By Cyril Tuohy
A survey of the registered investment advisor (RIA) marketplace by Schwab Advisory Services has found deal pace among RIAs remained flat with 54 transactions last year. This is the same as in 2013, and it is a sign that the industry is maturing.
The Schwab survey also found that average deal size last year rose to $878 million, an increase of nearly 9 percent over $808 million in 2013.
The 54 transactions closed last year also represented total assets under management of $47.4 billion, an increase from $43.6 billion in 2013.
Jonathan Beatty, senior vice president of sales and relationship management with Schwab Advisory Services, said it’s a good time for RIAs looking to sell.
“It remains a seller’s market for RIAs and the industry is in a position of strength as firms grow in value and more advisors and acquirers continue to be drawn to the independent model,” he said in a news release.
The survey found that in the fourth quarter, there were 10 deals, a drop of 44 percent from 2013.
Average deal size came to $445 million, $18 million lower than the average deal size of $463 million in the fourth quarter of 2013, Schwab also said.
In the third quarter of last year there were 15 deals and average deal size came to $688 million, the Schwab survey also revealed.
Industry observers are keen to see how the RIA market unfolds because many advisors are expected to retire in the next 10 or 15 years. Cerulli Associates found that in the third quarter of 2014, the average age of an RIA advisor was 50 years old.
Some advisors will sell their advisories at all costs, but it appears that many more will transition out of their careers in orderly fashion. They may reduce their hours over time or stay on under new RIA ownership to oversee a handful of major clients.
Beatty said many RIAs were being “selective about opportunities,” and sensitive to the “cultural and philosophical fit” of a merger to make sure the merger is sustainable over the long run.
“While many firms seek merger or acquisition opportunities as a means for growth, we haven’t seen the spike in consolidation that industry observers have predicted,” Beatty said. “Instead, firms are considering valuation and completing deals that best address their goals over the long term.”
Of the 54 transactions in 2014 reported by the survey, 41 percent of them were bought by RIAs, 38 percent by a “strategic acquiring firm,” 11 percent by buyers defined as “other,” 6 percent by a bank and 4 percent by an international acquirer.
Schwab’s data reflects transactions involving primarily high-net-worth and endowment-focused RIAs with assets under management above $50 million.
The survey doesn’t reflect the entire RIA market, but offers a snapshot of a sliver of the RIA marketplace.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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