RIA M&A In 2024: Navigating The Evolving Landscape

The registered investment advisor (RIA) M&A market is undergoing a significant transformation. After a decade of continuous growth, deal volume witnessed a slight dip in 2023. However, industry experts anticipate a resurgence in the coming years, fueled by a confluence of factors that are reshaping the landscape. Understanding these trends is crucial for any RIA owner or leader contemplating their firm’s future.

The Looming Succession Crisis: A Catalyst For Change

One of the most significant drivers of this shift is the impending succession crisis. Many RIA founders, especially those who built their firms during the bull market of the past decades, lack a well-defined succession plan. While this is partly due to a natural human tendency to procrastinate, it’s also a consequence of skyrocketing RIA valuations. With valuations hitting all-time highs, it’s becoming increasingly difficult for the next generation of advisors to afford to buy into existing firms. This widening affordability gap presents a compelling opportunity for external acquirers and may potentially lead to a wave of M&A activity in the coming years.

Founders Seek Liquidity: Time To Cash Out

Another key factor influencing the market is the growing desire of RIAs to secure liquidity. Having dedicated years to building their businesses, many are now looking for an exit strategy. This creates a pool of willing sellers for potential acquirers — offering a strategic advantage to firms with a clear acquisition plan and the resources to execute it.

The Rise Of Acquisitive RIAs: Bigger Players, Bigger Ambitions

Interestingly, a growing number of established RIAs are themselves becoming active acquirers. This trend can be attributed to two primary factors. First, organic growth, the traditional path to scaling a business, can be slow and challenging. Acquisitions offer a faster way to increase assets under management (AUM) and gain access to new markets and talent pools. Second, the rise of industry giants is putting pressure on smaller and mid-sized RIAs. Acquisitions allow for more effective competition by allowing these RIAs to achieve economies of scale and bolster their service offerings.

The Talent Imperative: Building A Sustainable Leadership Pipeline

Regardless of whether an RIA is looking to be acquired or wants to remain independent, one factor remains paramount: talent. Sophisticated acquirers are particularly interested in firms with a robust leadership structure and a clear path to ensuring minimal disruption to the client experience post-transaction. This means that investing in developing the next generation of leaders within your firm is crucial. Strong talent management not only increases your firm’s overall value — it also positions it for long-term success, whether as an independent entity or as part of a larger organization.

A Strong Start To 2024: Early Signs Of A Resurgence

Despite the overall slowdown in 2023, the 2024 RIA M&A market kicked off with a bang. Data from Echelon Partners reveals a surge in dealmaking activity, with the first quarter witnessing a 20 percent, year-over-year increase in announced transactions. This early momentum is primarily driven by strategic acquirers — in particular, established RIAs looking to expand their footprint. Additionally, private equity firms continue to show strong interest in the wealth-management space by making significant investments in RIAs.

Beyond The Headlines: Key Considerations For RIA Owners

While these headlines paint a picture of a dynamic and evolving market, it’s important to remember that navigating the RIA M&A landscape can be complex. Here are some crucial considerations for RIA owners and leaders.

• Understanding Your Options: Whether you’re contemplating an outright sale, a merger, or a strategic partnership, it’s essential to have a clear understanding of your goals and priorities. Consulting with a qualified M&A advisor can help you explore your options and develop a plan aligned with your long-term vision.
• Valuation Matters: Knowing the fair market value of your RIA is essential for any M&A transaction. Engaging a reputable valuation expert can provide an accurate assessment of your firm’s worth so that you receive a fair return on your investment.
• Regulatory Compliance: RIA M&A transactions are subject to a range of regulatory hurdles. Having an experienced attorney on your side can ensure that your deal complies with all relevant regulations, protecting you from potential legal complications.

Partnering For Success: How AdvisorLaw Can Help

At AdvisorLaw, we understand the complexities of the RIA M&A landscape. We offer a comprehensive suite of services designed to help RIA owners and leaders navigate every step of the process:

• No-Charge Valuations: Gain an objective assessment of your RIA’s value with our free valuation service.
• Expert Guidance: Our experienced attorneys will provide strategic advice and counsel throughout the M&A process, protecting your interests.
• Regulatory Defense: We will work diligently to secure a transaction that adheres to all regulatory requirements and noncompetes, minimizing potential risks.
• PPN: Our Practice Purchase Network gives you access to a network of groups actively exploring opportunities to partner or purchase your RIA. We use these groups to foster competition and check as many boxes as possible to find the right continuity partner. 

By partnering with AdvisorLaw, you can approach your RIA’s future with confidence. We will work collaboratively with you to understand your unique goals and develop a customized strategy that maximizes your value and achieves your desired outcome. Don’t let the ever-changing M&A landscape leave you behind. Contact AdvisorLaw today, and schedule a consultation to discuss how we can help you navigate the exciting path ahead.

Looking Ahead: The Future Of RIA M&A

While predicting the future is never an exact science, several trends are likely to shape the RIA M&A landscape in the coming years:

• Increased Focus On Technology: As technology plays an increasingly critical role in wealth management, firms with robust technological infrastructure and a commitment to innovation are likely to be highly attractive to acquirers.
• The Rise Of Niche Players: While larger deals are grabbing headlines, there’s also a growing space for specialized RIAs catering to specific client demographics or investment strategies. These niche players may find themselves attractive targets for acquirers looking to expand their service offerings.
• Regulatory Scrutiny: Regulators are likely to continue to scrutinize RIA M&A activity to ensure the protection of investors’ best interests. This underscores the importance of having experienced counsel on your side to navigate the regulatory landscape.

By staying informed about these trends and partnering with the right team, RIA owners and leaders can position themselves to capitalize on the opportunities presented by the evolving M&A landscape. With careful planning and strategic execution, RIA M&A can be a powerful tool for achieving your firm’s long-term goals and ensuring its continued success in the years to come.

Contact us today to learn more about AdvisorLaw’s M&A services.