With an estimated 10,000 RIA firms and only 50 reported M&A deals, there’s a sense that something is wrong in a market that should see more consolidation. Fidelity gathered a group of investment bankers and acquirers with $200 billion of AUM to flesh out the issues.
Their conclusion: Deals have been slow because of the lack of transparency, an unclear sense of valuation (unlike the real estate market, for example) and a lack of succession planning by RIA firms. The group concluded that for more deals to take place, there needs to be:
• written processes;
• inclusion of spouses and attorneys early in the process;
• better methodology for valuing practices; and
• transition planning.
While most of the larger deals pursued by the group involve wealth management firms, plan advisors are seeing some consolidation as it becomes harder to service midsized and larger plans alone. Teams are building, some through acquisitions like Captrust, some through recruiting like Pensionmark, and others through organic team-building within wire houses and other firms.
With the graying of the advisor population, not thinking about succession planning is like clients not preparing for retirement.
