Fidelity Clearing & Custody Solutions has partnered with Merchant Investment Management to increase RIAs' access to capital for acquisitions, the companies announced Monday.
The services will include access to a discounted loan origination fee for firms that custody assets with Fidelity, the companies said.
Merchant will also offer Fidelity’s custody clients reduced rates for its Advisor Assist, which offers a suite of compliance solutions, and Compass, which provides outsourced CFO and accounting services for advisory firms, according to the news release.
David Canter, head of the RIA segment at Fidelity Clearing & Custody Solutions, said most competitive RIA firms are achieving scale through mergers and acquisitions. “By our count, there are over 700 RIAs that manage over $1 billion, and they’re often doing so with national footprints," he said. "But it takes capital to create scale—and with the average deal size increasing three-fold in the past five years, access to that capital can sometimes be a roadblock."
“Lending solutions like this one are a game-changer for firms looking to make strategic acquisitions to create long-term, sustainable value,” he added.
While the number of deals in the RIA channel was down slightly in 2018, the size of those transactions grew significantly, causing more competition and consolidation at the upper end of the market, the news release said.
Ten deals in 2018 accounted for 59 percent of the AUM among all 88 RIA deals consumated in 2018, the release noted.