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In mid April, ECHELON Partners provided its update on RIA deal-making activity for the first quarter of 2018. Per their report, there were 46 announced deals consummated in the quarter, backing up the firm’s projection of over 200 deals occuring this calendar year. This follows on DeVoe & Co.’s study that revealed 153 RIA firm M&A transactions in 2017. The numbers show that there have been 199 deals since the start of last year, or 40 per quarter. Taken another way, that’s three deals per week . Stunning.
What does this mean? There are really three types of RIA firms out there right now: the acquirers, the sellers, and the firms that will have to fight for their lives as bigger competitors move into more markets via deals or organic expansion.
No matter what camp your RIA firm falls into, it’s time to assess if you’ve done enough to set your firm up for future success.
If you read through the press releases from firms announcing acquisitions, you’ll find three explanations are routinely offered by acquired firms for why they agreed to be bought:
“As we looked at our options for the long term success of our clients, staff and ownership, we realized that joining (redacted) would provide us with an enhanced client service experience for our clients.”
“It is the right time for us to become part of a larger organization,” commented (redacted). “Regulatory support, investments in technology and client reporting and financial planning services will allow us to provide greater value to our clients.”
“This partnership will allow the whole team to continue on our growth trajectory while focusing, first and foremost, on serving clients. We knew a merger partner would have the same commitment to marketing and provided differentiated services as we have had over the years.”
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Technology , client experience , and marketing that fosters growth and differentiation in a crowded marketplace are all essential ingredients for a healthy, growing firm. Firms best positioned to acquire have strong answers to all three and likely have been investing in all areas for a number of years. Don’t take my word for it. Just look at United Capital, RFG Advisory, Carson Wealth, Exencial Wealth Advisors, and others.
Firms that are ripest for acquisition recognize their importance and understand that they may not catch up fast enough to pass on the merger opportunity. Those that are sitting out the deal-making game need to determine how they will address technology upgrades, develop and maintain a contemporary client experience, and foster a commitment to marketing to best compete.