Majority of RIAs Planning on M&A in the Next Five Years

The motivation is growth, particularly boosting assets and revenues, expertise and clients, and ensuring that a succession plan is in place.

Seventy-six percent of registered investment advisers (RIAs) plan on a merger and/or acquisition (M&A) in the next five years, according to FA Insight’s Securing Your Firm’s Future survey. Sixty-one percent plan to acquire a solo adviser, 47% plan to buy a book of business, 42% plan to acquire a firm with multiple advisers, and 36% plan to merge with another firm.

Growth is the key motivator for these transactions, with 49% saying they are looking to increase revenue growth and 46% looking to boost asset growth. Twenty-four percent are looking to add more clients, and 21% are looking to expand into new markets.

However, RIAs are also looking forward to the practicalities of M&A transactions; 37% expect to realize economies of scale, 30% want to ensure that they have a succession plan in place, 21% want to round out their expertise, and 13% want access to new service capabilities.

“For more than a decade, the industry was abuzz with talk of an impending M&A boom,” says Vanessa Oligino, director of business performance solutions at TD Ameritrade Institutional, parent company of FA Insights. “After a few false starts, it now appears the trend is finally about to take hold.”

While 76% of RIAs of all sizes are planning on an M&A in the next five years, that increases to 100% of firms generating $4 million to $8 million in revenue.

There were 77 M&A deals among financial advisers in 2016, down from an all-time high of 85 in 2015, according to FA Insights. By comparison, there were only 43 in 2014, 48 in 2013 and 38 in 2012.

“Over the years, we found that one in four breakaway brokers chooses to join an existing RIA, rather than go out on their own,” says Scott Collins, TD Ameritrade Institutional director of broker independence. “Regardless of whether an adviser is joining a new firm or selling their practice, the right deal can benefit clients and create a business that might otherwise have taken years to build organically.”

FA Insights conducted the online survey of 234 RIAs in December, and followed up with interviews and focus groups.