Mergers and acquisitions continued to fuel growth in the independent registered investment advisor market last year, according to Schwab Advisor Services, which released 2014 year-end data on Tuesday.
The activity makes the independent investment advisory model one of the fastest-growing financial services segments and points to a healthy, sustainable industry, said Jonathan Beatty, senior vice president of sales and relationship management at Schwab Advisor Services.
There were 54 completed RIA merger and acquisition transactions in 2014, matching the total deals completed in 2013. Average deal size ticked upward by 9 percent from the previous year, with total assets under management going from $43.6 billion to $47.4 billion.
Buyers remained consistent over the past two years, with strategic acquiring firms and RIAs representing the majority of deals. RIAs beat out strategic acquiring firms for the year, accounting for 41 percent of the deals in 2014, compared to 38 percent closed by strategic acquiring firms.
“It remains a seller’s market for RIAs and the industry is in a position of strength as firms grow in value and more advisors and acquirers continue to be drawn to the independent model,” Beatty says.
“We are seeing more firms being strategic about their growth, and while many remain focused on M&A as part of that strategy, they are being selective about opportunities and considering additional factors such as cultural and philosophical fit to ensure a merger or acquisition is beneficial and sustainable over the long term for their firm and their clients,” Beatty adds.
Nearly 25 percent of the fastest-growing firms are looking to make acquisitions to bolster their growth, according to Schwab's study. The fastest growing firms reported three times more growth than the average firm as a result of organic growth and acquisitions.
“The steady level of M&A activity we’ve seen over recent years underscores the growth and maturation of the industry,” Beatty said.
Merger and acquisition activity is expected to continue, along with internal transitions of ownership, as the advisory population ages, according to Schwab.