The wealth management industry continues to evolve in lockstep with new client expectations and demands. One such demand is the removal of any conflict of interest a wealth manager may have when servicing a client relationship. As such, many retail clients are deciding to do business with Registered Investment Advisors (RIA), a specific type of wealth management firm held to the highest fiduciary standards within the industry.
Increased client demand for impartial and independent investment advice has led to a proliferation of RIAs across the U.S. The RIA channel continues to grow faster than any other wealth management segment, as firms of all sizes saw strong organic growth over than last five years. In addition to gathering new clients, and increasing wallet-share of existing clients, many firms are pursuing inorganic strategies to augment growth.
The last two years have seen unprecedented levels of M&A activity in the RIA space. In 2019, 127 deals were closed worth $151.3 billion in client Assets Under Management (AUM). These totals represent an increase of 44 percent in deals and 38 percent in AUM over 2018 totals, which itself was a record year.
Strong deal flow continued into the beginning of 2020. Through the first three months of the year, 23 deals were closed, representing just under $30 billion in client assets, a 35 percent increase over 2019 Q1 AUM totals. The majority of these deals, however, were completed in January and February, with only three closing in March due to the COVID-19 pandemic.
This article will highlight the critical forces driving M&A activity, key players in the space, and the potential ramifications of COVID-19 moving forward.
A version of this paper was published as an article on wealthmanagement.com to read it, click here.