The "year of the roll-up firm" is over.

After a big surge in firm acquisitions by "national acquiring firms" in 2012, the first quarter of 2013 showed a shift back to RIAs as purchasers among the industry's M&A transactions, according to a new study.

The number of deals for RIA firms jumped in the first quarter to 13, after three quarters of 10 or fewer transactions, according to new research from Schwab Advisor Services. But transaction value was lower than at any point in the last year, as the M&A landscape was dominated by smaller transactions within the RIA community.

"There were  a lot of large and midsize firms tucking in smaller firms," says Jon Beatty, Schwab Advisor Services' senior VP for sales and relationship management.


Succession-planning concerns are driving some of the deals, Beatty says, but there are other issues as well, such as access to new markets. "We also see advisors making tuck-ins to get scale," he adds.

Early results from Schwab's annual advisor benchmarking study hint at the growing hunger for acquisitions. More than a quarter of RIAs are actively shopping for acquisitions, according to the study -- and that number jumps to one-third among firms with AUM under $1 billion.

That's an increase, Beatty says. "In the 2011 survey, one in seven advisors was interested in [making an] acquisition, and it was one in 10 in 2010. So you can see momentum building."

One factor driving deals is the desire of advisors to expand their client base, Fiduciary Network CEO Mark Hurley said recently. "The problem is that the ability to add clients is finite," he says. "It takes 10 to 15 times the resources to bring on a new client than you need  for an existing client. ... Most wealth managers lose money on a new client for the first 18 months."

Acquisitions provide an alternative way to acquire clients without the upfront workload, Hurley suggested.


Even so, Beatty offers a cautious outlook for future deals. "If you look back over the last five years or so, M&A activity in the industry has been remarkably consistent," he says. "Buyers are waiting for stronger signs of a recovery, while sellers are holding out for better valuations."

For the number and value of deals to increase, the industry would need some sort of catalyst, he adds. "We have to remind ourselves that as much as we talk about RIA deal activity, the majority of advisors are focused on growing organically. Unless they move into that pool of interested participants, it will keep [the deal level] flat."

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