Strategic Acquiring Firms emerge as leading buyer category as
transactions among U.S. and offshore-based entities ticks upward
“While we see consistency in M&A activity in the RIA industry, with strategic acquiring firms continuing to show their buying power, we are not seeing the spike in industry consolidation that many analysts and observers have been predicting,” said
Data from Schwab’s 2014 RIA Benchmarking Studyi released in July, indicated that 9 in 10 RIA firms are looking to develop internal successors, suggesting that founders and principals are seeking continuity of their firm’s people, culture and values. Although M&A data for the first half of the year indicates a seller’s market in the RIA industry, many advisors are actually choosing not to sell. Instead they are continuing to grow organically and create value in their firms by building enduring enterprises.
With more than one-third (36%) of all firms participating in Schwab’s Benchmarking Study having doubled their AUM and revenues since 2009, the steady M&A activity this year also reflects the healthy ecosystem of the RIA industry. The RIA model continues to attract not just investors and advisors, but also more types of acquirers – in the U.S. as well as internationally.
M&A data for first half of 2014 showed activity among Strategic Acquiring Firms (SAF) moving upward from the levels of 2013, representing 38 percent of the total deals closed, versus 31 percent of deals completed by RIAs. Additionally, the data shows an increase in acquisitions by offshore-based entities, which represent seven percent of the total deals recorded for the first half of the year.
“As RIA firms grow and continue to evolve into efficiently managed businesses built for enduring success, they will increasingly appeal to a broader range of buyers,” said Beatty. “Internal succession is one of the best ways to strengthen, scale and grow a firm to potentially make it more attractive to a buyer. I expect we will continue to see consistent M&A activity in the coming months as acquirers seek opportunities and advisors consider more choices to monetize their firm’s value as part of a succession strategy.”
Schwab Advisor Services reports M&A industry data twice yearly as part of a continued commitment to advancing the interests of RIAs, including a consultative approach that helps firms determine their transition options and plan strategically toward them.
About Schwab Advisor Transition Services™
Schwab Advisor Transition Services helps advisors think through growing and exiting a business at the right time, with the right people and at the right value. This includes goal setting, evaluating options (internal succession, external sale, and merger or acquisition) and executing a transition plan. Schwab’s Transition Services includes Schwab’s M&A Listing Service, a national online database offered to independent registered investment advisors that custody with Schwab Advisor Services that connects independent investment advisors with firms interested in acquiring or selling their firm, or merging with another firm, and enables advisors to maintain anonymity while soliciting interest and collecting information from other advisor firms. Buyers also can search for investment professionals with books of business who would like to join an RIA firm. Additional information and new transitions content are available at www.SchwabTransition.com.
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1 All data compiled and analyzed by Schwab Advisor Services. Data reflects firms being sold with assets under management exceeding
iAbout the RIA Benchmarking Study
Schwab designed this study to capture insights in the RIA industry, based on survey responses from individual firms. The 2014 study provides information on topics such as asset and revenue growth, sources of new clients, products and pricing, staffing, compensation, marketing, technology, and financial performance.
Since the inception of the study in 2006, more than 2,800 firms have participated, with over half being repeat participants. A total of 1,132 advisory firms representing nearly three-quarters of a trillion dollars in AUM that custody their assets with Schwab participated this year, making this the leading study in the RIA industry.
The RIA Benchmarking Study comprises self-reported data from advisory firms that custody their assets with Schwab. Schwab did not independently verify the self-reported information. Participant firms represent various sizes and business models. They are categorized into 12 peer groups - seven wealth manager groups and five money manager groups, by AUM size.
The study is part of Schwab's Business Consulting Services, a practice management offering for investment advisors. Grounded in the best practices of leading independent advisory firms,
Unless otherwise noted, study results shown are for firms with