Merger and acquisition deals in the RIA industry predicted to remain strong in 2024 – Financial Planning
According to a recent survey conducted by consulting and valuation firm DeVoe & Co., experts in the field of dealmaking anticipate a surge in mergers and acquisitions within the Registered Investment Advisor (RIA) sector. Despite some reservations following past experiences, many midsize firms are expected to proceed with acquisitions.
Results from the “Annual RIA and M&A Outlook” survey, which polled over 100 executives, principals, or owners of RIAs managing between $100 million to over $10 billion in assets, revealed that 42% of respondents are optimistic about an increase in dealmaking this year. This figure is more than double the 18% reported in a similar survey from 2023. While the outlook is positive overall, not all firms share the same level of enthusiasm.
Larger practices, managing $1 billion or more in assets, are notably more inclined towards making acquisitions in the upcoming year. A significant 73% of those falling into this category expect to acquire at least one firm, compared to 75% in the previous survey. However, expectations have dipped amongst firms with assets ranging from $100 million to $1 billion, with only 42% foreseeing acquisitions, down from 52% in the prior year.
The decline among midsize firms may be attributed to the challenges faced during previous M&A deals, prompting a shift towards alternative methods to achieve their goals. Furthermore, the complexity and investments required to execute acquisitions have become more apparent, leading some firms to reassess their strategies.
Consolidation within the RIA industry has been a prominent trend in recent years, driven by large firms, often backed by private equity, looking to expand their practices. According to a report by Cerulli, industry consolidators had $1.5 trillion in assets under management in 2023, accounting for 18% of the industry’s total asset share, up 10 percentage points since 2018.
Jeff Nash, CEO of Bridgemark Strategies, emphasized that the pace of M&A deals is likely to remain brisk this year. Buyers are now considering the unique services that sellers offer, such as financial planning and tax strategies, indicating a shift towards more tailored transactions rather than a focus solely on financial metrics.
2024 proved to be a remarkable year for M&A deals in the RIA sector, with a record high of 272 transactions reported by DeVoe, surpassing the previous peak of 264 in 2022. Fidelity Investments also documented a record number of deals in 2024, totaling 233, involving nearly $670 billion in client assets, marking a substantial increase year over year.
The intensifying competition for acquisitions, particularly driven by private equity buyers, has propelled prices upwards. Despite escalating purchase prices, the industry’s long-term outlook remains positive, with high profit margins and robust revenue growth sustaining firms. Leading acquirers in 2024 were Focus Financial and its affiliates, responsible for 21 deals, signaling a continuation of the consolidation trend within the RIA industry.
