RIA Deals Hit Sizable Peak in Q2

Independent financial advisors channeled their inner game-show host Monty Hall (or Wayne Brady, for those under a certain age) this past quarter and said, “Let’s make a deal!” 

The registered investment advisor market announced 75 mergers and acquisitions in the second quarter, involving almost $1 trillion in assets under management, according to boutique investment bank Echelon Partners. While volume was down from 90 deals in the first quarter, it’s the second-most active Q2 in the last five years, and puts the industry on pace to exceed 332 total for the year. 

The heightened deal activity points to slight optimism for cheaper financing in the future, and advisory firms are gearing up for Federal Reserve rate cuts. “The Fed has signaled that rate cuts are impending, which will have a direct flow through to financing costs, hence resulting in a more attractive M&A environment,” Echelon said in a statement to The Daily Upside.

Pump Up the Volume

In the past few years, the second quarter has been a slower time for deals in the RIA market. Since 2019, the median number of deals for Q2 was 59.5, so this year’s season marked a slight uptick: 

• The bulk of the deals (84%) were conducted by strategic acquirers, which are primarily RIAs; the remaining deals (16%) were handled by financial acquirers, primarily PE firms. 

• AUM per deal made by PE investors in the second quarter trumped RIA-based deals, at $54.6 billion and $3.7 billion, respectively. 
• The largest transaction of the quarter was Fisher Investments: It sold a 20% stake to Advent International and the Abu Dhabi Investment Authority for nearly $3 billion in a deal that valued the wealth manager at around $13 billion. 

A Little AI Assistance: One of the most popular subsectors for deals was wealthtech, which experienced 33 transactions this past quarter, highlighting the market’s increasing demand for data analytics. “Strategic buyers recognize the competitive advantage of enhancing advisor technology on their platforms, which can drive organic growth,” Echelon said. “Firms throughout the industry are looking to create robust data platforms to maintain competitiveness with the quickly advancing ecosystem.”

Advisory firms aren’t collectively on board yet, but the Boston Consulting Group expects fintech — which includes products and technology used for both ultra-high net worth and consumer-level wealth management — to reach a market size of $1.5 trillion in revenue by 2030, roughly five times larger than it is today.