The data comes from Schwab Advisor Transition Services, a unit of Charles Schwab that works with advisers to set growth strategies and plan exits from a business line or channel. The firm says it observed 54 completed merger and acquisition (M&A) transactions in the RIA space last year, according to industry-wide data collected and analyzed by Schwab researchers. The deals totaled approximately $43.6 billion in assets under management (AUM).
Charles Schwab says RIAs emerged as the leading buyer category in 2013, representing about 44% of overall deal activity for the full year. Financial firms devoted to strategic acquisitions, which led the buyer category in 2012, represented 32 % of transactions in 2013, down from 53% in the year before. Across all deal types, Schwab finds there was a 20% increase in transaction activity in 2013 compared with 2012, although overall acquired AUM decreased by 26% from 2012.
Schwab finds the pace of deals was not steady in 2013; the second half of the year closed with 36 completed deals totaling $28.2 billion in AUM, which doubled the pace of 18 deals completed in the first half of 2013.
“We saw a healthy, consistent amount of M&A activity in the RIA sector last year as the independent model continued to be a destination of choice for advisers and more firms looked to fast track their growth,” explains Jonathan Beatty, senior vice president of sales and relationship management, Schwab Advisor Services. “There was an identifiable trend last year during the second half of 2013 in which larger firms acquired smaller and mid-size firms, an indication that firms across the spectrum looked to M&A as a means to quickly expand their footprint.”
According to Schwab’s data, the second half of 2013 showed smaller RIAs employing M&A as a growth strategy. The trend, Schwab says, reflects findings also seen its 2013 RIA Benchmarking Study, in which 25% of firms with between $100 million and $250 million in AUM reported to be actively looking to acquire another firm.
But not all the merger activity involved smaller advisory firms purchasing competitors or partners, the data shows, with substantial acquisition activity coming from both larger firms and new players looking to enter the independent advisory space. For instance, one large deal announced in early 2014 between RCS Capital Corporation (RCAP) and Cetera Financial Group, valued at $1.15 billion, expanded RCAP’s relatively new and small adviser footprint by some 6,600 new representatives and added $145 billion in AUM. RCAP says the acquisition puts it in position to be the second- or third-largest independent advisory network in the U.S., based on number of advisers.