Data & Research July 10, 2023

Wealth Management M&A Dips Slightly in Q2

The second quarter decline mimics similar drops in 2020 and 2022, even as the industry went on to strong dealmaking for the full calendar year.

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Wealth management mergers and acquisitions activity marginally declined in the second quarter of 2023, mirroring a Q2 trend from 2020 through 2022, according to Echelon Partners’ “2Q23 RIA M&A Deal Report.”

There were 65 transactions in the wealth management sector during 2Q 2023, a moderate decline compared to previous quarters, according to the M&A consultancy.

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“In 2Q23, quarterly deal volume fell to its lowest point since 2Q [2021],” the report stated. “This is partially driven by macroeconomic uncertainty affecting all industries but is also largely due to the seasonality in wealth management M&A activity. Buyers and sellers tend to close more deals at the beginning and end of the year which leads to a seasonality in deal announcements.”

The overall M&A transaction value for all industries in the United States decreased by 44% in the first half of 2023 compared to the first half in 2022, based on information from the S&P Global. However, during the same time frame, the wealth management industry experienced a notable increase of 38.4% in total transacted assets under management, a proxy for transaction value, Echelon noted.

Echelon found the increase in transacted AUM encouraging, considering the higher cost of capital and the activity seen in other industries. The overall data indicated that wealth management M&A remains resilient.

“In the second quarter, buyers announced 65 transactions, dipping below the 75 announced in 1Q [2023],” the report stated. “The relatively low volume this quarter is consistent with historical trends as the second quarter is typically the least active quarter of the year in terms of deal announcements.”

Some of the biggest dealmakers were in asset management and private equity, including Bain Capital LP, Flexpoint Ford LLC, Ares Management Corp., Leonard Green & Partners LP, Stone Point Capital LLC and Atlas Partners.

Retirement and employee benefits aggregator OneDigital ranked ninth among the top buyers in part due to its acquisition of Huntington Bank’s $5.6 billion retirement advisory business. SageView Advisory Group ranked 10th in part due to its acquisition of the lead partners of Retirement Benefits Group, a retirement plan consulting firm with $5.2 billion AUM.

Echelon’s report also highlighted that significant investments were made in large registered investment advisers during Q2. Almost half of all transactions in 2023 involved RIA targets with more than $1 billion in AUM. Furthermore, Q2 outperformed the reported count of 33 transactions in Q1 by 9%.

The deals tracked and identified in the report included any transaction involving an RIA with more than $100 million of assets under management, according to Echelon.

Compliance July 10, 2023

EBSA Publishes Regulatory Update on Health Facility Fees, Provider Networks

The FAQ says facility fees count toward out-of-pocket limits and price estimates, while maintaining a contractual relationship causes a provider to be considered in-network.

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The Departments of Labor, Treasury and Health and Human Services issued an FAQ Friday covering the No Surprises Act and the Transparency in Coverage Final Rules. The FAQ clarifies when a health care provider is in-network for the purposes of reaching the maximum-out-of-pocket limit and how facility fees are to be disclosed.

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Signed in 2020 and effective in 2022, the No Surprises Act regulates the billing practices of out-of-network medical providers and bans many forms of surprise medical billing. The FAQ clarified that a provider with a contractual relationship with a health plan will be considered in-network for the purposes of applying the MOOP limit, explains Roberta Casper Watson, a partner in Wagner Law Group and head of its welfare plans practice group.

Ryan Temme, a principal at Groom Law Group, clarifies that certain “single case agreements” probably would not “be pulled into the FAQ.”

Temme explains that if a plan participant is treated by an out-of-network provider, that provider can collect the uninsured balance from the participant, known as “balance billing.” By clarifying that a direct or indirect contractual relationship causes the provider to be in-network, the FAQ limits this practice.

According to Temme, balance billing was one of the key motivations for the No Surprises Act in the first place, because it enabled providers to pass large, and often unexpected, costs on to the participant. He describes the FAQ’s clarifications as “commonsense.”

The new final rules require health insurance plans to offer price comparison information and providers must provide a good faith estimate of out-of-pocket costs upon scheduling of a treatment or service or upon request.

The FAQ clarifies that these rules apply to facility fees as well, which Watson says are often used to sidestep legal requirements concerning billing.

The FAQ says, “The Departments are concerned that individuals are increasingly being charged facility fees for health care received outside of hospital settings, which increases health care costs. When facility fees are covered by the individual’s plan or coverage in connection with essential health benefits provided in-network, cost sharing for those fees is subject to the MOOP limit. However, when not covered by the individual’s plan or coverage in connection with the provision of essential health benefits, those fees expose patients to financial risk. They are also likely to come as a surprise to the individual.”

Facility fees cannot be left out of price estimates or MOOP calculations, according to the FAQ.

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