This is according to David DeVoe, founder of San Francisco-based DeVoe & Co., which provides mergers and acquisitions consulting in the RIA space. DeVoe formerly served as managing director of strategic business development at Charles Schwab Advisor Services.
“Generally the aspiration [of banks] is to diversify revenue streams and create a cross-sell opportunity,” DeVoe says. “A bank can’t help but look at an advisor’s base and think those would be great clients to create connections to.”
In a recent large deal, fast-growng RIA Luminous Capital of Los Angeles – whose founders broke away from Merrill Lynch in 2008 – are in the process of selling their firm to New Republic Bank for a deal reportedly worth $100 million.
DeVoe says he expects to see more acquisitions of this sort, if not necessarily of this size. The banks are following in the footsteps of private equity investors, consolidators and RIAs themselves, all of whom have been acquiring RIA firms as “a natural process of consolidation,” as DeVoe puts it, occurs in the space.
As of late October, there had been 35 deals in the RIA industry this year worth a total of $42.34 billion, according to Charles Schwab, which tracks RIA industry activity.
At 54% the consolidators account for the majority of these deals.
“Today there are probably 25 [consolidators] which I think is ultimately good for the industry,” DeVoe says. “It provides a number of options for the advisors.”
As for banks, many of them have moved beyond the worst challenges of the recession, have more money to spend and are looking for new opportunities, according to DeVoe.
“The memory of strained relationships [with past RIA acquisitions] may have faded,” DeVoe says. “the client base of RIAs continues to be really attractive to these [banks] so it’s an area of the market that they will be watching.”