An uptick in mergers and acquisition among investment advisory firms at the end of last year suggests that the pace will increase, according to a study by Pershing Advisor Solutions, a unit of BNY Mellon. However, there were fewer deals, and they took longer to complete in last year, compared to the peak in 2007.

Only 41 deals involving firms with more than $100 million in assets under management were completed, and the firms acquired were smaller. The median assets under management of all acquired firms last year was $400 million, the lowest median asset level observed in the last 10 years and about 15% lower than in 2009.

Registered investment advisors with less than $100 million in assets under management accounted for 18% of all firms sold or merged.

Banks, which were prominent buyers ten years ago, are less active and serial buyers have slowed. RIA-to-RIA deals now account for about half of transaction activity.

Although few of the details are public, the study suggests that the values of acquired companies are down between 10-15% from the 2007 or holding steady.

"Advisory firm owners need to maintain a solid understanding of current M&A trends as part of their own planning and management process," said Kim Dellarocca, director in global marketing for Pershing LLC. "Owners would be wise to run their firms with an eye toward long-term value creation and a thoughtful transition process for their practice and their clients. This approach will ensure sustainability that isn't dependent on a key principal."

"Unless the owner's preferred resolution is shuttering a firm, some type of a sale, merger or acquisition is inevitable," said Dan Inveen, principal at FA Insight, which performed the study for Pershing. "Every advisory firm owner must someday come to a monumental decision concerning their business, and the Real Deals series was designed to enable RIAs to better understand the trends impacting transactions in order to realize the most value from their firms." 

Real Deals 2010 is based on transaction data and expert interviews. Survey data, trade publications and regulatory filings were used to gather data.

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