Perhaps equally important was that most advisors were neck deep in client service-especially early last year-and didn't have time to deal with M&A matters.
Meanwhile, banks--both regional and national--have essentially become non-players in the RIA M&A space, particularly in 2009. "Acquisitions of RIAs by banks often didn't yield the hoped-for results," DeVoe says. "You often saw cultural frictions and challenges on the cross-selling side."
The biggest consolidators of RIA assets last year were RIAs themselves, a group that acquired 55% of the total AUM involved in M&A deals. That far outpaced the roughly 30% AUM share acquired by so-called consolidators such as Focus Financial Partners, United Capital Financial Advisers and others.
"Clearly, [the RIAs'] growing presence shows they're thinking strategically about M&A and how these transformational moves can enable them to achieve their overall goals," DeVoe says.
DeVoe, whose company benefits from increased M&A activity, believes the trend will pick up steam in 2010 with rising cash flows at advisory firms and with the growing interest of private equity firms that want to invest in the RIA space.
As for valuations, DeVoe says cash flow is one of the most important considerations in judging an advisory firm's worth. Firms must also have a sustainable growth story and a strong management team, and the next generation of strong management must be in place as well.
DeVoe says firms with less than $100 million generally sell for four to six times cash flow; firms with between $100 million and $500 million go for five to eight times cash flow; and firms larger than $500 million sell for more.
Majority Of Advisors See Growth In '10
Most advisors have an eye on business growth this year, but fewer have a plan in place to make it happen, according to a recent survey.
Curian Capital's survey of roughly 1,800 independent financial advisors, conducted last November, found that 68% of respondents describe their business mind-set this year as one of business acceleration and growth, but only 56% have a strategic plan in place for that growth.
Only 10% of advisors feel their business strategy is sound and doesn't need to change. One-third of advisors do know their business model needs to change, but they aren't sure how to get there.