Are RIA mergers and acquisitions getting less sexy?

The pace of RIA dealmaking has leveled off over the last few years, with the number of 2014 deals exactly flat with the previous year, and the aggregate AUM acquired ticking up only slightly to $47.4 billion from $43.7 billion the previous year, according to new data from Schwab Advisor Services.

And both AUM figures are considerably lower than that of 2012, when what Schwab calls "strategic acquiring firms" -- such as United Capital, Focus Financial, HighTower and the like -- snapped up an aggregated $58.8 billion worth of firm assets.

Indeed, Schwab's Jon Beatty -- senior vice president for sales and relationship management for Schwab Advisor Services -- described dealmaking as a "utility" for the industry.

"M&A continues to be a viable solution for advisors looking to transition their business or grow their business," he says. "The consistency of it is informative; we haven't seen a catalyst to create a spike."

There were 54 publicly announced deals for firms with assets of more than $50 million in 2014, the study found -- the same number as in 2013. That number is higher than the number of deals in 2012, but down from the numbers of deals made in 2010 and 2011, according to the Schwab data.

FOCUS ON INTERNAL ACTIVITY

While Beatty characterizes the current environment as a sellers' market, he suggests that a couple of factors may be keeping deal pace moderate.

For one thing, he notes, "at least 70% of the firms in our benchmarking study said they were focused on internal transitions." So while advisors give their attention to internal succession plans, he suggests, they may be deferring efforts for outside deals.

Another possibility, he suggests, is that RIAs are making smaller moves. "We hear anecdotally that firms are tucking in advisors into firms," he notes.

Some of those arrangements may be too small to meet the threshold for the Schwab study, he says; others may be a question of semantics. "What's the difference between acquiring an advisor and hiring an advisor to join a firm?" he asks rhetorically.

Finally, he says, advisors may simply be stalling in hopes that their firm's assets -- and, effectively, its price -- will rise as markets do.

"They're waiting for a reason to sell," he says. "And at this time the valuations of their firms are going up."

For instance, he notes, more than one-third of the firms in Schwab's 2014 benchmarking study had doubled both AUM and revenue over the past five years; and 29% expected to double in size over the next two years, by 2016.

"Success," he says, "is allowing sellers to wait."

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