The dramatic growth in the number of RIA industry firm mergers and acquisitions will not be derailed by rising interest rates or inflation, two industry executives predicted.
Although some deal makers might pause when world events or economic conditions overwhelm the news, the steady upward trajectory of M&As in the financial industry will continue, they said.
“We may see a pause in deals in the second quarter, but the third and fourth quarters of this year are set to boom again,” David DeVoe, founder and CEO of DeVoe & Company, a San Francisco-based consulting firm for RIAs, said in an interview.
All world crises impact the markets and economy and the war in Ukraine is no different, they said. “Similar to when Covid hit, at first everyone freezes, but then in 60 days or 90 days there is a pent up demand that continues the M&A growth,” Jim Dickson, CEO of Sanctuary Wealth, an Indianapolis-based financial services firm and platform for breakaway RIA firms with $20 billion in assets, said in an interview.
Last year, M&A activity was the most prolific ever in the history of the wealth management industry and is showing no signs of slowing, DeVoe & Company said in its annual report. The industry recorded 165 acquisitions with a record breaking 64 transactions occurring in the third quarter of 2021 alone, the most deals ever completed in a single quarter. Among the most prevalent end results are the emergence of hybrid RIAs, combining an independent advisory firm and a broker-dealer, they said.
“The goal of the firm for hybrid RIAs is Io have the best toolbox for the advisors,” Dickson said.
There is only a slim possibility that “interest rates going up could slow the M&A surge. It would need to be a significant increase in interest to affect it,” DeVoe said. “I’m not really worried about that.
“Likewise, inflation could do it but what we have experienced so far has not had an impact on the number of deals,” he added.