FA Magazine July/August 2023 | Page 29

FA ’ s 2023 RIA Survey & Ranking
FA ’ s 2023 RIA Survey & Ranking

Consolidation Crunch Hits Rate Reality

Are all the RIA merger marriages going to slow ? Or will deep pockets keep the deals moving ?

It ’ s

HARD EXCEPT WITH HINDSIGHT TO remember the evolution of an industry or profession . There was a time when clockmakers were independent artisans cutting their own gears by hand near a river , until the advent of mass production allowed clock production with replaceable parts to coalesce in Connecticut around the 1820s . Or think of how the internet remade the travel industry , ironing out the inefficiencies of booking airfare and hotel rooms with real time numbers and washing out a third of U . S . travel agents in two decades .
Now think of the RIA business — one still young enough to feel growing pains ( such as its struggles with HR departments ) but old enough for some to now imagine it having its own variant of the accounting industry ’ s Big Eight ( before they shrank into the Big Four ).
Then there ’ s the messy , still fragmented present . The frenzied consolidation of financial advisory firms , predicted for two decades , has finally slowed down as financing becomes more expensive . That will likely bring down firms ’ lofty valuations , which recently stood north of 10 or even 12 times cash flow .
Stephen Galletto , an attorney at Stark & Stark who helps sellers , says that even before Covid-19 he saw small RIAs having “ stupid money ” shoved in their faces from aggregators wanting to acquire clients and assets ( and the rich , recurring revenue streams ), even if the advisor didn ’ t want out of the business . According to some estimates , the global private equity industry currently sits on $ 1 trillion in capital and it earns nothing unless that money is put to work .
Attractive recurring RIA revenue streams have lured new giant , target-hungry acquirers . Marty Bicknell , who runs his own giant shop , Mariner Wealth Advisors , says new players have emerged that nobody would have seen coming four years ago — firms with $ 20 billion to $ 40 billion in assets that have pounced on the space , aided by cheap financing and easy access to capital . And yet , as big as some firms are getting ( he hopes to get his own shop up from 1,400 to 5,000 advisors in three years ), he notes that the wirehouses employ tens of thousands of advisors . LPL Financial has more than 21,000 . In other words , the increasingly popular RIA model still faces other big models like private banks and brokerages .