Consolidation Pressures

While various sectors of the U.S. economy face consolidation pressures, the registered investment adviser (RIA) industry is in the eye of the merger and acquisition (M&A) storm. According to Fidelity Investments’ year-end “Wealth Management M&A Transaction Report,” 2019 proved to be a record year for both RIAs and independent broker/dealers (B/Ds) when it came to M&A activity. The firm reports that, across the RIA and independent B/D channels, there were 139 transactions, representing $781.1 billion—amounting to increases of 43% and 38% for the two channels respectively, compared with full-year 2018.

Fidelity says, “The pressure for financial services firms to scale and the pervasiveness of prepared buyers who hold significant capital in a low interest rate environment” continue to fuel record transaction activity. Underscoring the aggressive activities of serial and strategic acquirers, 54% of RIA transactions were completed by the 10 most active firms, accounting for 68 deals in total.

As 2020 unfolds, Fidelity expects the same forces—external capital, growing operating costs, the search for talent and the need for scale—to pave the way for another year of strong activity.