Volatility Not Enough to Slow RIA M&A Deals

Volatility Not Enough to Slow RIA M&A Deals

The first half of 2015 saw a significant increase in merger and acquisition activity among registered investment advisory firms, a trend Schwab expects to bleed into the second half of the year despite the recent market upheaval.

“The success of the RIA industry, buoyed by the impact of a six-year bull market, has helped increase valuations and put RIA firms in a place of competitive strength where they are well-positioned to invest in growth,” says Jonathan Beatty, senior vice president of sales and relationship management as Schwab Advisor Services.

Beatty doesn’t see the recent stock market volatility having a major impact on RIA deals. “Short term corrections generally don’t have long term, meaningful consequences to our industry. Should this turn into more of a secular move over the long term, such as we saw in 2007, 2008 and 2009, that could certainly be influential, as it was then,” he says. “We have to play this through a little bit as it develops.”

So far this year, Schwab Advisor Services tracked 37 deals with more than $49 billion in assets transferred. That’s up from 29 deals totaling $32.6 billion over the same period in 2014. 

“We’re seeing a fairly significant uptick in M&A activity both in the number of deals we saw in the first half of this year, as well as in the fact that we’ve already exceeded the dollar amount of assets acquired in all of last year in the first half of this year,” Beatty says. 

Over 11 of the reported deals Schwab tracked involved RIA firms with over a billion dollars in assets; four of those firms had more than $5 billion. 

“You always want to look at this data in the context of the bigger industry. When we think about an industry that reports to have 10,000+ firms, even if we do 70 deals this year, it’s still a very small percentage that are participating in M&A,” Beatty said. In other research, most firms say they are pursuing an internal succession strategy, not selling to another firm.

And given the disparate nature of the industry, it's hard to be exact. Schwab tracks transactions involving RIAs with assets under management exceeding $50 million, yet noted fewer deals than DeVoe & Company, which also records RIA deal activity. DeVoe, which tracks firms with over $100 million in assets, said there were 61 transactions in the first six months of 2015, up 84 percent from the same period in 2014. 


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