Page 22 - Investment Advisor January/February 2022

RIA LESSONS & LEADERS

By Jeff Berman

4 Experienced Voices Outline 2022

Roadmap for RIAs

Expect more mergers and acquisitions, record consolidation, bigger players

in all markets and new technology ecosystems.

IA merger and acquisition This is about a $6 trillion industry changes, there’s just this awareness that
activity achieved another mile- and is expected to grow to $9 trillion, the tax rates are probably never going to
R stone in 2021, surpassing 200 growing about 10% a year, Adolf said. be better, so they can only move against
transactions in a calendar year for the There will probably be $3 trillion “in a seller,” he said.
first time, according to David DeVoe, motion in the next five to seven years,” One significant issue that is changing
CEO and founder of the research firm not the 10 years some expect, he added. going into 2022: ”Before, you [could]
DeVoe & Co. be in a city in America and it’s you and
Last year marked the eighth succes- PETER MALLOUK, CEO AND like a hundred other firms, but now
sive record year for RIA M&A activ- PRESIDENT OF CREATIVE PLANNING you’re starting to see the five big names
ity, and the same is expected for 2022. From August through October … showing up in every town,”
But DeVoe told Investment Advisor this year, “we saw a huge according to the executive.
we shouldn’t necessarily expect the number” of new RIA “And they’re all going
30%-50% growth in the number of firms come to mar- to get bigger” in those
M&A transactions we’ve seen in recent ket for reasons that markets, he said.
years. Still he and three other industry included a fear the Advisory firm
executives Investment Advisor inter- tax rate was going owners are asking
viewed all predicted continued RIA to rise, according themselves how
sector consolidation. to Peter Mallouk, they can compete
Below are their projections for the CEO and president with the major
sector in 2022, along with their thoughts of Creative Planning. players, Mallouk
on other trends. A growing number said. His prediction:
of RIA firms also are “There will be people
RUDY ADOLF, CEO, CHAIRMAN AND coming to market because [who] are going to success-
FOUNDER OF FOCUS FINANCIAL “valuations have expanded, sell- fully compete, but you’re going
“It was a very good year” for RIAs ers are getting older, [and] pricing has to have to make decisions to be able
in 2021, according to Rudy Adolf, gotten too high to do internal succes- to do so in the future. …. Some people
CEO, chairman and founder of Focus sions,” he said. won’t be able to make those invest-
Financial, noting it was another record Advisory firm owners are also “a little ments, and some will.”
year with increased M&A concerned about big competi- Meanwhile, “most of the big firms
activity. What “gets lost,” tors in their backyard that have a huge amount of leverage tied
however, is that “this are starting to show up,” to them, and it will work out wonder-
industry is still under- Mallouk added. fully if the market continues to go up,”
consolidated,” he Those factors are he said.
argued. Noting “going to drive a But Mallouk warned: “If we have
there were over five-year consoli- a prolonged bear market, with an
200 deals in 2021, dation in the space” emphasis on the word prolonged, not
he said: “From my in which the num- like the pandemic” that lasted only “a
perspective, this ber of M&A trans- couple of months,” things won’t go so
industry should be actions will grow, he well for those large players, because
doing 300, if not 400, predicted. “Whether “the space is much more fragile than
transactions.” or not there are tax it appears.”

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