slash acquisitions of similar size firms in the future,” and he expects the MAI-Evoke deal to be “the first of many to come” between RIAs of similar scale. Gordo’s RIA manages roughly $8.5 billion in assets and has made 17 acquisitions since its launch in 2023.

“You'll see a $10 billion [RIA] buy a $10 billion, a $20 billion buy a $20 billion, a $20 billion buy a $10 $billion, a $20 billion buy a $15 billion, a $30 or $40 billion buy a $15 or $20 billion,” said Gordo. “I always say if you have a $500 million RIA, if you go and transact with a $40 or $50 billion RIA, what impact did you make on that business? It's equivalent to throwing a bucket of water in the Pacific Ocean. It just doesn't matter.”