Merger activity among RIAs dipped a smidge in the first quarter, but it's too early to tell if that portends a trend, says Schwab Advisor Services.
There were 23 merger and acquisition deals completed during this year's first quarter, down from 25 in the year-earlier period, according to Schwab. Those 23 transactions comprised about $20 billion in assets. At the current pace, this year would see 92 deals representing $80 billion in assets, or well off last year's record pace of 109 deals involving $156 billion in assets.
As has been the case for the past year or so, the biggest driver of M&A deals in the recent quarter was RIAs buying other RIAs to achieve strategic goals-that accounted for more than 50% of total deals completed. Other acquirers included consolidators and private-equity firms.
David DeVoe, managing director of strategic business development for Schwab Advisor Services, says there has been an almost steady rise in RIA M&A activity since 2003, an exception being the 2009 downdraft caused by the economic recession and market crash that whacked advisor assets under management and revenue, compressed advisory firm valuations and caused advisors to leave the negotiating table to take care of nervous clients. He believes last year's record M&A pace could've been a short-term thing as negotiations that were put on the back burner in 2009 were later consummated in 2010.
"I think that's why we saw a softening in the first quarter, and that could potentially carry over through the rest of this year," DeVoe says. "But too many things can happen in this space, so I don't want to make a prediction."
Schwab Advisor Services provides custodial, operational and trading support for more than 6,000 independent RIAs.