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M&A still strong in the wealth management sector

Ryan Lawler
Sep 15, 2022
Illustration of two people shaking hands on a giant stack of money.
Illustration: Aïda Amer/Axios

M&A in the wealth management space was a popular topic of conversation at the Future Proof Festival in Huntington Beach, California, this week.

Why it matters: While other sectors of the M&A market may have slowed down due to macroeconomic concerns, the pace of dealmaking between RIAs and broker-dealers still seems brisk.

By the numbers: “This year to date, there have been something like 120 transactions, representing $160 billion in assets traded,” Bluespring Wealth Partners president David Canter said.

  • Despite record year-over-year growth in the number of transactions in the space, Canter said that activity represents just a tiny fraction of the almost 15,000 RIAs in the market today.
  • And that activity is likely to continue, Mariner Wealth Advisors managing director Kevin Corbett said. “We haven't seen deal flow slow down … it's just not happening.”

The big picture: It’s not just deal activity that is high, but also the valuations that deals are being done at.

  • “We're currently in an environment that is almost a conspiracy to drive down valuations. We have economic turmoil across the world, and in the U.S., interest rates are going up, and there are a whole number of different negative factors. Yet valuations continue to be really strong today,” DeVoe & Company CEO David DeVoe said.

Yes, but: Some of those headline valuations and multiples hide some of the underlying structure of the deals being done.

  • “I think it's important to really put those in context. Most headline multiples are possible valuations based on a series of earn-outs and other contingencies that continue to exist,” MarketCounsel Consulting CEO Brian Hamburger said.

Between the lines: Succession planning is one primary reason RIAs want to sell their practices, but it’s not the only one.

  • Many are looking to partner with larger institutions that have built platforms allowing them to serve their clients in a deeper, more meaningful way.
  • “It's not just about an owner-operator or founder trying to satisfy his retirement plan,” Corbett said.

Yes, and: Talent retention is another area driving selling activity. If firms are not creating a compelling opportunity for their next-generation advisers, Corbett said, “those folks are going to be looking for new homes.”

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