RIA merger and acquisition activity is still hot, but it’s not because of the RIAs themselves.

According to the latest Nuveen / DeVoe RIA Deal Book, RIA transaction activity is on track to achieve a third successive record year. However, RIAs were responsible for a declining portion of acquisitions during the second quarter.

“There’s definitely reason to believe that we’ll see a continuation of the trends we’ve seen thus far in 2017 to unfold over the next 12 months or so,” says David DeVoe, managing director at DeVoe & Company. “We may—and in all likelihood we will—see a record year of activity. The consolidator space will continue to evolve, banks will make RIA acquisitions an initiative, new RIAs will conduct transactions and many of the RIAs that have already conducted deals will make one or more additional acquisitions this year.”

The first six months of 2017 yielded 82 mergers and acquisitions involving RIAs, according to DeVoe, versus 71 in the same period a year ago. That's an increase of 15 percent.

RIAs were responsible for 22 percent of the total acquisitions in the second quarter of 2017, declining from 29 percent in the first quarter.

“This is a significant decline, and it could be part of a short-term trend,” says DeVoe. “There’s a new category of acquirer, private equity firms are back, and the largest mega-RIAs are going to have more momentum. Thus, banks and consolidators are having greater success.”

DeVoe says that, on balance, RIAs are conducting similar numbers of transactions as in previous years.

Banks and consolidators have increased their acquisition activity to take away share from RIAs. After conducting just 3 percent of the RIA acquisitions in 2016, banks have been responsible for 15 percent of the M&A activity so far in 2017. Similarly, consolidators are responsible for 51 percent of the transactions thus far in 2017, compared to 44 percent of the deals in 2016.

Some of the shift towards banks and consolidators may be regulation driven, says DeVoe, as firms with scale may have an easier time adjusting to the uncertainty around the fiduciary rule, SEC examinations and other pressures.

“Compliance has never been fun, but it continues to become more onerous,” he says. “The DOL rule is just one more technical headache that can be alleviated with a sale to a certain kind of buyer.”

DeVoe recorded 38 deals in the second quarter, the fifth consecutive quarter of 35 or more transactions and the 11th straight quarter of 30 or more transactions.

In the second quarter, several mega-deals helped transaction activity clear $100 billion in AUM, the second-highest total ever recorded and starkly higher than the under $21 billion in transactions during the first quarter of 2017. Most notably, Focus Financial Partners in May purchased a majority stake in SCS Capital, a $16.5 billion firm.

Nevertheless, the average AUM of RIA sellers is down from more than $1 billion in 2016 to $698 million through the first half of this year.

Break-away brokers appear to be declining as a drive of deal activity, says DeVoe.

“There’s still a strong foundation for some of this activity to be sustained, but a surge that was driven by forgivable loans is likely to recede and we’ll return to a new level of normalcy in the breakaways,” he says.

Year to date, breakaways from broker-dealers were responsible for 52 percent of the M&A activity, compared to 54 percent last year and 58 percent in 2015.

In addition to its M&A consultancy, San Francisco-based DeVoe & Company tracks RIA transactions, publishing their findings in quarterly RIA Deal Book reports.