Charles Schwab

Schwab Reports Record-Setting Pace of RIA M&A Activity

Transactions in the registered investment advisor industry are on pace to beat the record set in 2015.

According to a Schwab Advisor Services report that tracks merger and acquisition activity in the RIA space, 52 deals were made in the first half of 2016, a 41 percent increase in number of transactions made in the first half of 2015 and just two shy of the number of deals made in all of 2014.

The value of M&A deals is also increasing along with the number of deals made. The deal value reached $75 billion, surpassing full-year values for most of the past decade and jumping 50 percent from the first half of 2015. The average transaction was for $1.4 billion.

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Most of the activity (31 of the 52 deals) was made during the first quarter, beating the record of 21 deals set in the third quarter of 2015. The value of deals surged 122 percent over Q1 2015 to $51 billion.

“We’re off to a strong start; building off the momentum of a record year in 2015,” said Jon Beatty, a senior vice president at Schwab Advisor Services. “Should we get a strong second half, we could put another record on the scoreboard for 2016.”

When asked what’s driving increase in both volume and value of RIA transactions, Beatty cited the overall health of the advisor industry. Assets and revenues are at an all-time high, he said, and profit margins remain strong.

“It’s a great time if you’re interested in monetizing your business,” Beatty told WealthManagement.com.

Beatty added that demographic factors, including the aging advisor industry, a need to scale and difficulty attracting new talent are also propelling the M&A trend. There’s also an increasingly diverse group of buyers, giving sellers more options to find the right fit.

But the increased M&A activity doesn’t necessarily point towards industry consolidation. Beatty pointed out that there are more firms in the industry than there were five years ago, and there hasn’t been a year that ended with fewer firms than it started. While the largest firms (those managing at least $1 billion) are increasing, Beatty thinks there is room for medium and smaller firms as well.

“M&A will go where the RIA industry goes,” Beatty said. “The more success the independent movement has, the more M&A activity we’re going to see. A healthy business model is generally supported by capital that is seeking return.”

“I think for the industry overall, this is a healthy dynamic that is going to support the success of the RIA industry, which is in a lot of ways changing the face of the financial services industry.” 

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