In 2016, there was a record number of mergers and transactions in the RIA industry, Schwab Advisor Services reported today, echoing other recent measures of the advisor M&A space, but Jon Beatty of Schwab says the numbers are in fact a "subplot of a bigger story: the growth of the RIA industry." Since the independent advisor space is "thriving, you'd expect M&A to follow suit," said the senior VP of SAS in a Wednesday interview.
The Schwab report — 2016 Independent Advisor Industry Transactions — counts 94 transactions taking place last year, up 12% from the 84 deals Schwab counted in 2015, and up 74% from the 54 deals made in 2014. The average size of a transaction also increased last year to $1.44 billion, 5% above 2015's average deal size and 64% higher than the $878 million average transaction in 2014.
Who's buying? Other advisory firms and strategic acquiring firms, aka rollup firms, who together accounted for 70% of all transactions (independent RIA firms, 41%; strategic acquirers, 29%). Banks accounted for 9% of all deals in 2016.
(Schwab's data is collected by the firm's RIA custody unit and includes deals "involving primarily high-net-worth- and endowment-focused RIAs" with a minimum of $50 million in assets under management. The data also includes "advisors in transition," including breakaway brokers, who joined existing RIAs "and received equity consideration" for doing so.)
What's driving the increase, particularly since 2014? Beatty, who's responsible for sales and relationship management at the largest RIA custodian, said there are a "number of variables" driving M&A.
Yes, the demographics of RIA owners is one of those variables, but rather than attribute the growth only to advisors' exit plans or succession issues, Beatty puts it in a broader context.
