In addition, any deal needs to fit into a long-term strategy of what the firm is trying to create, Slater said. “There’s a lot of discussion [at B-Ds] around what they’re trying to build, and less about just doing a transaction.”
Keeping Close
As firms get bigger, however, they face challenges in maintaining close relationships with advisors.
“There’s a tension they’re trying to manage there,” Slater said. “The risk is that they become too removed from individual advisors.” Senior managers report that they must spend a substantial part of the time connecting with their advisors, he said.
Small firms can survive, Fidelity says, but they must have a definable niche to attract and retain advisors. Boutique firms offer one way to compete, since they offer clients close contact with senior management.
Advisors themselves will increasingly have to decide what they want, such as a close connection to management, or the robust technology and support that scale offers, Slater said.
Large RIA firms are also on the prowl for merger partners, the report says, although none have yet reached the scale of the large B-Ds.
But as RIAs continue to grow, and B-Ds shift to more fee-based business, the lines between the two channels are blurring.
RIA firms have become “real businesses” with regional and national brands, Slater said, and many retain the ability to do some commission business, making them attractive landing spots for both fee-based and hybrid advisors.