Mergers and acquisitions continued to fuel growth in the independent registered investment advisor market last year, according to 2014 year-end data from Schwab Advisor Services.

The activity makes the independent investment advisory model one of the fastest-growing financial services segments and points to a healthy, sustainable industry, says Jonathan Beatty, senior vice president of sales and relationship management at Schwab Advisor Services.

There were 54 completed RIA merger and acquisition transactions in 2014, matching the total deals completed in 2013. Average deal size ticked upward by 9% from the previous year, with total assets under management going from $43.6 billion to $47.4 billion.

Buyers remained consistent over the past two years, with strategic acquiring firms and RIAs representing the majority of deals. RIAs beat out strategic acquiring firms for the year, accounting for 41% of the deals in 2014, compared with 38% closed by strategic acquiring firms.

“It remains a seller’s market for RIAs, and the industry is in a position of strength as firms grow in value and more advisors and acquirers continue to be drawn to the independent model,” Beatty says.

“We are seeing more firms being strategic about their growth, and while many remain focused on M&A as part of that strategy, they are being selective about opportunities and considering additional factors such as cultural and philosophical fit to ensure a merger or acquisition is beneficial and sustainable over the long term for their firm and their clients,” Beatty adds.

Nearly 25% of the fastest-growing firms are looking to make acquisitions to bolster their growth, according to Schwab’s study. The fastest-growing firms reported three times more growth than the average firm as a result of organic growth and acquisitions.

“The steady level of M&A activity we’ve seen over recent years underscores the growth and maturation of the industry,” Beatty says.
Merger and acquisition activity is expected to continue—along with internal transitions of ownership—as the advisory population ages, according to Schwab.