Retiring Advisors Push M&A Deals to $2.5T

If you’re selling, they’re buying.

Mergers and acquisitions are a cornerstone in plenty of RIAs’ growth strategies, and the buying mindset is becoming inescapable. More than half of RIAs, some 54%, are currently seeking an acquisition, according to a Cerulli report. That share has increased as a wave of advisor retirements, coupled with succession challenges, continues to create new M&A opportunities now worth more than $2.5 trillion. “Internal succession is pretty hard for RIAs, especially when you get into billions of dollars in AUM,” said Stephen Caruso, Cerulli associate director. “Valuations are so high right now. Oftentimes you look for an acquirer who has the resources and career pathing for your team, so your team is taken care of as part of this deal-making process.”

Big Fish, Massive Pond

Like wealth itself, assets in the advisory industry remain highly concentrated. Just 2% of RIAs, those with more than $5 billion in AUM, control more than half of all RIA assets. “The large continue to get larger,” Caruso told Advisor Upside, citing firms like Hightower, Corient and Wealth Enhancement Group. During the next decade, Cerulli projects more than 26,000 acquisitions in the RIA industry. The biggest firms with the deepest pockets will have the most opportunities, but Caruso noted mergers up and down the AUM spectrum. “That’s something we see playing out in the long term,” he said. “Just because M&A is becoming more active in this space, doesn’t mean that there isn’t room for smaller deals as well.”

The report found that between 2022 and 2024:

• Cresset purchased six RIAs with average total assets of $7.35 billion
• Corient acquired 20 firms averaging $1.4 billion in assets. 
• Wealth Enhancement purchased 47 firms with about $400 million in assets apiece. 
• Wealth Partners Capital Group bought 85 RIAs averaging roughly $245 million in assets.

Niche to See You. Meanwhile, smaller RIAs are realizing they have to become more specialized or compete differently, Caruso said. “Smaller firms have the benefit of affecting faster asset growth or asset acquisition, but it still relates to how you compete in your local area,” he said. “Your average RIA on Main Street is competing against the Edward Jones advisor five blocks down, and they’re competing against the other small RIA three streets over.”

The post Retiring Advisors Push M&A Deals to $2.5T appeared first on The Daily Upside.