Deal flow in wealth management mergers and acquisitions has remained strong, valuations have yet to drop, and all signs point to the status quo continuing into 2023, according to a panel of M&A experts.
The panelists—Mark Tibergien, former CEO at Pershing Advisor Solutions; Raj Bhattacharyya, CEO at Robertson Stephens; and Peter Nesvold, partner at Republic Capital Group—shared their perspectives in a webinar earlier this week, moderated by Scott Slater, vice president at Fidelity Institutional.
They agreed that while 2022 might have individual investors losing sleep over market dips and swirls, it’s a great time to be a financial advisor.
“This is the time when people in this business earn their keep, that’s for sure, but the business of wealth management couldn’t be better,” Tibergien said. “Whether you choose to remain independent of corporate or passive ownership, or whether you intend to merge or acquire, it’s a dynamic industry to be in.”
The economic uncertainties that stress investors these days pale by comparison to 2008, when it seemed the future of the entire financial system globally was at risk, or even to the technology bust of the early 2000s, added Bhattacharyya.
“What’s important to remember is that in every one of these situations, a properly constructed portfolio, managed by an advisor, that takes into account the client’s wealth plan, has stood the test of time,” he said. “The fiduciary relationship we have with our clients in the RIA space is extremely important. It is these markets that test the RIA model, and I think the model comes out even stronger when the markets are challenging and when our clients most need us.”
Even under the strain of the Covid economy, financial advisors had plenty of opportunity to branch out and take on some personal risk, as seen in the more than 500 RIAs that opened doors in 2020-2021, Nesvold said.
“That’s pretty remarkable, because if you walk down Madison Avenue you can see how devastating the pandemic was to small businesses. And RIAs are small businesses,” he said. “And yet in terms of numbers, RIAs have been able to thrive despite what we’re seeing in the financial markets. That’s testament to the resiliency of the RIA model and why it really is a terrific business.”
Deal Flow Is Strong
According to Fidelity, the number of completed RIA deals is up 25% over the last year, with transactions for firms with assets under management under $250 million and those between $250 million and $500 million seeing the strongest activity, Slater said. Meanwhile, assets under management are off by only 10%.