Fidelity M&A Report Counts Fewer, Far Bigger Deals Among RIAs and IBDs

Fidelity’s 2019 Wealth Management M&A Transaction Report shows there were 23 RIA deals inked during the year worth $1 billion or more.  

Fidelity has released its 2018 Wealth Management M&A Transaction Report, analyzing mergers and acquisitions (M&A) activity in the space for the full year.

According to the report, 2018 transaction numbers were down compared with 2017 figures—though assets in motion were up. In total, Fidelity says there were 95 transactions totaling $563.4 billion in 2018.

This figure is down 13% from 2017, but that number hides the fact that the assets transacted more than doubled—up from 2017’s $265.5 billion—across the registered investment adviser (RIA) and independent broker/dealer (IBD) channels. At year’s end, RIAs accounted for 87 of the 95 wealth management transactions.

“While the number of transactions in the RIA channel was down 16% from 2017, the total AUM transacted increased by 10% to $109.4 billion,” the report says. “There were 23 RIA deals worth $1B and above, and while they represent only 26% of the channel’s activity, they represent 76% of its transacted AUM.”

Fidelity says the IBD channel had eight transactions, up from three in 2017 and representing $454 billion. Fidelity calls this “a dramatic” 174% jump from 2017’s $166 billion.

Matching findings from the last few years, Fidelity says “strategic acquirer models” have come to the fore in the RIA space. They are increasingly capitalized by private equity and continue to drive the majority of M&A activity. Indeed, Fidelity says strategic acquirers accounted for 68% of RIA buyers in 2018.

“Overall, but particularly in the RIA space, 2018 was a seller’s market,” Fidelity says. “It remains to be seen whether the market’s volatility and recent decline will shift to again favor well-capitalized buyers, and how that would impact the valuations sellers have enjoyed of late.”

According to Fidelity, firms will “undoubtedly continue to face today’s core challenges of building a sustainable business, competing against stronger platforms with greater scale, addressing the need for talent, and staying ahead of new pricing pressures.”

“These challenges, combined with new and increasing sources of capital, will likely continue to drive concentration and convergence in and between channels in the independent adviser space in 2019,” the report concludes.