Data & Research January 30, 2013

National Acquiring Firms Keep Driving M&A Activity

Mergers and acquisitions for registered investment advisers (RIAs) saw a 30% rise in the total value of transactions year over year, according to Schwab.
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Industry-wide data about RIA mergers and acquisitions compiled by Schwab Advisor Services for year-end 2012 underscores the growing size and strength of this model, according to the firm.

The assets under management of the 45 deals completed in 2012 totaled $58.8 billion versus $43.9 billion for the 57 deals in 2011. 

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“The independent model has become a destination of choice for both advisers and high-net-worth investors alike, and the growth in the overall size of the deals we saw in 2012 is proof that this is a model that is growing and flourishing,”  said Jon Beatty, senior vice president, sales and relationship management, Schwab Advisor Services.

“It also points to a new inflection point for the industry, as RIAs appear to be actively considering M&A as a way to grow their business, and as a component of their succession planning efforts,” Beatty said. 

 National acquiring firms remained the dominant buyer category, finishing the year with 25 of the 45 total M&A deals. Meanwhile, the proportion of acquisitions by RIAs dropped in 2012, down from 44% of the total deals closed in 2011, to 20% of those completed in 2012.

“National acquiring firms are proving to be a good overall alternative for the growth of the industry, attractive to both advisors that are looking to join the move to independence or RIAs that are seeking to expand their footprint or execute a succession strategy,” Beatty said.

Activity among national acquiring firms remained high for the third consecutive quarter in 2012, representing 55% of the deals completed throughout the year.

Schwab Advisor Services produces its RIA mergers and acquisitions report quarterly.

Additional information is available here.  

Data & Research January 30, 2013

EBRI Challenges Study About Plan Tax Incentives

A study that found tax incentives for retirement savings in Denmark had no impact on increasing total savings may not be relevant to the U.S.
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According to a new report by the Employee Benefit Research Institute (EBRI), the two retirement systems have some similarities but also major differences—mainly that, unlike in the U.S., in Denmark the availability of employment-based, tax-deferred retirement plans is not tied to the tax-deferred status of the accounts. The study of Danish workers examined only the impact that changes in tax incentives for work place retirement plans might have on worker savings behaviors, but did not address how employers might react to changes in retirement savings tax incentives. 

The EBRI report notes recent surveys have found many American private-sector plan sponsors have expressed a desire to offer no plans at all in the absence of tax incentives for workers. If this happened, low-wage workers—who are generally less prepared for retirement—would suffer on several counts, said Sudipto Banerjee, EBRI research associate and co-author of the report.

“The Danish study provided insight into the savings behavior of Danes, conditioned by the culture and influences of public policies and programs of Denmark,” Banerjee said. “But the ‘success’ of workplace retirement plans in the United States depends on the behavior of two parties: workers who voluntarily elect to defer compensation and employers that sponsor and, in many cases, contribute to them.”

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(Cont’d…)

The authors of the study about Danish savings behaviors offered statistical evidence that changes in tax preferences for Danish work place retirement savings plans had virtually no effect on total savings of those affected by the change. (See “Tax Incentives Show Little Effect on Saving.”) This has drawn the attention of those interested in considering a modification of the long-standing tax preferences for employment-based retirement savings plans in the U.S, EBRI contends. 

“While the study of Danish savings behaviors presented the impact of tax-incentives and the ‘nudges’ of automatic mandatory savings as an ‘either/or’ solution, the optimal solution—certainly for a voluntary system such as the one currently in place in the U.S.—may well be a combination of the two,” noted Nevin Adams, co-director of the EBRI Center for Research on Retirement Income, and co-author of the report. 

The full report is published in the January 2013 EBRI Issue Notes, “Tax Preferences and Mandates: Is the Danish Savings Experience Relevant to America?” online at www.ebri.org.

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