The Wire

A robo-RIA M&A firm has launched from tiny Mt. Kisco, NY, to redress the yawning sophistication gap between mom-and-pop sellers and big-time buyers, who mostly scoff at the software startup.

Fabe Assist entered the market in April asking sale-minded RIAs to plunk down $3,400 then buckle down for three hours to answer 47 questions. It may be a bargain in a market where acquisition fees can soar from hundreds of thousands to millions of dollars.

The red hot RIA M&A market shows no signs of cooling down, according to one of the industry’s leading buyers.

“The market is not slowing down anytime soon and actually might even accelerate,” said David Barton, vice chairman of Mercer Advisors, speaking at a virtual M&A panel presented by Advisor Growth Strategies. “2021 might even be more frothy than last year.”

As the Biden administration proposes to hike capital gains taxes, some advisory firms are jumping at the opportunity to sell their firms before any changes take effect. While it seems favorable to do so, some RIA executives warn of the potential traps sellers might face.

Rush Benton, senior director of GTCR-backed Captrust, advises selling firms to choose their partner wisely, he said during a recent virtual roundtable hosted by Advisor Growth Strategies, a management consulting and transaction advisory firm.

One of the largest registered investment advisory firms by assets in the U.S. is dipping a toe into the M&A waters.

Edelman Financial Engines said it will purchase Viridian Advisors, a Bothell, Washington-based RIA and tax planning firm managing $846 million in client assets. With $270 billion in customer assets and private equity backing from Hellman & Friedman, Edelman said it will make Viridian’s office its fourth branch in the Seattle area, according to the Wednesday announcement.

Mergers and acquisition activity among independent advisory firms has been growing at a breakneck pace the last few years, but the majority of firm owners choose to ignore opportunities outside of being in full control of their business. These advisors may not see the perfect storm of competition that is bearing down on them. The coming years will require owners of RIAs to be nimble, run scaled operations, or both.

The RIA world was not exempt from the systemic gut punch of Covid. It scrambled to adopt remote service. The market shock in March 2020 forced firm owners to think about the sustainability of their businesses. Job losses from the pandemic accelerated the rate of retiring boomers. RIA owners are not exactly a youthful bunch, either; they have to reckon with their own succession planning.

CI Financial has embarked on an unprecedented deal spree over the past year and a half, buying 18 RIAs and amassing $63bn in US assets. 

The run has not gone unnoticed by the firm’s US competitors. 

In a virtual M&A roundtable discussion hosted by Phoenix RIA consultancy Advisor Growth Strategies, Mercer Advisors chief executive Dave Barton (pictured left), Captrust head of wealth management M&A Rush Benton (pictured center), and Mariner Wealth Advisors chief executive Marty Bicknell (pictured right) took a skeptical look at the Toronto-based asset manager.