Registered investment advisory firms should learn some new terms and M&A dynamics that reflect a much different market from only a few years ago, according to a new study.
The concepts include “mini-mega merger,” an “equity-culture revolution” and the “race to institutionalize,” management consulting and transaction advisory firm Advisor Growth Strategies said earlier this month in its annual RIA M&A report about the key themes shaping negotiations and deals. The below slideshow highlights some of the most important findings.
Unlike other wealth management M&A studies that primarily focus on transaction volume (which dropped off slightly last year with brighter prospects for a bigger flow in 2024), the report homes in on RIA valuations, what size firms are the most popular to acquire, and increasingly important deal factors that may get lost in the discussion. As the largest RIAs reach into the hundreds of billions of dollars in assets under management, they’re trying to add more services and grow even bigger, said Advisor Growth Principal Brandon Kawal.
“We just didn’t have independent RIAs even five years ago that were nearly this size and growing at this rate either organically or inorganically,” Kawal said in an interview. “It’s a national and, at some point, probably international race to go really deep into markets.”
For the sixth year, the report drew a sponsor in BlackRock, which carries cachet with financial advisors as the world’s largest asset manager. (Fidelity Investments’ monthly wealth management M&A reports also highlight how deals have captured industry giants’ attention.)
“While not all advisors choose to be buyers or sellers, all advisors carry the responsibility to their clients, team members and themselves to consider their options or develop their own perspective on organic growth,” Liz Koehler, the head of BlackRock’s U.S. wealth advisor engagement team, wrote in a message included in the report.
And one of the main lessons to glean from Advisor Growth’s analysis adds to the business reasons for investing in the next generation of advisors, which is something that many of the biggest dealmakers are already doing. For example, Plymouth, Minnesota-based Wealth Enhancement Group has developed succession planning assistance, ramped up its advisor recruiting pipeline and bulked up training through the “Wealth Enhancement Group University” program, according to Kris Carroll, a managing director for the firm’s Carolinas region.
“We’re really looking at multiple paths to address what we think of as this shortage of next-generation talent,” Carroll said in an interview.
For more on the new trends and terminology driving deals this year, scroll down the slideshow. To see a roundup of five important deals shaping the industry, click here. And to get a look at the biggest transactions last year involving independent brokerages, follow this link.
Note: All of the below data and insights come from Advisor Growth Strategies’ 2024 version of “The RIA Deal Room” report, which is entitled “Life After the Gold Rush.” Find Financial Planning’s coverage of last year’s edition at this link.