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Got a Succession Plan? Advisor M&A Deals Hit New Record


Despite market volatility and geopolitical instability in the first half of 2022, wealth management firms closed a record number of merger and acquisition (M&A) deals, according to a report from Echelon Partners. Registered investment advisor (RIA) deals have ticked upward for years, with an aging advisor workforce and strong buyer appetite for new talent helping to drive the increase. Advisors should keep an eye on this continuing trend and what it means for succession planning. Here’s what advisors should know.

A New Record for Advisor M&A Deals

The first half of 2022 posted another record for mergers and acquisition activity among wealth managers, according to Echelon Partners’ “RIA M&A Deal Report” preview. Echelon Partners is a boutique investment bank focused on M&A and succession planning for the wealth and investment management industries.

“Transaction volume has remained high in the face of turbulent market conditions,” the report says.

Notably, the industry announced 181 deals during the first half of 2022, and Echelon predicts 308 total deals for 2022 under current market conditions, which would squeak by 2021’s total of 307.

“We continue to believe that RIA M&A is still in its early stages and that the key secular forces driving deal activity will supersede short- (and) medium-term macroeconomic headwinds,” said Barnaby Audsley, vice president at Echelon Partners, in an email to SmartAsset.

Strategic acquirers and consolidators continued to dominate the wealth management M&A space, announcing 46% of all transactions since the start of 2022, the report says. Direct private equity investments and large independent broker-dealers drove significant activity as well.

While the number of deals rose, average assets under management (AUM) per deal (excluding those with more than $20 billion in AUM) fell from last year’s record. In the first half of this year, the average AUM per deal hit $1.84 billion, down from 12.1% from 2021 levels.

“The number of larger transactions involving firms with more than $1 (billion) in AUM also declined,” the firm says.

What Is Driving Advisor Acquisitions?

Advisors making a deal. RIA M&A has reached a new record.

A number of factors have nudged up RIA M&A deals in recent years. Those trends include an aging advisor workforce, historically low interest rates, strong buyer appetite for fresh talent and asset growth, more recent concerns about a changing tax code and robust firm performance. Sellers have taken advantage of the cost efficiency an acquisition can offer. It can help scale costs and raze hurdles associated with compliance, technology and management. Independent advisors may view a sale as a clear path to growth and a way to plan for succession.

Meanwhile, buyers eye the benefits of talent and AUM growth involved in a purchase. “The industry is and will continue to be human-capital-intensive,” Audsley says. Although wealth technology solutions may increase productivity, “many firms see M&A as the most effective way to not only acquire assets but also talented advisors.”

How Advisors Can Take Advantage of Record M&A Deals

Independent advisors eyeing the possibilities presented by robust M&A activity can take steps to best position their firms for future acquisition.

Audsley recommends maximizing growth and scale from three sources:

  1. Increasing AUM from new and existing clients, or organic growth.
  2. Recruiting or acquiring other advisors’ businesses, or inorganic growth.
  3. Investment performance.

“During times of economic uncertainty, firms can set themselves apart as valuable acquisition targets by maximizing growth from sources one and two,” Audsley says. “Acquirers place a premium on organic growth, especially in times of market volatility.”

Bottom Line

Got a Succession Plan? Advisor M&A Deals Hit New Record

Despite economic headwinds, some experts are forecasting continued record-breaking activity in the advisor M&A space. Advisors should take note: Whether or not a firm elects to go ahead with a third-party sale, proper succession planning can ensure that clients and employees weather a transition in leadership and ownership as smoothly as possible.

Tips for Growing Your Financial Advisory Business

  • Let us be your organic growth partner. If you are looking to grow your financial advisory business, check out SmartAsset’s SmartAdvisor platform. We match certified financial advisors with right-fit clients across the U.S.
  • Expand your radius. SmartAsset’s recent survey shows that many advisors expect to continue meeting with clients remotely following COVID-19. Consider broadening your search and working with investors who are more comfortable with holding virtual meetings and/or spacing out in-person meetings.
  • Get more details on financial advisor succession planning. In SmartAsset’s recent survey of almost 500 financial advisors, we found the number of advisors with a succession plan has increased. Explore our findings on what types of succession plans they have in place.

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