The SEC had some classy news to share yesterday.

At long last, the agency is (almost certainly) approving dual share classes, which would give asset managers the ability to add ETF share classes of existing mutual funds and vice versa. Companies began seeking exemptions from the Securities and Exchange Commission two years ago, soon after Vanguard’s exclusive patent on dual share classes expired. Unless a hearing is requested, the first exemption from Dimensional Fund Advisors will be approved. The firm’s application, and amendments to it, have served as a template for others, as the SEC worked with the firm to incorporate changes based on its own feedback and input from other industry players.

“We are thrilled that meaningful progress has been made, and we think it’s the watershed moment,” said Aisha Hunt, principal at law firm Kelley Hunt, who has worked with the company second in line, F/m Investments. “Within 15 days, hopefully there is a clear path the SEC will approve to permit dual share classes. This has been a long time in the making.”

Share and Share Alike

The approval allows asset managers to add share classes to funds rather than having to prepare, launch and manage separate versions of products in the two different wrappers, which is something that some of the larger fund companies already do. It could be a major opportunity for active mutual fund managers that don’t have full complements of ETFs, given that sales trends have strongly favored index funds and ETFs. Mutual funds will benefit from the tax capabilities of ETFs, and ETFs can benefit from the cash flow and distribution of mutual funds.

But it will take most fund companies some time before they are ready to launch. Dimensional has been preparing and “intend[s] to launch as soon as we are operationally ready,” co-CEO Gerard O’Reilly said in an announcement. “We know many investors are eager for the ability to exchange mutual fund shares for ETF shares without incurring transaction costs or taxes. However, investors’ custodial platforms will need to facilitate these transactions, and readiness will likely vary across platforms.”

There were several significant steps that took place this year as the SEC moved ahead with the approval process:

• Firms made changes to their applications over the summer to address the responsibilities that fund boards have in deciding whether adding a mutual fund or ETF share class is appropriate, and what disclosures should be made to help investors understand the differences.
• Most of the amendments to the most recently revised applications address differences in dividend schedules between the two wrappers, Hunt noted.

Government Shutdown, Maybe? There are roughly 80 different applicants for dual share classes waiting on what happens next. It’s no small detail that the federal government may shut down starting next week, unless Congress reaches a funding deal. “It will be helpful to get more definitive guidance about how the regulatory procedure and timeline would play out if there is a government shutdown, or even a prolonged government shutdown,” Hunt said.

If independent advisors don’t necessarily have bigger fish to fry, they may still be catching a lot more.

Focusing solely on high-net-worth clients and charging based on assets is one way to operate. The only problem is that most Americans aren’t millionaires. The pond is large, and many independent advisors are finding new areas to cast their lines. Between 2019 and 2025, XYPN firms saw client bases grow an average 25% per year, XYPN co-founders Michael Kitces and Alan Moore told Advisor Upside. By comparison, RIAs that custody with Charles Schwab reported only 6% CAGR over the same period.

Kitces and Moore attribute this boom to a planning-first philosophy where AUM and returns take a backseat, making financial advice more accessible. “If you’re trying to do financial planning on top of an asset minimum, you’re still ruling out 80% to 90% of the country,” Kitces said during the XYPN LIVE conference in Austin.

Go Your Own Way

Consolidation is often in the headlines, with bigger firms acquiring smaller ones. However, the exact opposite is actually happening at a much faster rate, Kitces said. Aggregators acquire roughly 150 to 200 firms annually, but in 2024, XYPN helped launch more than one new firm every business day. “Most [advisors] still prefer the autonomy of independence and don’t want to be employee No. 373 at a mega firm,” he said. “Aggregation is often just an exit strategy for mid-sized firms with founders who were not able to develop internal succession plans.”

• Roughly 27,000 advisors switch firms or go independent each year, according to McKinsey & Co.
• Cerulli projects independent RIA headcounts will experience 4% CAGR through 2028, reaching more than 56,000 advisors and outpacing all other channels.

Success as an independent advisor goes beyond the services you offer. Moore said some of the most effective advisors focus on very specific client sectors. For instance, Atlanta-based Pandowealth works exclusively with Chick-fil-A franchisees. “If you can get really defined and be willing to tell that Burger King franchise operator, ‘Not today,’ … we’re seeing them grow into incredibly successful firms,” he said.

Private vs Indie. Private equity’s growing role in wealth management is also fueling the independent boom. When PE firms buy RIAs, strict employee covenants can reshape advisor operations. Moore said advisors who reject PE ownership can either join another founder-led firm that may eventually sell to PE or start their own firm. “Private equity is not bad, they’re not evil, but it does have different time horizons, levels of diversification, and they own dozens, if not hundreds, of investments,” he said. “Those misalignments can make the culture of the firm really challenging.”

Don’t think of it as selling out, but rather as buying in.

Over the next half of the decade, there are expected to be 1,500 M&A deals involving asset and wealth managers, according to a new report from consultancy Oliver Wyman and Morgan Stanley. That means one in five firms existing today will be acquired by 2029. In the past, the wealth and asset management industries were highly fragmented, and firms could find success with small teams and just a handful of clients. But the landscape is changing.

“In 2024, the industry saw record AUM transacted, bolstered by high-profile mergers and thriving mid-market consolidation activity,” analysts said in the report. “These dynamics are already at play.”

Dealer’s Choice

The issue is that mid-sized firms are being squeezed by shrinking profit margins and rising technology costs. Meanwhile, many new clients are going toward already large, profitable firms that have the funds to improve their tech stacks and hire new talent. Clients are consolidating, too, choosing firms that can do all their financial planning and portfolio management under one roof.

And deal numbers aren’t slowing down. In fact, they’re twice as high as they were a decade ago, the report found. Since 2022, more than 200 deals a year has become the new normal:

• By the end of this year, analysts project a total of 266 transactions. By 2029, that number could be closer to 350.
• Most deals today are within the same sector — asset managers acquiring asset managers, and wealth managers acquiring wealth managers — the report found.

Raw Deal. While consolidation has led to greater valuations for wealth managers, deals aren’t always a success. Less than 40% of asset managers transactions improved cost-income ratio three years after the deal, and many saw clients pulling money out or growth lagging behind the market, the report found.