Over the last several years, wealth management M&A has run hot, thanks to an increased appetite among private equity firms and the desire among RIAs to create more scale, add more services and increase efficiencies. While it’s true that headwinds have emerged more recently—including questions about the strength of the economy and rising interest rates—there was no shortage of activity through the first half of 2023.  

Indeed, buyers and sellers both continue to have key strategic reasons to remain active, even as some of the underlying trends have shifted slightly compared to previous years. Based on our findings, let’s consider the current state of play and forecast what could be in store going forward.

• Deals are still happening. At the beginning of the year, many predicted that the wealth management M&A market would cool, and from the outside looking in, the perception may be that it has. But that’s not what happened based on the data we have reviewed thus far. During the first half of 2023, there were a similar number of deals compared to the same period in 2022. Mega deals continued to account for a small slice of all transactions: RIA sellers with at least $3 billion in assets under management accounted for only 10% of the RIA transactions over this time frame. That number was 11% over the same period in 2022. Meanwhile, 65% of all deals involved firms with fewer than $1 billion in AUM—a 7% decline compared to the first half of 2022.

• First-time buyers. It’s no secret that private equity-backed serial acquirers have accounted for much of the recent dealmaking in wealth management. That trend continued during the first half of 2023, when such buyers took part in roughly 75% of all RIA acquisitions. While those participants are not going anywhere, the number of first-time acquirers has increased, including independent RIAs looking to merge with or acquire like-minded firms in an effort to create more scale and add services for clients and advisors. In all, first-time acquirers made 19 deals through June, up from 16 during the first half of last year. We see the ‘first-timer’ trend holding up during the second half of 2023.

• Sustained private equity appetite. Private equity has long invested in wealth management. As noted above, though, the level of interest has intensified in recent years, helping to drive a pronounced spike in overall activity. Because of the wealth management sector’s recurring revenues and strong growth potential, we expect private equity firms to remain attracted to the space going forward. In fact, new participants are still entering the market. Several private equity firms invested in the sector for the first time during the initial six months of 2023. 

• Buyers are becoming more selective. Although we see M&A activity continuing for the foreseeable future, it may take longer to complete certain deals. Before the Fed began to tighten policy in March 2022, the low-interest rate environment facilitated easy financing and allowed parties to execute deals more rapidly. With financing harder to access, buyers will likely maintain greater discipline for some time when evaluating potential acquisitions. We’ve noted that many are already becoming more selective, increasingly applying more care to not only finding the right overall fit but ensuring a successful integration after the deals close. 

Thanks to rising interest rates and growing unease about the health of the economy, it was reasonable to believe that 2023 would finally be the year when the pace of M&A deals across wealth management would begin to fizzle out. But up to this point, that hasn’t been the case. Though different in meaningful ways from a year ago, the market remains alive and well—and likely will stay that way for the foreseeable future, given the current dynamics. 

Bomy Hagopian, CFA, is a partner with Berkshire Global Advisors, a leading provider of trusted M&A and strategic advice to the financial services industry. Hagopian co-leads the firm’s wealth management practice.