Yet it ’ s also hard to imagine the complete consolidation of RIA firms when so many new practices are starting up all the time . Will the profession fall into fewer powerful hands like accounting did or will it continue to look like the medical profession , with both HMOs and small group practices flourishing , with the latter offering the kind of high-touch service necessary in a business where client relationships are sticky and precious — and hard to replicate by a big corporation ?

“ There ’ s thousands and thousands of advisors out there ; there ’ s more RIAs that are being created each year than are getting acquired ,” says Dave Welling , the CEO of Mercer Advisors , which oversaw $ 48 billion as of April .

Matthew Brinker , a managing partner with Merchant Investment Management , an investment company that makes minority investments in firms , says all the borrowing with cheap money has finally caught up to the private equity buyers . Acquirers that paid for firms at the top of the mar-

Does your firm have an outside institutional investor ?

TOTAL AUM IN 2022 BY SIZE RANGE

SIZE RANGE

■ Yes 16.12 %

■ No 83.88 %

ACTIONS FIRMS HAVE TAKEN IN THE LAST 3 YEARS

CATEGORY

NUMBER OF FIRMS

If YES , what percentage of the firm do they own ?

2022 AUM ( BILLIONS )

ACTIONS TAKEN IN LAST 3 YEARS %

■ 0-20 % 16.67 %

■ 20 % -40 % 20.24 %

■ 40 % -60 % 22.62 %

■ More than 60 % 40.48 %

2021AUM OF SAME FIRMS

ACTIONS LIKELY IN NEXT 12 MONTHS %

Hired strategy consultant 35.89 % 5.37 % Obtained a valuation appraisal 40.88 % 9.98 % Added one or more offices 37.04 % 11.52 % Held exploratory merger talks 39.54 % 9.79 % Rejected a merger proposal 26.87 % 3.26 % Hired a former registered rep to work at your firm 34.74 % 8.83 %

% CHANGE

>$ 1billion 308 $ 3,082.75 $ 3,185.45 -3.22 % $ 500 million < $ 1 billion 96 $ 68.58 $ 83.73 -18.10 % $ 300 million < $ 500 million 40 $ 15.96 $ 17.18 -7.10 % $ 100 million < $ 300 million 59 $ 12.07 $ 12.43 -2.89 % $ 50 million < $ 100 million 10 $ 0.69 $ 0.71 -2.81 % < $ 50 million 8 $ 0.18 $ 0.20 -11.76 % TOTAL AUM 521 $ 3,180.23 $ 3,299.70 -3.62 % ket are likely to see their revenue buffeted now that stocks have stopped rising — and as debt gets more expensive . He compares the current situation in private equity to that of the 2008 financial crisis , when highly levered acquirers took on a ton of debt to pay at the top end of multiple ranges for firms across an array of industries — and then struggled to restructure finances as major banks wrestled with the mortgage crisis .

Brinker hesitates to name names , but a few big firms have recently come in for criticism for their high debt leverage numbers and their strategies to fix them , namely Focus Financial and CI Financial ’ s U . S . wealth management business . Both serial acquirers own some of the best big RIAs in the business . They also have lots of company when it comes to carrying big debt loads .

Focus and CI recently turned once again to private equity , this time to restructure their debt . CI not only nixed plans to go public this year but instead sold 20 % of itself to a consortium led by Bain Capital , bringing in a billion dollars in an aggressive move to deleverage . Focus , meanwhile , took itself out of the public market altogether with the help of private equity firm Clayton , Dubilier & Rice — and got its ratings slashed by Moody ’ s and Standard & Poor ’ s as a result .

CI Financial ’ s deal drew initial market applause for its rich valuation but was later slammed by analysts who said the deal terms with Bain were more constraining than at first assumed . The Toronto-

What mostly accounted for your asset inflows in 2022 ?

New assets from existing clients 35.70 % Assets from new clients 53.36 % Market performance 7.68 % Assets from mergers or acquisitions 8.83 %

What mostly accounted for your asset outflows in 2022 ?

Assets withdrawn by retired clients 42.03 % Assets lost by clients who died 12.86 % Assets withdrawn by clients for personal use 28.60 % Assets withdrawn by clients who left the firm 15.55 %

ADVISORY FIRM CHARACTERISTICS

CATEGORY MEAN 2022 MEAN 2021 % CHANGE MEDIAN 2022 MEDIAN 2021

% CHANGE Number of client relationships 4,519.63 4,286.07 5.45 % 590 583 1.20 % Firm assets per client * $ 5,968,709.97 $ 7,443,174.60 -19.81 % $ 1,783,632.76 $ 2,026,763.29 -12.00 % Overall assets per client ** $ 1,350,575.79 $ 1,477,670.75 -8.60 % NM NM NM * A comparison of assets per client at each ranked firm . ** A ratio of total assets to total clients at all ranked firms . NM = not meaningful .

28 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2023 WWW . FA-MAG . COM