A new report outlines what large RIA “Acquirers” look for in assessing acquisitions.
Fidelity’s Wealth Management M&A Transaction Report notes four attributes that firms typically look for in their assessment of “fit”:
- Client experience design and execution. The report notes that large RIA Acquirers are very attentive to the client experience and want to understand a firm’s process, touch points and contact frequency, and channels used (including the role of digital).
- Similar investment philosophy and capabilities, such as comprehensive financial planning.
- Common philosophy on how to treat employees. According to the report’s authors, this can include philosophies regarding compensation as well as criteria for advancement within the organization. As part of this assessment, the report says they’re also looking to ensure future employees possess the right skill sets (e.g., technical capabilities, emotional intelligence, leadership) to complement or fill any gaps in their organization.
- The right chemistry. Acquirers look for compatible personalities among all partners and associates that are part of the deal. According to the report, investing the time to have conversations with all stakeholders can help validate whether the chemistry is right and develop a clear understanding of future roles.
The report also outlines six characteristics of the large RIA Acquirer model in their approach to M&A:
- Seek to boost growth and increase scale
- Access capital through multiple sources
- Take a strategic and deliberate approach to pursuing targets
- Place a high importance on creating a well-defined shared vision
- Believe deal terms are instrumental when finalizing price
- Make integration a priority and competitive differentiator
The report focuses on large RIA Acquirers, defined as wealth management firms with $1 billion+ in assets, strong management and track records of executing well-defined acquisition strategies, firms that the report says have driven 26% of all M&A activity in 2016. The report cites 2016 M&A activity as involving 104 transactions representing nearly $67.1 billion in AUM.
Acquisition Goals
When it comes to defining acquisition goals, the report notes that large RIA Acquirers typically focus on three priorities:
- Expanding geographically with the intent of efficiently building a presence and brand in a new and distant market
- Acquiring next-gen talent, who can potentially help supercharge organic growth by providing an array of technical and client-facing skills and leadership potential
- Building density in markets where the acquirer has an existing presence in order to increase scale and gain efficiencies and elevate their brand profile
