Although the RIA space has continued to see strong merger and acquisition activity since the pandemic started, the combination of weakness in the global economy, expected recessions in the U.S. and other countries, and the Russia-Ukraine war have created a "suboptimal condition" for the U.S. and macro global environment, according to David DeVoe, CEO and founder of DeVoe & Co.
And "several of these things are impacting the RIA space," he said Dec. 1, during his firm's "RIA M&A Recap and 2023 Outlook" webinar.
Although there were "a lot of pressure points that could or maybe even should be slowing down mergers and acquisitions, it keeps chugging along," he recalled saying in September.
M&A activity in the first two quarters were up about 20% from 2021 and in the third quarter up about 30%, he noted.
Twenty deals grew to a "new normal" of 30 deals before the pandemic and then "surged" to 58-60 during the pandemic, he said.
The industry has been "running at about 68 transactions pretty consistently for the last five quarters," he noted. But "we've seen a slowdown" in M&A activity since then, he said.
DeVoe provided advice on several actions they said advisory firm owners should consider now and in 2023.
Six of those suggested actions are below.
1. Take steps to keep your best advisors and other staff.
DeVoe pointed to fall data showing that 44% of U.S. employees were seeking jobs and 34% were actively looking for a new job, while another 10% intend to look for a new job.
With that in mind, he said: "Everyone should be very focused on retaining and optimizing their human capital."
2. Consider expanding your firm to other countries.
"International's really interesting," according to DeVoe. "Focus [Financial] comes to mind as a firm that has set a flagpole over Europe and has been doing things for several years now" there, he noted.
