The Wire

June 5, 2020

The Forces Boosting RIA Valuations and Driving a Dramatic Shift in Deal Structure

Buyers and sellers of RIAs have begun heavily favoring cash to fund deals. But valuations have increased despite the immediate payouts to sellers, a sign of the growing prevalence and clout of large RIAs in the country.

In 2019, the average acquisition of one RIA by another was funded by 70% cash, 22% equity and 8% contingency (meaning a future payout would be determined by conditions agreed upon by the buyer and seller). That preference for cash represented a “large shift in deal structure,” according to a new report by Advisor Growth Strategies, a consulting firm to wealth managers.

June 4, 2020

Valuations Leap in RIA Deals, Reveals New Advisor Growth Strategies Study

The pandemic has impacted RIA M&A transactions, but increased competition and the need for succession planning that drove a blockbuster 2019 for deals have not gone anywhere, according to The 2020 RIA Deal Room studyAdvisor Growth Strategies, one of the industry’s most trusted resources, researched 31 transactions that took place in 2019, surveyed 96 advisory firms and applied their own insights as leaders in RIA business management. With the support of their sponsor, BlackRock, Advisor Growth Strategies releases the most in-depth, quantitative study publicly available of why and how RIA industry deals succeed.

June 4, 2020

Approval clears the way for the mega-merger of RIA custodians and discount brokers to close on schedule.

The Department of Justice (DOJ) has approved Charles Schwab’s $26bn takeover of TD Ameritrade.

Regulatory approval clears the way for the merger of discount brokers to close in the second half of 2020, as the companies indicated when the deal was first revealed in November of 2019. Shareholders of both Schwab and TD Ameritrade are set to vote on the merger today.

June 3, 2020

WSJ Wealth Adviser Briefing: Gun Stocks, Safer Investments, Sleep Changes

John Furey, managing partner and founder of Advisor Growth Strategies, wrote in Barron's that it stands to reason that a global crisis like the Covid-19 pandemic, and its economic
aftershocks, would slam the brakes on mergers and acquisitions in the RIA space. Time will not wait for firms in need of succession plans. They need resources and commitment to court the next generation of advisors and clients, and those resources must come from growth. We don’t know how long the pandemic will impact the industry’s appetite for M&A, but the good news is that RIAs can still do plenty of things, right now, to secure advantageous footing when we come through the crisis.

June 1, 2020

The Case for a Permanent RIA Road Show

It stands to reason that a global crisis like the Covid-19 pandemic, and its economic aftershocks, would slam the brakes on mergers and acquisitions in the RIA space. A recent Fidelity report highlights a stark reversal in deal flow: six RIA deals in March and April, compared to 20 in January and February, representing a 38% year-to-date decline against the same period in 2019. While buyers and sellers might turn to playing it safe during this volatile period, the fundamental needs that drive industry M&A have not gone away.

June 1, 2020

Navigating Client 'Concentration Risk' in a Sale

According to a November 2019 Cerulli Associates report, in the next five to 10 years, RIA firms with about $2.5 trillion in assets under management could be acquired.

Cerulli breaks down that number with $1.6 trillion based on retiring RIAs, $469 billion attributed to breakaway advisors, and $348 for growth-challenged firms.

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