For advisory firm owners who are looking to sell their businesses, it is probably not going to happen in the next few months, according to DeVoe & Company’s fifth annual survey on M&A expectations released today.

Advisors anticipate lower valuations and fewer deals to be completed into the first quarter of 2023 than has ever been reported in the history of the survey. DeVoe & Company surveyed 112 senior executives, principals or owners of RIAs ranging in size from $100 million to more than $10 billion in AUM to gauge their expectations for mergers and acquisitions for the near future.

After several years of recording breaking numbers of M&As, the fourth quarter of this year saw a remarkable slowdown that is expected to continue into the first quarter of next year, DeVoe said. More than half of those surveyed said they expect lower valuations over the next year, compared to just 8% in 2021. On the flip side, only 8% expect higher valuations over the next year, compared to 39% in 2021.

Nearly 60% expect M&A activity to flatten or decline in the next year, according to the Annual RIA M&A Outlook. The executives from firms with $1 billion or more in AUM, in particular, predict a decline in activity.

The executives said volatile market conditions are dragging down valuations and putting a damper on activity. In addition, rising interest rates, ongoing global turmoil, and a looming U.S. recession are significant threats to activity. The slowdown has the potential to drag on for the year, according to most advisors. Only 42% expect RIA M&A activity will increase over the next year. A year ago, 63% indicated activity would increase.

Succession planning, including a possible sale of a firm, should be spurring advisors to action, but apparently is not. The average owner is estimated by DeVoe & Company to be more than 62 years old.

“Sixty-three percent of advisors see the lack of succession planning as a big problem for the future of the industry, up from 56% a year earlier and 50% in the previous three years,” the survey said.

The lack of activity is exacerbated by the fact that many firm owners do not consider the next generation as ready to take over. Sixty-eight percent of RIA leaders believed second and third generation employees of their firm were not ready to take over management and leadership roles.

But short-term predictions are challenging. “Although DeVoe & Company expects that RIA M&A will continue to increase over the next five years, our crystal ball for the deal volume over the next few months is a bit cloudy. It will likely be bumpy in the near term, as the long term trends upward,” the firm said.